The Onslaught of Automation (Why I Save So Much, Part 3)

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Is this guy coming for your job?

Today we’re back talking about why I save such a high percentage of my income.

Last week we talked about buying options and how hard work is paying less and less over time.

One of the reasons that we are being paid less for our labor is the increasing reliance by companies on automation. This increased automation is a serious enough concern that it gets its own article today.

Moore’s Law

In technology, there is a rule of thumb called Moore’s Law. What Moore’s Law says is that the number of transistors that can be fit onto circuits doubles every 12-18 months.

In and of itself, that sentence means absolutely nothing to me.

What it signifies, though, is that technological growth is exponential.

Technology advances, which allows technology to advance even faster, which allows technology to advance even faster.

As we are money nerds over here, think of it like compound interest. When you invest money, your money earns interest. Then your interest earns interest. Then your interest’s interest earns interest.

The pace of growth gets faster and faster.

This exponential growth is what makes it possible for you to carry around a phone in your pocket with more processing power than all of the technology that we used to land a man on the moon. Millions of times more power.

Unexpected Advances in Automation

What Moore’s Law means for automation is that it will happen faster than we expect.

There were a number of studies, papers, and books in the early 2000s that discussed automation. The belief at that time was that automation would only be able to replace routine, repeatable tasks.

Driving is one example of work that supposedly could not be automated. Surely there was no way to program a car to take a left turn in traffic. There is far too much human perception that needs to go into making those kinds of decisions.

Another example, from a 2003 study, was “deciphering the scrawled handwriting on a personal check.” This is non-routine because everyone’s handwriting is different. While it is easy for a human to read different writing, it was not easy for a computer.

Except that now we deposit checks at ATMs all the time. We can even deposit checks by taking a picture of them with our phones. (Think about how that last sentence would have sounded in the 1990s.)

We’ve also got driverless cars on the road successfully making left turns in traffic every day.

These are tasks that specifically were mentioned as long-shots for automation that are automated a decade later.

If you feel like your job is exempt from automation, it might be time to do a little more research.

(And if you think you are safe because you are involved in a job that requires creativity, then I’d like you to meet the robot composers that have been writing music since 2010.)

How Automation Expands

There are two main ways that automation has been able to break into so many fields. The first is splitting up tasks. The second is machine learning.

(I also apologize in advance to any tech experts in the audience. I am new to this area, and so my explanations are overly simplified. If you believe any corrections or clarifications are necessary, let me know in the comments.)

First, splitting tasks. If one person is designing and building a piece of furniture, it requires a very high degree of skill. If instead, you split this task among ten people who each have one small part of the process, it suddenly becomes more routine and repeatable.

This was the idea behind the assembly line. If each person had a smaller and more specialized task, the team as a whole could work more efficiently and create more products.

But tasks that are routine and repeatable are also susceptible to automation. Once something becomes routine, it becomes possible for an algorithm to take over. This is why we are seeing a lot of automation right now in manufacturing.

The next method (and the method that was not predicted by the early-2000s prognosticators) is machine learning.

The simple explanation of machine learning is that humans write algorithms that then improve on their own as they are exposed to new data. This is how Netflix learns what you like to watch and how Facebook learns what to put in your newsfeed. The predictions get more accurate as you provide the algorithms with more data about yourself.

The implications of machine learning are really fascinating. For an understanding of how machine learning could cure cancer in our lifetimes, check out The Master Algorithm. For an understanding of how machine learning could lead to the extermination of all humanity, check out Wait But Why’s Road to Superintelligence part 1 and part 2.

For our purposes here today, machine learning means that the tasks that can be automated in the near future may be tasks that we cannot predict. Big data can be absorbed to solve lots of engineering problems that seemed insolvable, like teaching a car how to drive itself safely and learning how to read messy handwriting.

The Oxford Study

The most commonly-cited study on automation is a 2013 Oxford study.

(Normally I read the studies so you don’t have to, but this one is actually an interesting read. It has a well-written discussion on the relevant background information and what to expect going forward if the topic interests you.)

Most mentions of the study cite the top line number and ignore everything else. And, to be fair, the top line number is a huge deal that everyone should know.

