On 20th January 2017, Barack Obama handed Donald Trump the keys to the White House.
But a month before that, on 20th December, he signed off on one of the final reports of his Presidency.
I got hold of that report a couple of weeks ago and it’s on my desk right now.
I wanted to see if contains anything interesting to add on a subject I’ve been thinking about for a while.
Make sure you keep reading Monkey Darts in the coming weeks, as I’ll be sharing my findings with you.
And if you invest in the stock market, it’s a theme worth checking out.
This will have a HUGE IMPACT on the global economy
This is a major trend that’s been developing for many years.
But now it’s accelerating….
It’s a trend that affects you and me and every one of us to some degree.
As you’ll see in this week’s Monkey Darts, for some people it will have life-changing consequences.
In terms of how they make a living. And how they plan for the future.
For some it will bring positive change.
For others… not so good.
It has huge implications for society as a whole and the way all of us live our lives.
And when you get a theme that is so far-reaching and so pervasive, you’ve got to take notice as an investor.
If you play it right, there’s money to be made from this trend in the years ahead
First, some background…
The changing face of the workplace
There’s a good reason Obama’s team put this report together.
Clearly this trend has huge implications for US economic policy.
But it’s a trend that’s challenging our own economy here in the UK, too. And that of every other country in the world.
The title of the report is Artificial intelligence, Automation, and the Economy.
At this point, you might be thinking of various well-used phrases that spring to mind…
Like ‘the rise of the machines’, ‘the robots are coming’ or ‘invasion of the job-killing computers’.
(OK, I just made that last one up. But variations of the other two have been doing the rounds for years!)
You’d be right, that’s exactly what the report is about: machines replacing people in the workplace.
What Obama saw
Obama’s researchers had three main objectives.
First: to consider tasks that have long required human labour… but which machines or computers or robots are learning how to do.
Second: to figure out the implications.
What’s the potential economic impact of that disruption?
Will it be good or bad for the economy?
And how will it affect people whose jobs can be done by the machines?
Obama and his team saw how far-reaching and powerful this trend is. And his report was commissioned to explore exactly those themes…
And their third objective: to lay out “recommended policy responses”.
In other words, what the mighty US government should do about this unstoppable trend.
Robot Roots in the Industrial Revolution
Technological progress is a great thing.
It brings new comforts and conveniences.
And it can streamline processes and make businesses more efficient.
Which is all good for bottom line profit.
But with new tech comes automation.
And that means certain roles become susceptible to being replaced by machines.
Of course, this isn’t a new phenomenon.
Think about banks.
The Robot Bank Cashier of Enfield
As recently as 50 years ago, to get money from a bank, you’d go to a branch and take your place in the queue.
You’d write a cheque and give it to the cashier.
They’d count out the cash by hand and pass it back.
And they’d be paid to do that all day.
But technology had other ideas.
Someone figured out that the cashier wasn’t really needed.
Or at least not for handing out cash.
In 1967, Barclays Bank unveiled the world’s first cash machine in Enfield, North London.
It was a crude version of what we now know as an ATM.
To use the machine, you had to insert a paper cheque.
This cheque was marked with a substance called carbon-14.
That meant the machine could read it and determine how much cash to hand out.
But initially, the cheque had to be issued by a cashier.
So, you still needed some human input.
But as technology and digitisation has improved, machines have become smarter and more widespread.
There are now some 3.5 million ATMs around the world.
And the bank cashier’s job has been under attack ever since.
It’s the same story for many other counter services.
Like airport check-ins or railway ticket offices.
Wherever you look, computers have replaced, or at least reduced the need for, human staff doing routine tasks.
And the automation of jobs is not just a 21st century phenomenon.
New technology has been taking on the work of humans since the dawn of the industrial age in the 18th century.
And governments have been anticipating the effects of automation on the economy for many years.
Back in 1964, President Lyndon B. Johnson set up the National Commission on Technology, Automation, and Economic Progress.
The aim of the commission was to examine the impact of technology on the economy and the job market.
It’s not that the Johnson Administration feared the advances of technology.
At the time, Johnson remarked:
“Automation is not our enemy. Our enemies are ignorance, indifference, and inertia. If we understand it, if we plan for it, if we apply it well, automation will not be a job destroyer or a family displaced. Instead, it can remove dullness from the work of man and provide him with more than man has ever had before.”
Which seems like a smart attitude.
Still, Johnson knew the government needed to understand how the US economy and its workforce could adapt to new technologies.
And Obama’s 2016 report tackles with the same issues.
Only, technology has come a long way in the 52 years since Johnson’s commission.
To cut to the chase, the report concluded that the effects of AI-driven automation would present significant challenges for future Administrations.
That sounds negative. But it’s not.
How AI will bring huge opportunities for investors
Obama’s team predicts AI will make “important, positive contributions to aggregate productivity growth, and advances in AI technology hold incredible potential to help America stay on the cutting edge of innovation”.
The report’s recommendation is that future governments invest substantially in research and development to advance AI.
America will be pumping billions of dollars into R&D to maintain its position as a leader in AI.
Of course, that kind of state backing will filter through to the private sector. And companies involved in developing AI technology could make excellent investments over the coming years.
Some of the sectors that stand to benefit are health, education, energy and transportation.
And the report also highlights the important role AI will have in tackling one of the scourges of our times: cybercrime.
