Why Automation is Good for Business

Robots will take your job. That, we’re so often told (and in increasingly gloomy tones) is an inevitability, and one that for many of us, will render us irrelevant – or at least make us feel that way. We can’t do anything about it, so the argument runs; we simply have to show up to our respective offices each day, do our work, and wait for the inevitable.

In a sense, this sort of pessimism has its merits. By predicting a worst-possible-outcome scenario, short of “robots will kill us all”, commentators are giving people reasons to develop new skills, explore other income streams and plan for the future. These are shrewd courses of action to take at any time, and at any age.

But all the doom-and-gloom talk also has its shortcomings. There are nuances to the argument that haven’t been discussed, and an increasingly oppositional flavour to the commentary that suggests that automation and its ultimate expression, robots, are in some way competing with human beings. Not only is this not true, but it draws away attention that might be given over to the many ways in which automation benefits business and therefore the wider economy. Something that benefits everyone.

“They found, by analysing 14 years of data, that both wages and worker productivity increased in factories using robots.”

Automation improves productivity by completing designated tasks in less time. The first rudimentary tools developed by our ancestors meant that fewer people and less time were needed to complete a given task, freeing up time and manpower, which can then be invested in other things. Even in the modern day, automation can make human workers more productive: that was a conclusion drawn by George Graetz at Uppsala University and Guy Michaels at the London School of Economics[1]. They found, by analysing 14 years of data, that both wages and worker productivity increased in factories using robots. Each human worker added more value to the economy than before their implementation. The Harvard Business Review managed to capture the surprise of many when it ran with the headline, “Robots seem to be improving productivity, not costing jobs.”[2]

“Automation creates a space in which individuals can be creative, and so think up new and imaginative ways to solve the problems of the consumer.”

For businesses themselves, improved productivity and lower costs are of course good things, creating or saving capital which can be invested back into the company (and creating jobs for those who assemble, design and maintain the machines). Machines are naturally resilient to stress and failure in a way that humans are not, and can self-diagnose problems, perform consistently and work longer hours. This means, in other words, higher quality work, fewer errors and less danger to human workers. What’s more, demand for ever-cheaper products has led many of the larger companies to look abroad, to Bangladesh or China for instance, where the labour is cheaper and the regulations on working conditions looser. Advanced automation can bring those factories back to the country of origin, saving costs on shipping, overseas contractors and foreign taxes, and creating jobs for those at home while still offering the consumer cheaper products[3].

And the rise of automation could trigger a renaissance of small business[4]. With the most time and labour-intensive processes automated, entrepreneurs and small business owners have time to do what matters most: come up with new products and experiences to offer to the consumer. In other words, automation creates a space in which individuals can be creative, and so think up new and imaginative ways to solve the problems of the consumer[5]. Already, the Internet has made it simpler to find small businesses, and online review sites should be seen as a good thing, so long as small businesses don’t compromise on quality as their larger, cost-cutting counterparts so often do.

“The money saved by businesses because of automation can be directed towards workers’ wages, or recruitment; businesses can even launch new, off-shoot companies.”

The money saved by businesses because of automation can be directed towards workers’ wages, or recruitment; businesses can even launch new, off-shoot companies. Or, those with more capital can simply spend it elsewhere. However you shake automation or hold it up to the light, it promises more money flowing through the economy and more opportunity for individuals. In the long term, automation will be understood to complement labour, ultimately reducing the time we spend working and perhaps even creating more time for us to spend with our families and friends, or exploring individual and creative pursuits[6]. It is an exciting time for business. An ocean of opportunity will stretch out before those who embrace automation at the earliest possible instance. No doubt we’ll continue to read stories about the rise of job-taking robots and the end of secure employment as we know it, but soon, these will fade away. Perhaps they will even be replaced by stories of innovation, successes and examples of man and machine working harmoniously, side by side. In the meantime, until the future becomes the present, we will simply have to endure the pessimism.

[1] Crei, [2] Harvard Business Review, [3] Inc., [4] Forbes, [5] SOLIDitech, [6] The Atlantic

This article is designed to throw an everyday lens on some of the issues being discussed and debated by investors across the world; it is not research, so please do not interpret it as a recommendation for your personal investments. If something has piqued your interest and you would like to find out more or discuss what investments might be suitable for you, please contact one of our Investment Managers on 020 7337 0777.