The study found that 47% of jobs that people are working in today are at high risk of being fully automated in the next 10-20 years.

47%! That’s almost half of all jobs! In the next 10-20 years!

And I’m here to tell you that that may be underselling the total changes.

Partial Automation

The 47% number that the Oxford study lands on is for jobs that can be fully automated. This means that it excludes all jobs that will lose workers due to partial automation.

The example the Oxford study uses is that of construction. Robots cannot really take over the job of a construction worker building a house. They can’t traverse an ever-changing job site in unpredictable weather to do a wide variety of different tasks.

But they can make parts of houses in a warehouse and then ship those parts out.

And this is what we see happening more and more. Prefab homes are built in a warehouse piece by piece. The sections are then shipped to the construction site and assembled there.

This process won’t eliminate the need for homebuilders, but it will certainly reduce the need for them. You need a much smaller crew to assemble a home prebuilt by robots than you do to build a house from scratch.

The same type of trend is (and will be) true in my field. As a lawyer, I do a number of different tasks. For example, I interact with clients, review and analyze documents, research case law, write memos and motions, and argue cases in front of judges and juries. As a government lawyer, I also do a lot of work that at private firms would be done by legal assistants and paralegals.

As noted in the Oxford study, legal assistants and paralegals are at high risk to be fully automated out of existence in the next 10-20 years. On top of that, document review and legal writing are already being automated and the quality of those processes will continue to improve. Researching case law has also become easier and easier with the advancement of technology.

While interacting with clients and arguing cases are at a very low risk of automation (at least in the near future) a significant amount of work could be automated off of my plate. And those of my coworkers. At that point, we may only need a third of the current lawyers on staff to do the same amount of work. Maybe fewer.

Add to that the online companies that are starting to computerize a lot of legal tasks (think Legal Zoom and Novo) and you’re looking at the same pool of lawyers competing for a smaller and smaller list of jobs. Not only will this make jobs harder to come by, it will also drive down salaries as the supply exceeds demand by more and more.

Economic Collapse?

All of this probably makes it sound like I am predicted a permanent 60% unemployment rate and the collapse of the American economy. I’m not.

We’ve gone through economic revolutions before and the economy as a whole has come out the other side just fine.

The Industrial Revolution was a massive economic upheaval. It displaced entire industries and left workers unemployed. But it also created new jobs that nobody could have predicted. The entire idea of a factory job was nonsensical and unimaginable before the industrial revolution.

This is the pattern of economic revolutions. Creative destruction as a process creates new jobs and industries while destroying old ones.

It’s possible that this time is different. Maybe this time we only get the destruction. Maybe we end up with a permanent 60% unemployment rate.

But I am always skeptical of anyone who says “this time is different” to pretty much anything. So I am moving forward under the assumption that the economy will be fine in the long run. I am anticipating that our kids will choose from a number of jobs that we haven’t even imagined at this point.

Automation and the Individual

The biggest problem with creative destruction on a massive scale is not to the economy as a whole. Instead, it is to the individual.

The solar power industry has created far more jobs than have been lost in the coal industry. This is great news for the economy.

It doesn’t help the unemployed coal miner who has spent his whole life in that one industry.

So, yes, the economy will probably be fine. But individuals are going to be hurt.

I don’t want to be one of those individuals. If my field is automated out of existence when I am 50, I don’t want to need to learn a whole new field and start at the bottom of a whole new career ladder.

Maybe I will want to. Maybe I’ll see a field that interests me and will want to dive in and learn new skills.

But I don’t want to rely on that path as the only way to pay my bills. I want options.

Plus, increased automation will lead to even more income inequality. As we saw last week, if we can’t reverse the trends, we might as well not get left behind.

So what about you? Have you thought about automation in your field? Do you think my analysis is overboard or unwarranted? Let us know in the comments!

24 thoughts on “The Onslaught of Automation (Why I Save So Much, Part 3)”

  1. I’m pretty sure my seasonal job (tax prep) will go bye-bye, at least for regular folks. I already see that most of my clients are older. The software to do it yourself is good and getting better, and the overhead of a place that does strictly tax prep is high (12 months of rent, etc for 3 months of work.)

