When I was 17 years old, back in 1971, I sold orange juice near a busy street corner in New York City. My job was to stand out in front of a fruit stand and dispense quarts of OJ from a machine. It was pretty simple: keep the hopper on the top of the machine filled with oranges and keep the supply of quart jars steady. Then, when a customer came by to make a purchase, I filled a quart jar with juice, took the customer’s money and rang up the sale in the cash register.
That was my job, rain or shine, in warm weather or cold: keep the machine operational, give the customer the goods and collect the money. Other people had this job, too. Selling fresh-squeezed orange juice to the masses by way of a rather simple piece of automation technology kept us busy.
But, here’s the thing. If my employer had to choose between me or the machine, he’d have chosen the machine every time. The machine was a gold mine. It made more orange juice in a minute than 10 human squeezers could have done in 10 times the amount of time. In fact, if my employer used humans, he would have lost money. The machine was key to his commercial success selling orange juice.
Now, hold this thought while I move forward to recent times.
In May of 2019, the rideshare service Uber went public. In order to issue shares on a public exchange, the company, as prescribed by law, needed to publish a prospectus describing its business model as well as how it intends to use the money it raised through the IPO.
Every company that’s listed on a public stock exchange publishes a prospectus. Facebook has one, and so does Microsoft. Even World Wrestling Entertainment, the folks that produce action-packed events such as the WWE Super ShowDown and WrestleMania, has one. The prospectus is the way the SEC creates transparency into the finances and commercial strategies of a company. If you take the time to read one, a prospectus will tell you a lot.
So I did. I read the Uber prospectus and I found something very interesting on Page 10: “We are investing in technology to power the next generation of transportation. Our Advanced Technologies Group (‘ATG’) focuses on developing autonomous vehicle technologies, which we believe have the long-term potential to provide safer and more efficient rides and deliveries to consumers, as well as lower prices,” stated Uber.
In other words, Uber is actively pursuing driverless technology as a key commercial objective. Why? Well, to answer this question let’s go back to my days in New York City playing trusty sidekick to the orange juice machine.
Back then, in order for my employer to make money selling fresh-squeezed orange juice, he needed both me and the machine working in tandem to fulfill the commercial objective to turn some oranges and a glass jar into money. In terms of his commercial objective, I was the weak link in the chain. I got sick. I had bouts of adolescent unreliability. I moved on to greener pastures when better opportunities appeared. If he could have replaced me with a vending machine that sold fresh orange juice he would have. If I were in his shoes, I’d do the same thing. But at that time, orange juice vending technology was not as advanced as it is today. I was lucky, I guess.
But, that was then and this is now. So let’s go back to Uber.
Remember, the commercial objective of rideshare is to turn a moving vehicle into money. Right now this involves a cellphone, a human and a car. The cellphone provides the driver with passenger pickup information and routing instructions to get to a destination. The car provides the transportation. The human operates the car in response to and with the assistance of information coming from the cellphone.
Right now humans are really good at operating motor vehicles and interacting with the cellphone and passengers very much in the same way I was really good at keeping the orange juice machine full of oranges and dispensing the product to customers. But, just as I was the weak link with the orange juice transaction, so is the human in a rideshare. The cost of a human can vary and things can get sticky in terms of legal matters that go with human employment. Yet, the risk is offset by profit the human produces, for now anyway. But, that can and will change. Take the human out of the equation and the profits go up and the risk goes down, provided the underlying automation technology is advanced enough to meet the demands of the situation.
If you have any doubt that driverless technology will advance to the point where humans can be replaced, think back to how crappy voice recognition was in 1989. It was really, really bad. Now, voice recognition is really, really good, even in a variety of languages. Getting to that level of technical maturity only took 20 years. Now, imagine how good a driverless vehicle will be 10 years from today. I’ll wager it will be really, really good.
Yes, some people will point to the current fatalities created by driverless automation to assert that human displacement won’t happen. But, if you have any doubt that it will, keep in mind that the were a lot of crashes early on when the Wright brothers took to the skies in 1903. Yet, by 1919 KLM was flying commercially. That’s a pretty dramatic accomplishment in terms of safety improvement for a technology.
So the long and the short of it is, just as the owner of the fruit stand would have gladly chosen an orange juice vending machine over me, so too does Uber want to take the human driver out of the car. For all intents and purposes, a rideshare vending machine will be the preferred way to meet the commercial objective at hand.
So, where does that leave humans?
The conventional wisdom is that as human labor continues to get replaced by machine automation, there will be new, unimagined jobs for those displaced workers. I think otherwise.
Consider this: around the 1880’s there were almost 200,000 horses in the City of New York. Now, if you can find 400, you’re lucky. Why? Because that much horse labor isn’t needed anymore. Some have gone onto other jobs, such as being a thoroughbred competitor at Aqueduct Racetrack or a tourist amusement pulling a carriage through Central Park, but as far as being the engine the moves street-cars, carriages and mounted pedestrians, that time has long passed. Horse labor no longer meets the commercial objectives of transportation.
So too will it be with humans who earn a living driving a motor vehicle. They will be displaced. Only this time there is a very good chance that there will not be the number of new, unimagined jobs created that will meet the needs of the broad segment of the population being displaced. Yes, there will be new specialized work, but not at the scale necessary to absorb the number of those out of work. After all, once the automobile came along, the 200,000 horses left behind in New York City did not go on to become thoroughbred racers.
The point of the analogy is this: the more specialized the work becomes, the more difficult it is to quickly acquire the skills necessary to do the work. For example, some displaced drivers might be able to become data scientists quickly, but a significant majority will not. To assume otherwise is folly.
Addressing the issue of worker displacement due to advanced automation is a serious problem, one that deserves significant attention. Hopefully, we’ll figure out some solutions that have long term viability. Otherwise, we’re in for some big trouble because no matter what, businesses will continue to advance and embrace automation to meet their commercial objectives. As the saying goes, “an ounce of prevention is worth a pound of cure.”