The Future of Work

    The Future of Work

    Last year, education expert Anthony Seldon made a bold prediction - within a decade, robots will start to replace teachers in the classroom. A revolution in one-on-one learning, according to the vice-chancellor of the University of Buckingham, will render traditional methods obsolete as machines adapt to the individual styles of children.

    The steady march of artificial intelligence has prompted many questions about what jobs will remain untouched in coming years. The answer, it appears, is very few. Dr Carl Benedikt Frey and Dr Michael Osborne of the University of Oxford predicted five years ago that almost half of all jobs are “at risk” of automation by 2033.

    “It’s not hard to imagine artificial intelligence and data analytics replacing a lot of the things that human beings have traditionally done”, says Robert Wolcott, a clinical professor of innovation and entrepreneurship at the Kellogg School of Management at Northwestern University.

    Some of the predictions for how working life will change are indeed stark, and that has sparked much hand-wringing about how humans will adapt, how economies will evolve, and how investors might benefit.

    Marketplace disruptions

    The idea of ‘technological unemployment’ has arisen sporadically since the Industrial  Revolution. Recently however, experts have warned that countries are unprepared for the impending changes that will come with automation.

    There’s a lot of uncertainty about the details of how this technology will affect the economy

    “My belief is that the next 20 or 30 years will be far more challenging than most people think,” says Wolcott. “Things will be far better when we start to shift our expectations about what work is and why we do it”.

    The immediate risk is in the short term, according to Ed Felten, of Princeton University’s Center for Information Technology Policy. As new industries and positions are created, there will be insecurity about the future. “There’s a lot of uncertainty about the details of how this technology will affect the economy,” he said.

    In order to prepare, countries such as Finland, Scotland and India are implementing or trialling universal basic income (UBI) policies as a potential response to potentially higher unemployment rates. Some prominent business figures, including Richard Branson and Facebook co-founder Chris Hughes, have championed the idea, which guarantees all citizens what amounts to a default wage.

    “The push for universal income really reflects a desire to rethink how the social safety net policies work,” Felten says. Expensive to implement, such policies can send resources to people who need them but also to those who don’t.

    “I do think it makes sense to be thinking about what a social safety net looks like in an economy where maybe [there is] a greater inequality of wealth and income and there may be a lot less job security for people,” he says.

    Adapting to automation

    A further challenge is making sure societies, and especially younger workers, have the skills to adapt and succeed in a fast-changing job market.The problem is nothing new. It is something we’ve seen throughout history, Wolcott said.

    Just look at how the automobile replaced the horse-and-buggy or how refrigeration replaced harvesting blocks of ice that were hand delivered by people to keep food from spoiling.

    And it is something we will see happen again, as new technologies automate our lives and replace human labour, said Walcott.

    “The question is: will we be able to replace and shift people to new roles and new capabilities quickly enough to maintain some level of access and stability from an economic and political perspective?”

    The changes could come faster than was seen at similar moments in history. Joel Mokyr, an economic historian at Northwestern University, noted that robots will be able to combine machine learning with artificial intelligence to teach themselves, which will revolutionise how warehouse work is done.

    “I would not be surprised [if ] in the end, the entire factory system [that] emerged in the late 18th and early 19th century will indeed, if not disappear, suddenly become much less prevalent,” he said.

    The new economy

    As capitalism adjusts, global markets will face the challenge of adapting their reference points as companies focus on new industries and types of work. For investors, choosing opportunities which capitalise on the shift will be pivotal.

    Wolcott points investors towards companies making strides in quantum computing and semiconductors, such as NVIDIA. Mokyr highlights the rise of 3D printing. As individuals gain the ability to create customised goods, shopping habits may change as people no longer have to go outside their home to purchase items, he said.

    In terms of how humble humans will fare, there will likely be a bigger emphasis and value placed on handmade and artisanal one-of-a-kind products, Felten says. Also important will be any jobs where human interaction is integral to the job, and where personalised attention is key. This could be as simple as buying a cup of coffee.

    “Part of the experience is having that person, the barista, fuss over your coffee. People want to see that. People who run coffee shops want to put that activity on display, because that’s part of your product,” Felten said.

    As capitalism adjusts, global markets will face the challenge of adapting their reference points

    A flexible future

    Other jobs, especially “knowledge workers” like actuaries will likely be replaced, Wolcott says, as more companies begin using artificial intelligence and data analytics.

    Workers who were previously educated in highly specialised skills will need to learn how to be more flexible and adaptable, Mokyr says. That could mean a growth in apprenticeship programs, according to Felten, a concept that favours countries like Germany that have a strong history in the area.

    How fast artificial intelligence and robotic systems automate and change the meaning and purpose of work will depend on the population and mindset of each country. Japan, with its ageing population, has more enthusiasm for automation to support an older, non-working community, Mokyr says.

    Regardless, the speed at which countries automate will go hand in hand with the continued globalisation of the economy, Felten says.

    “It’s going to be a time of faster change than we have seen before and much of it will be unpredictable.”

    Important information

    This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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