    One of the books I’ve read in the last year is Ready Player One. First, it’s a really fun book with lots of callbacks to the 80s pop culture of my childhood. But second, the dystopia in the book seemed really relevant. Few jobs, and those mostly remote and low paying. Virtual schools. Debt-induced indentured servitude. No government other than what megacorps chose to do. Crazy stuff, but just plausible enough to say maybe it isn’t so crazy.

    So for now, I’m encouraging my kid’s interest in coding and saving my pennies.
    Emily @ JohnJaneDoe recently posted…How to Become a Millionaire: Jon’s 10-Minute Speech to New GradsMy Profile

    1. I also do some seasonal tax prep. My thought was that once I’m far enough along on the FI path I could have the option of doing just the tax prep work. I’d get to work 3 months out of 12 and could work from pretty much wherever in the country I wanted. Lately I’ve been coming to the same conclusion as you. There may not be tax prep work to do 10 years down the line.

      And I loved Ready Player One! Such a fun read. It is kind of an unsettling view of the future in that it isn’t hard to see how we could end up going down a similar path.
      Matt recently posted…You Always Have a ChoiceMy Profile

  2. Automation has done wonders for my personal finances and I’m thankful for that. I also agree with Emily that a large number of professions are going to be obsolete in its current state in the near future. It’s up to us to keep innovating and creating a place where the human aspect is a necessity. Very excited to see what this generation continues to come up with!

    1. There are definitely a lot of exciting aspects of automation. It has made our lives a heck of a lot easier and has made a lot of consumer goods cheaper, allowing us to enjoy luxuries on a budget. The next generation could do some great things with technology. I do think we’ll be able to solve some of the most intransigent problems that we’ve been facing.

      Thanks for stopping by with a positive outlook, Lance!
      Matt recently posted…You Always Have a ChoiceMy Profile

  3. I am definitely on board with you when it comes to automation. It’s going to be coming in a wave. I definitely worry from time to time that the accounting work will be replaced by an office of Watson computers so I am working hard to develop my skill sets so that I’ll remain marketable. I’m also trying to save as much as possible so that when the time comes I can exit the workforce when I choose as opposed to a machine showing me the door 🙂
    Mustard Seed Money recently posted…How Much Do You Spend On Furniture?My Profile

  4. I’m an attorney and I always assumed that it was a profession that was pretty safe from automation. Sure there are things like document review and stuff like that which I could see being automated but not the more complex things like drafting legal documents. I’m not so sure anymore: http://www.slate.com/articles/technology/robot_invasion/2011/09/will_robots_steal_your_job_5.html
    Andrew@LivingRichCheaply recently posted…The Pension: My Golden HandcuffsMy Profile

    1. I often get a response of “But we’ll always need lawyers!” when the topic of automation comes up. But is that really true? And even if it is, how many of us will they need in the future? The scariest part about that article is that it is 6 years old!

      Thanks for the comment, Andrew.
      Matt recently posted…You Always Have a ChoiceMy Profile

  5. I’ve not thought too much about automation in my field – project & office mgmt – but it seems anything is possible! Thus, like you, I’m saving (automated) and buying options.

    I do still struggle to wrap my head around driverless cars. And I had to laugh about mobile deposits of checks. Yes, we would have thought that was nuts in the ’90s. I wonder what we’ll be saying 10-20 years from now!

    1. I am actually looking forward to driverless cars. The vast majority of accidents occur because we all suck at driving, so the roads would be a lot safer if we weren’t behind the wheel. Plus, reading a book or writing while on a long road trip would be great!

      It is an interesting thought experiment to try to think about what drastic changes could exist in the near future. The old Nokia brick didn’t come out until 1997, cost a ton of money, and all you could do besides call was play Snake. Look at where we are 20 years later!

      Thanks for the comment, Amy!
      Matt recently posted…You Always Have a ChoiceMy Profile

  6. Nice write up without having to mention anything about how many millions of bits/sec. I have no fear for our economy or unemployment in the augmented phase of this transition. As we are working alongside these machines and with these machines there will be more jobs and wealth than ever. The scary part, that I’m not convinced is possible, is when one machine is created that is 1% smarter than we are.

