The big questions about the future of automation

By | September 24, 2016

the-big-questions-about-the-future-of-automation-dividends-down-under-blogAuthor: Mr DDU.

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The world is changing faster and faster, the sharing economy is just one small part of what’s to come from automation, becoming more efficient and cutting out the middlemen.

If you’re scared or excited by that, I think that shows if you think you’ll benefit or lose out in the years to come.

We’ve already seen some big changes:

-ATMs and internet banking have replaced visiting a physical bank
-Self serve kiosks at shops, supermarkets and McDonald’s (ordering)
-Online accounting programs like Xero
-Apps of all kinds (betting, food ordering etc)

And the list goes on and on.

 

Every tech and car company in the world are racing to produce their first legal automated car. Once these cars are out in the world, there will be massive ripple effects. Is this going to put all taxis and Uber drivers out of business? Who’s going to own these cars? How long before non-automated cars are banned from certain roads? How is insurance going to work?

None of these are easy questions to answer. Automated cars are just the first stage of automated transportation that’s coming. Automated trucks, buses, delivery vans and trains are all being researched & developed.

Automation is an incredible technological development. Machines don’t need holidays. They don’t need sleep. They don’t get sick. They don’t go on strike asking for more pay (yet!). It will make companies and shareholders a lot of money – but what about the people they’re replacing?

Machines don’t pay taxes. They don’t spend money in local shops. They don’t get a mortgage, have kids or utilise local infrastructure like airports. The people who have jobs spend money, helping spread money around the economy.

In the industrial revolution we saw a huge percentage of (farm) jobs disappear. Since then, a large number of jobs in other sectors have been created. Job categories like lawyers, accountants, Government (teachers etc) and healthcare have all exploded in the last 60 years.

Hopefully more jobs can be created that didn’t exist before, such as social media teams. Will there be enough created to make up for potentially hundreds of thousands of jobs lost in Australia, millions in Europe and the USA? It’s hard to say.

There’s a wide range of possible scenarios from best case ‘The world will become a better place than it is now’ to ‘A large portion of society loses their job and can’t get another one’.

 

The potential game changer
Some countries are now facing up to these future issues by considering paying every citizen a Universal Basic Income. This is where the country’s government gets rid of most of its social welfare and replaces it with an income that every citizen receives.

How much income? Figures are as wide ranging as $12k – $30k. How much is enough? It depends on each country’s cost of living and generosity.

Switzerland recently had a vote to decide if each citizen would receive 2,500 Swiss Francs ($2,555 US) a month. This would have meant $30,660 US each year for every citizen. The amount reflected the Swiss high cost of living. But the vote was 77% no and 23% yes, so universal basic income was rejected.

But Finland are actually doing a trial of UBI with 10,000 people. Each person will receive 550 Euros a month for 2 years. If the trial works, it will be implemented across the country. According to a Finnish survey, 69% of Finns are behind the UBI idea – so Finland may become the first country to have UBI. It’s always a Scandinavian country that does this type of thing first isn’t it?

 

What are the advantages of a Universal Basic Income?
No absolute poverty. If everyone has the guarantee of a basic income, everyone can afford a basic home, simple food, utilities and water. It would hopefully be enough to eradicate all homelessness.
-Freedom not necessity. If people have a guaranteed income, they don’t have to take that minimum wage job to pay their bills. They can instead open a business or do the training for a better job. This would hopefully mean they pay more tax to the government as well, helping pay for the system.
-Levels the welfare playing field. If everyone gets the same amount of welfare, there can’t be any uneven receivers of money. At the moment in Australia renters can get Govt money, home owning mortgage payers can’t. Parents get Govt money, childless people don’t. Older people can get Govt money, younger people don’t. So, tough luck if you’re a younger, childless home owner. Everyone would get the same amount, to use on whatever they want.
-May boost the economy. As we all know, most people have a tendency to spend a lot of their money. Therefore most of the money put into the public’s hands would get spent and spread around the economy.
-Time for creativity. I’ve read suggestions that once UBI is in place, that we’ll all have all the time in the world to enjoy the arts and culture of society, instead of wasting time earning money to live. Creativity can lead into the inventions and innovations of the future.

But there are potential flaws too.

 

Who will pay for it?
If there are so many people out of a good paying full time job, then that’s a lot less payroll taxes for the Government.
All the automation will probably put a lot of businesses to the wall too. In total there will be less businesses paying less income tax.
A lot of money is raised through speeding and parking tickets for local Governments, as well as normal parking. Automated cars won’t speed or park in a paid-for area.

