Using technology to phase out human workers

I know I should be writing about Italy today since the country was downgraded Friday night to Baa3 by Moody’s. That puts it one notch away from junk and potentially makes the country ineligible for quantitative easing, were it to come to that.

But let me save Italy for tomorrow because I have run across a slew of good tech-centric stories. And I want to start with Engadget’s take on a recent Uber story from the Wall Street Journal because it’s pretty far-reaching.

Uber’s drone-based food delivery could begin in 2021

According to the Wall Street Journal, Uber is looking to hire someone with “flight standards and training” experience, who can “enable safe, legal, efficient and scalable flight operations.” If the info is legit, It looks like Uber is looking to keep development of the program under wraps as the job posting is no longer listed on its website. According to the Wall Street Journal’s report, the drone-based delivery service has been dubbed “UberExpress,” and will exist under the umbrella of Uber Eats. The job description reportedly described a desire for an applicant that can “help make delivery drones functional as soon as next year and commercially operational in multiple markets by 2021.”

Many large companies have been testing the waters of drone delivery services: Amazon made its first drone delivery via Prime Air in 2016, and Alphabet ramped up their drone delivery service last year. Regulations regarding drone operations are very complicated and stringent, however, so there are a lot of legal hurdles companies must overcome before we start seeing widespread drones-as-a-service take off. As such, getting UberExpress off the ground in three years feels like quite the undertaking.

Is this stuff from Uber and Amazon fanciful pie-in-the-sky or is the 2021 time frame a realistic one? Even if we’re talking 2021, it tells you where we’re heading: a whole slew of jobs will become obsolete, just as bank tellers and telephone operators have become obsolete.

I was at a Target megastore in Annapolis with my wife yesterday. And we went to the self-serve line of 4 check out kiosks. The kiosks were being monitored by a single employee instead of having four cashiers as you would have seen 10 years ago. So what happens to the other three potential employees? Are they redeployed elsewhere at Target? Or should we assume that they find jobs somewhere else? I think this is an important question because it’s not clear to me that these cashiers will find some other equivalent job somewhere else.

I see this discussion as related to the next story. My key takeaway there is in quoted below

They Said Seattle’s Minimum Wage Would Cost Workers a Lot. Now the Picture Looks Brighter. – The New York Times

“For folks trying to get a job with no prior experience, it might have been worth hiring and training them when the going rate for them was $10 an hour,” Mr. Vigdor speculated, but perhaps not at $13 an hour.

Who’s going to train these potential cashiers? And at what salary level does it make sense to do so? I wish I had the answer to that question.

Now, in a world of full employment, it wouldn’t really matter as much. If you can keep slack in the labor force down, workers will be in higher demand. And companies will be willing to train them. On Friday, I listened to a radio interview discussing the lack of skilled trade labor. A trade manager said that the US simply doesn’t train people for vocational jobs. And he was desperate for staff, willing to increase wages to entice people, wiling to pay existing staff more to prevent them leaving and willing to basically train people on the job.

Isn’t that where we want to go? I ask that as a question because I always get the sense that the model the Fed uses to deal with the economy is predicated on making sure just enough people are unemployed that this doesn’t happen. I call it Fed-engineered unemployment.

Now, in Japan, where society is aging, they don’t have that problem. It’s just the opposite. A German-language article gets at this. Let me pass on the link and the translated snippet in quotes below.

In seiner Not öffnet Japan die Grenzen – Arbeitskräftemangel: Japan lockt Ausländer mit neuem Arbeitsvisum – WELT

(Under duress, Japan opens the borders – Labor shortage: Japan lures foreigners with a new work visa)

“In recent years, the government has tried to counteract [the fact that there are fewer and fewer young people] by integrating more older workers and women into the labor market, but this too is not enough, so Tokyo is now planning to recruit more foreign workers, which is a small revolution for the country.

“The job market is tight”

The aging of society is particularly advanced in Japan. At the turn of the millennium, there were still 86.5 million Japanese aged 15-64, working age as commonly defined. There are now only about 75.5 million. “

I highly recommend running this article through Google Translate and reading it.

Speaking of immigration, here’s the latest from the US, where the President is trying to keep people out:

President Trump Threatens to Cut Aid Over Migrant Caravan | Time

Guatemala, Honduras and El Salvador were not able to do the job of stopping people from leaving their country and coming illegally to the U.S. We will now begin cutting off, or substantially reducing, the massive foreign aid routinely given to them.