    The day this happens we become obsolete. The robots will build and design the next generation of robots and so on. If the robots start programming themselves who is setting the goals and will the goals always be in humanities best interest?

    1. The 1% smarter robot is a really interesting thought experiment. It is the base of the discussion in the Wait But Why article I linked to. It discusses the improvement generation to generation that you mention and concludes that there are really only two possible outcomes: either we solve all of the world’s problems, or the robots kill us all. Somewhat high stakes.

      Thanks for the comment, Grant!
      Matt recently posted…You Always Have a ChoiceMy Profile

  7. This is an interesting post and it really gets me thinking. I don’t fear automation, but I do fear being left behind by automation. This is why I am working hard to have my money produce more income. So if my job ever gets automated, I have a choice. I can choose to work in another industry or I can just retire because I have saved enough money.
    Leo T. Ly @ isaved5k.com recently posted…Who’s The Real Leo T. Ly?My Profile

  8. The key to this whole article for me is this statement:

    “I am always skeptical of anyone who says ‘this time is different’ to pretty much anything.”

    I, too, am moving forward under the assumption that the economy will be fine in the long run because new jobs that I can’t even imagine will replace the old. I only hope that I get at least 5 more years out of good, intense lawyer work before it’s all automated! (And I imagine that’s as close to a guarantee as I’ll ever get in anything.)
    The Vigilante recently posted…Net Worth 2Q 2017: It’s Amazing What You Can Do…My Profile

    1. I think 5 years of lawyering is probably a safe bet at this point. I’d start being worried 15-20 years out (which is one reason that I’m working to have the money to be able to leave before 15-20 years is up). It feels like the legal industry will be a gradual decline rather than a sudden collapse.

      Thanks for stopping by!
      Matt recently posted…As Happy as an Old PersonMy Profile

  9. If you talked to a horse in the 1900s, they probably would have said the same thing. “Sure, cars will be a thing of the future but they’re never going to replace horses entirely. We’ll find new jobs.” And now there are significantly less horses and most of them are prancing around in dressage costumes.

    So, I think it might be a false conclusion to choose between whether “this time it will be the same” or “this time it will be different”. It might be both. It’ll be the same as it was before but this time it’ll impact humans.

    Automating our physical jobs during the Industrial Revolution isn’t a great one-to-one comparison to the automation that’s going on now. Sure, the Amazon drones are further automating physical labor, but what about IBM Watson and the automation of news writing articles such that humans have a hard time knowing whether it was written by a robot or a human? We’ve never dealt with automation before that replaces (or supersedes) our mental ability to think.

    I think the coming automation revolution is a pretty big deal and I firmly want to be on the side of the capitalists rather than the labor, since all the spoils will go to the owners of the machines (e.g. consider the profit per person at Google compared to the profit per person at General Electric).

    Great read!
    Biglaw Investor recently posted…Investing Strategies You Can’t IgnoreMy Profile

    1. All fair points. I’ve heard good arguments on both sides and haven’t really been able to decide which side I fall on. The key for me is that whether you think automation will cause long term joblessness or you think it will just cause short or medium term instability, the solution for individuals is the same: Get as much money in capital as possible. The policy approaches to solving the problem would be very different and if I were an elected official I would be spending a lot of time studying this issue and talking to experts, but from where I’m sitting now I need to invest either way.

      Thanks for the thoughtful comment!
      Matt recently posted…As Happy as an Old PersonMy Profile

  10. I work in IT, so we’re pretty close to automation and the power of things like machine learning and artificial intelligence. I actually have a co-worker who decided to switch fields into machine learning because he’s afraid that if he doesn’t, he’s not going to have a job in 5-10 years. It’s amazing just how fast technology is changing the world. Many jobs available now didn’t exist 10 years ago, and most of the jobs 10 years from now don’t exist yet.

    1. I do wonder if everyone will need to have some grasp on machine learning and AI in the future in order to continue working. In the same way that email and the Internet have become ubiquitous as necessary tools in the modern workplace, will we need to be able to work with AI and machine learning algorithms to get anything done in the future?

      We definitely live in a time of rapid change.

      Thanks for stopping by, Liz!
      Matt recently posted…As Happy as an Old PersonMy Profile

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