The vast majority of the money will simply come from the current welfare pool of money, but that won’t be enough. Perhaps it will be initiatives like a $2 per Uber fare that will help raise the money needed.

The funds will probably have to come from other department’s budgets, or more taxes will have to be raised on the companies doing the automating. I’m not an economist so I’m not sure how feasible it would be for Australia.

 

Any other major criticisms?
UBI may encourage some people to never work again. Whether that’s a totally bad thing or good thing, I’m not sure.

 

Who will benefit from automation?

Back to the topic of automation; one of the biggest industries we’ve seen a glimpse of how the future could be is the car industry. So, it’s easy to speculate who might benefit.
Assuming all cars end up being electric cars, somebody is going to have to produce and distribute all the extra electricity. That could potentially mean companies like AGL (ASX:AGL), Origin (ASX:ORG) and Vocus (ASX:VOC) have a lot more demand for electricity. Electric cars should be a lot better for the environment and air quality too.

If the cars are automated, they’re going to be relying on data for location and direction. You’d imagine this is a LOT of data. Someone will need to handle that data. Will it be companies like Telstra (ASX:TLS), TPG (ASX:TPM) and Vocus (ASX:VOC)? Or a satellite company that sends the data?

There should be a LOT less accidents and deaths on the road, which is awesome for those people and their families. If even one life could be saved, wouldn’t this be worth doing?

Uber, probably, will benefit, but the current human drivers won’t. Although, if car companies produce their own version of Uber, they’ll have some stiff competition.

 

Final thoughts
Automation is going to be a huge change for our societies. It has the potential to do so much good for the world. But we need to make sure that the negative consequences are thought through and planned for.

 

Readers, would you like a UBI in your country? What do you think of the upcoming wave of automation? Are you scared or excited (or both) by it? Will you buy an automated car as soon as it comes out?

 

Thanks for reading this article about our financial journey Down Under.

Onwards and upwards!

34 thoughts on “The big questions about the future of automation

  1. TJ

    This is fascinating. I heard about the Swiss vote, but I didn’t know there was a country that was starting to implement it. Of course 500 Euros is a lot less than 2500 Swiss Francs.

    You always hear that something like UBI would make people more lazy, but I rather like your take on it, that it would allow people to be more creative and start their own businesses.

    1. Dividends Down Under Post author

      We will be following the progress of UBI very closely – Finland is a HUGE test and could pave the way for many other countries (that want it) to actually implement it.

      I always tend to look at the optimistic side of things, and I’ve read countless of examples of people who’d like to do X but can’t because they have to pay their bills with a poorly paying job instead.

      Mr DDU

  2. Mrs. ETT

    I cannot wait for automated vehicles. I’m not one of those people who love driving, particularly as I see less and less patience and tolerance on the roads, while breaking road rules and aggression is on the rise. I am looking forward to the day when I can step in a car and sleep on the way to work (I could sleep on the train, I know).

    I like the idea of UBI because of fairness. I don’t feel qualified to comment on the practicalities though. I think starting with a small experiment as Finland is trialling is the way to go.

    1. Dividends Down Under Post author

      That’s interesting that you’re really looking forward to automated cars. When they come out, will you buy one for yourself? Or will you want an Uber-style service and just call one when you need one? Technically you could just call an Uber and sleep there..probably a bit expensive for that situation 🙂

      I also like UBI, I hope Finland can make it work.

      Mr DDU

      1. Mrs. ETT

        That’s a good question. I’d just assumed I’d buy one because … yep, that’s what I’ve always done. It will be time to shake up the assumptions though. I’d be happy enough to call one, as long as there was enough supply and it was cost effective.

        1. Dividends Down Under Post author

          It’ll be interesting to see what you Mrs ETT. I guess a big part of it will be how much these cars are going to cost upfront..and maybe how much money you can make from them if you rented them out?

          Mr DDU

  3. FJ

    Automations definitely create a big impact in job markets, but hopefully everything will get re-balance in couple of years. It seems like initial impacts will be for drivers and car insurance companies.

    For me, I love to drive cars instead of sit back and do nothing.

    1. Dividends Down Under Post author

      I hope everything can be rebalanced too, FJ. It will be a difficult transition if millions of people need to find a new job all at the same time though.

      Mr DDU

  4. Dividend Diplomats

    DDU,

    Very interesting. Never fully thought it through to universal basic income and this is very interesting. It would take a BIG overhaul of almost every virtual system to have this work: Government, healthcare, banking, housing, food suppliers, etc.. you name it. So much involved. Very interesting.