— Donald J. Trump (@realDonaldTrump) October 22, 2018

The story notes:

Guatemala received $249 million of U.S. aid in 2017, according to USAID. Honduras received $175 million, and El Salvador received $115 million.

If you want to keep this on the tech theme, think of all of these stories in the context of machines replacing manual laborers and unskilled laborers. It’s not just UberExpress but also driver-less cars, where Waymo is starting a pilot rideshare program this year.

Here’s some more tech:

Netflix adds to growing debt pile with $2 billion bond issue | Reuters

Netflix Inc announced on Monday it will tap debt markets for a second time this year, aiming to raise another $2 billion as the streaming video pioneer invests heavily in production of original shows and content acquisition to fend off intensifying competition…

Netflix has said it plans to spend $8 billion on content this year. The company had already spent $6.9 billion on TV shows and movies by the end of its third quarter, suggesting that if they continue apace, their 2018 spending is likely to be closer to $9 billion.

Netflix in April sold $1.6 billion in debt, after raising $1.9 billion in November 2017, bringing their total debt to $8.4 billion, the majority of which has been raised in the past three years. Its long-term debt as a percentage of total capital has roughly doubled to 65 percent since the end of 2014.

This worries me. 65% is a huge number. US companies are leveraging up. And when the next downturn hits, some of these companies are not going to be able to service their debt.

Lime is building its first scooter ‘lifestyle brand store’ in LA | TechCrunch

My take: Note the following at the end of the article though – it points to why these business models are not good. Now Lime has a ‘lifestyle brand store’? Sounds like a bubble to me:

Regulators should inquire about what percentage of scooter company fleets are broken and what percentage of rides end within 90 seconds of starting, which is typically due to a malfunctioning vehicle. Cities could then award permits to companies that keep their fleets running, rather than that litter the streets with massive paper weights, or worse, vehicles that could crash and hurt people. Scooters are fun, cheap and therefore accessible to more people than Ubers, and reduce traffic. But unless startups like Lime put a bigger focus on helmets and cautious riding behavior, we could trade congestion on the roads for congestion in the emergency room. Hopefully the retail store will drive closer ties between Lime and city governments to prioritize safety.”

Regulation is always a missing cost in a lot of these blue sky business models. UberExpress and Amazon Air have that same problem too.

Here’s blockchain running into a regulatory buzzsaw in China.

China will soon require blockchain users to register with their government IDs

China’s central government has drafted a new regulation that would strip blockchains of their anonymity, requiring users to provide their real names and national ID card numbers when registering for a blockchain service. Trading Bitcoin is already banned in the country, but the policy will place significant restrictions on ongoing blockchain development.

Germany suggests global minimum tax for tech giants

Germany’s finance minister Olaf Scholz has proposed a global minimum corporate tax for multinationals as Europe takes aim at digital giants including Amazon, Apple and Facebook.

Mr Scholz said the internet economy “was exacerbating” the problem of companies piling their profits into tax havens, which he plans to tackle through joint measures with France to force companies to pay domestic taxes in proportion to their profits.

“We need a worldwide minimum tax level that no state may go below,” Mr Scholz, a social democrat in conservative Chancellor Angela Merkel’s coalition government, told the “Welt am Sonntag” weekly.

“We require coordinated mechanisms which prevent the displacement of revenues to tax havens,” said Scholz.

That’s it for tech. Here are a few other noteworthy developments to follow.

US home sales in September fall for sixth straight month to slowest pace in three years | South China Morning Post

Prices and supply of homes are rising, while buyer traffic has declined, according to the National Association of Realtors

Trump’s tariffs have made U.S. steel the most expensive in the world, Ford says | Financial Post

Domestic hot-rolled coil — the benchmark price for American-made steel — has gained 28 per cent in 2018 as the Trump administration implemented tariffs on imports. The levies helped push the price to about US$920 a metric ton earlier this year, the highest in a decade. U.S. steel currently costs about US$150 more per metric ton than steel in China, the world’s biggest consumer, which accounts for more than half of global demand.

Trump says team working on tax cut for middle-income earners | Reuters

U.S. President Donald Trump said the administration was studying a tax cut for middle-income earners that could be rolled out some time around the beginning of November, just before pivotal congressional elections.