Companies developing technology to provide cyber-defence and fraud detection could be great stocks to back.
I’ll be hunting down some of those companies in Monkey Darts.
Robots will do 50% of jobs in Japan by 2035
The White House AI report recommended ongoing discussion and engagement between government, industry and the public to make the most of AI’s effects on the economy.
There have also been lots of independent studies focussing on AI and automation. And not just in the US…
To give you an example, Nomura Research estimates that half the jobs in Japan will be performed by some sort of robot by 2035.
It’s a similar story in Australia. Consultancy firm PwC predicts that within 20 years, 44% of jobs there will be disrupted by automation.
And 30% of jobs in Britain are potentially at risk from AI, PwC says.
It’s a major trend across the world.
Automation is most likely to affect routine tasks, where machines are already taking over.
PwC claims more than 1o million UK workers, with the majority in retail sales roles, are at risk.
But not all jobs are under threat.
PwC’s head of technology and investments, Jon Andrews said AI and automation “will rebalance what jobs look like in the future, and that some are more susceptible than others.”
He explained that in the future, “knowledge will be a commodity so we need to shift our thinking on how we skill and upskill future generations. Creative and critical thinking will be highly valued, as will emotional intelligence.”
So, if you’re in a job that requires creativity, judgement and opinion, you’re probably safer than someone on the retail shop-floor.
But who knows, the speed at which things are moving, maybe super-smart robots capable of independent thought will one day be lawyers…
For now, it’s worth thinking about what’s under threat right now.
Is your job at risk from automation?
There’s another report I read called The Future of Employment: How susceptible are jobs to computerization?
This was published by a couple of guys at Oxford University.
Carl Benedikt Frey is an economist interested in the transition of industrial nations to digital economies. His co-author, Michael A. Osborne, is an engineer focused on creating machine-learning algorithms.
What Frey and Osborne did was take 702 specific jobs and look at how susceptible each was to computerisation.
Their work concluded that 47% of total US employment could be automated “in a decade or two”.
They found that 12 of the 702 jobs studied were 99 per cent likely to be automated in the future.
All those 12 jobs are characterised by having a predictable pattern of repetitiveness. And that means that computer algorithms can replicate the process.
So, we’re talking about jobs like data entry inputters, telephone operators, accounts clerks, insurance underwriters and telemarketers.
And then there are a bunch of jobs where (for the foreseeable future), you’re pretty safe from the machines.
Eight out of the 702 occupations had a 0.35 per cent or less chance of being computerised based on current technology.
These jobs all required a level of expertise achieved by lots of study and human interaction (which machines can’t currently replicate). Things like therapists, social workers and emergency management directors were on the ‘safe’ list.
(If you want to know how susceptible your job is, there’s a neat search tool in this Telegraph article.)
I’ve pinched a chart from Telegraph (below) that shows most jobs are either very likely or very unlikely to be automated.
So, a large chunk of the 702 jobs the Oxford study looked at are ‘at risk’ from the rise of the machines.
As we’ve seen, jobs like cashiers, ticket clerks and telephone operators are already being replaced by computer technology. Many more face their jobs being taken in the near future.
For anyone in a job like that, and it’s all they know how to do, this could be life-changing. They’ll need to adapt to keep earning a living.
Here’s how the report’s authors put it:
“Our findings imply that as technology races ahead, low-skill workers will reallocate to tasks that are non-susceptible to computerisation – i.e., tasks requiring creative and social intelligence. For workers to win the race, however, they will have to acquire creative and social skills.”
Cashing in on automation
On the flipside, there are companies which are positioning themselves to profit from this trend. And they could turn out to be good investments in the years ahead.
A recent Investors Chronicle report picks out AIM-listed Blue Prism as a UK company well placed to benefit from the trend.
Blue Prism uses ‘software robots’ or what it calls its ‘Digital Workforce’ to automate rules-based back-office functions.
By employing these robots to do repetitive, time-consuming tasks, a company can free up its best people to focus on other more productive challenges.
And it’s certainly been finding no shortage of customers. Investors Chronicle said it “won 609 software deals during the year to 31 October 2017; up significantly from 189 deals a year earlier”.
The shares haven’t done too badly either: up 1,643% since the shares first started trading two years ago.
Consultancy firm McKinsey & Company predicts that “up to 30 percent of the hours worked globally could be automated by 2030”.
If it can keep selling its Robotic Process Automation software and ride this trend, Blue Prism should be well placed to cash in.
I think it’s a stock to keep an eye on.
Stay tuned for more on the evolution of AI
Of course, we’re just scratching the surface of AI here.
The automation of routine jobs is the starting point. And it’s all we’ve had time to look at in this issue of Monkey Darts.
But the scope of what robots are capable of now… and what will be possible in the future… is mind-boggling.
Dave Coplin is a world-renowned tech thought leader and for 12 years was Chief Envisioning Officer for Microsoft UK. Now he runs a consultancy advising on the impact of technology on society.
He says AI is “the most important technology that anybody on the planet is working on today.”
And it’s everywhere.
AI is already driving technological changes in industries as diverse as advertising, media, car manufacturing, healthcare and agriculture.
And according to one fascinating report I’ve come across lately, AI has HUGE implications for the financial sector.
I’ll take a closer look and come up with some ideas of how we can play this trend in future issues of Monkey Darts.
I’ll be back next Friday – have a great weekend.
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