    -Lanny

    1. Dividends Down Under Post author

      It would be a gigantic change Lanny, and wouldn’t be popular with people who hate ‘big Government’. We’ll have to see what happens.

      Mr DDU

  5. Ten Factorial Rocks (TFR)

    Good post. While you have analyzed two important emerging trends, Automation and UBI, separately, it’s interesting to look at both together. I feel removal of low level routine jobs from Automation combined with UBI can unleash the potential of millions of otherwise lowly paid workers into something, say a new service, that adds value to others. Some may get into arts, culture and theater so that also improves society. Of course, there will be some lazy guys who prefer to do nothing but subsist on UBI alone but at least that removes abject poverty. I, for one, look forward to Driverless cars.

    1. Dividends Down Under Post author

      Thanks TFR. I think I did kind of cover that in the ‘what are the advantages of UBI’, but I agree with you – giving people that security net COULD result in people doing what’s best for them, not just taking the first job they can.

      Mr DDU

  6. Mr. PIE

    Maybe it is the Brit still in me, but I love to do the things that cool cars (crikey, never mind cool cars….any car,) are made for. And that’s drive em!! Whether it is navigating a mountain pass in the snow in a 4 x 4 or top down and hitting the highway on a sun drenched coastal route. That’s living for me.

    To your point about UBI, I agree with you that generally speaking, Northern Europeans are more progressive in their thinking. The Scandanavian countries also have a brutal cost of living so those amounts on their trial run are balanced with what it covers in a real sense. I do like what they are experimenting with though. Like science, it takes a hypothesis and experiment or two ( or twenty) to push boundaries. Will be interesting to see what comes of this. Thanks for making me aware of this initiative.

    1. Dividends Down Under Post author

      Haha, you sound like quite the motor head Mr Pie. As an Aussie, the sun drenched coastal route sounds more appealing than the snow covered mountain pass.

      I am extremely curious to see how their experiment works. It could herald a global realisation that UBI can work (even if countries don’t go ahead with it). Fascinating stuff!

      Mr DDU

  7. Dividend Diplomats

    Very interesting concept. Sounds like it would have a chance to succeed in a smaller country; however, I think there would be some major issues in a larger country. That could potentially be a lot of money shelled out. This sounds like an economists dream here though!

    Bert

    1. Dividends Down Under Post author

      There would be a huge expense for a large country like the USA, but there may also be huge benefits. I can see Europe and the CommonWealth countries adopting this before the USA (if they do), as just Obamacare wasn’t extremely divisive. This would be even more so!

      Mr DDU

  8. Mustard Seed Money

    It will be very interesting to see how the Finnish experiment with UBI goes. One thing that I wonder is if everyone has the same baseline in income, will the prices of goods and services increase.

    If people have the ability to buy more goods you would theoretically think demand would increase. Now if there are a finite amount of these goods the supply will decrease thus raising the price of the goods until demand and supply are back at equilibrium.

    Then theoretically we are back at the point we are now where people are forced to work jobs they don’t like to afford the goods that they need.

    I could be really off so I welcome any feedback that you have.

    1. Dividends Down Under Post author

      I get what you’re saying/theorising MSM. Most advocates for UBI are saying that UBI will just be on top of what people are earning (if they have a job). So some people will have their wage, and their investment income, and get this UBI. Whereas the worst off will only have this UBI, so there will still be this big separation in income, wealth and what they can afford to buy.

      In a situation where everyone had the same income, I’d agree with what you’re saying. But because of the different income levels, I don’t think it will quite happen like that.

      Mr DDU

  9. Charlie

    Interesting post. UBI in all likelihood will fail. Outside of bitcoin there are no self-generating wealth creation schemes. Unless a country has a budget surplus and no debt it couldn’t be sustainable.

    Until the Great Recession, technology was the impetus behind innovation resulting in wealth generation. In my day, telephone operators were replaced by analog then digital switches. Mainframes by client-server then PCs then the internet. The technology is sure to evolve. With human nature being what it is – and if history is a guide – I’m sure we’ll figure out how to stay ahead.

    1. Dividends Down Under Post author

      Hopefully humanity as a whole can sort ourselves out. The owners of capital seem to have been the ones that have benefited most over the last 5 years. If we can’t all benefit, then I hope all of us (bloggers and readers) can stay one step ahead.

      Mr DDU

  10. Team CF

    All very interesting points, I could write a essay about my ideas about it (but I won’t).
    UBI would be a nice thing, but due to the massive overhauls in the various governmental and tax systems, I don’t see it happening very soon. Albeit it may be required when automation kills off most low income/education jobs. The higher education jobs will be next to start to disappear.
    Albeit I welcome automation, i’m slightly worried about the privacy issues associated with this automation (think app’s ability to see/access many personal items on your phone/tablet).

    1. Dividends Down Under Post author

      I was curious about what you’d say CF, as I’d think the Netherlands would be one of the first few countries to implement UBI.

      I don’t think the world will suddenly take up UBI next year, but I imagine quite a few of the countries that will take it up, will have done so by 2025.

      Let’s hope automation less painless than a lot of the detractors say it will be.

      Mr DDU

  11. Amanda @ centsiblyrich

    I admit, the automated cars scare me a little. I would definitely consider one, but would like to wait until they’ve been in use for quite some time and have most of the problems worked out.

    UBI is fascinating. I like the idea, but wonder how it will work out in practice. It will be interesting to follow along and see how it works out in the Finnish experiment.

    1. Dividends Down Under Post author

      I can understand your unwillingness to use an automated car. Can you imagine what the reaction will be if someone dies in one? Even if thousands of people are saved on the road, people don’t want to be the unlucky one.

      And who knows how successful UBI will be? – With all the different attitudes and politics out there in different countries, the same policy might not work as well in 2 different countries.

      Mr DDU

  12. MrSLM

    I’m excited by the coming automation, and by machine learning and AI in general. If you haven’t, read about AGI and ASI, super interesting.

    1. Dividends Down Under Post author

      I’m glad you’re looking forward to it MrSLM – one of the few people completely positive about it. What are AGI and ASI? A simple Google doesn’t reveal anything.

      Mr DDU

  13. Josh @MoneyBuffalo

    I know I’ve watched the Terminator movie series a time too many & fearful of automation from that. It is interesting times we live in. Our great grandparents saw lots of change as electricity & automobiles revolutionized their world. Same thing with automation.

    My prediction is there will be a lot of short-term upheavel in our generation, but future generations won’t know a world without it.

    1. Dividends Down Under Post author

      Even Stephen Hawking has emphasised how careful we need to be about AI and automation, they could easily get out of hand.

      It does seem like there’s going to be a revolution of change coming about soon, and I’m not sure everyone knows how to deal with it (particularly the people at the top, like politicians).

      Mr DDU

  14. Aaron @IncomeHoncho

    One of the big changes I see coming are those Chipped credit cards. Why do you really need it? it’s actually slower than sliding it so it makes no sense to me. But they’re pushing it out without even asking the general population if they want it or not.

    1. Dividends Down Under Post author

      I guess it gives options on how to pay? In Australia our cards now have 3 ways of paying the sliding, the chip and pin and paywave/paypass – they will take your money no matter what lol.

      Mr DDU

  15. amber tree

    You write a nice article on this “hidden” subject.

    Where the industrial revolution killed a lot of pure labour jobs, automation via apps and AI chat bots will kill a lot of current white collars jobs. Not only the typical clerics that do admin in big companies. When you see the results of Watson in assisting doctors or answering questions of a lawyer, we all should be scared.

    Will there be a Mad Max situation where a few people have all the capital and intellectual resources to automate all services? If so, who will have money to pay for that? UBI might be the answer.
    With an UBI, who would want to be a cleaning lady or collecting the trash? Robots maybe?

    For now, a lot of questions and loose ends in my head…

    Thx for the article

    1. Dividends Down Under Post author

      Thanks Amber Tree. I did hear a lot about Watson a couple of years ago, but I’ve not heard of any new projects recently.

      It is a scary possibility in the future – who knows what will happen? The situation you describe kind of already exists, there are few people who own most of the capital.

      Mr DDU

  16. Finance Solver

    Automation is a little scary. A team can make 1 product that can help millions of lives, eliminating the need for additional people for work. I don’t know if UBI will ever take into effect, and I don’t see it taking it into effect in a country, say like the US, that has a huge workaholic culture around it. If that doesn’t happen, it’s up to us to become more creative and give us an edge in creating value for society!

    1. Dividends Down Under Post author

      There are plenty of positives and negatives to automation. What will all the people do who have been replaced by a software program? I’m not sure. Each country will have to design their own fix to their problem though, their population are counting on it.

      Mr DDU

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