Good Friday morning.
Recent developments in robotics, artificial intelligence and machine learning have the potential to eliminate half the activities people are currently paid to do in the workforce, according to a study out from the McKinsey Global Institute this morning. And it’s not just manufacturing jobs. Many middle- and high-skilled jobs, including those in data collection and processing, have a significant degree of automation potential.
That change won’t happen overnight. The McKinsey report says it will take anywhere from 20 to 40 years for half of today’s work activities to be automated. And new jobs will be created in the process.
“People will need to continue working alongside machines to produce the growth in per capita GDP to which countries around the world aspire,” says the report. “Thus, our productivity estimates assume that people displaced by automation will find other employment.” But the work they do will have to change, requiring considerable re-education and training.
The report says the coming shift is of a similar order of magnitude to the shift away from agriculture that occurred in developed countries in the 20th century. You can read the full report here.
Separately, I spent a few hours yesterday visiting Year Up – an impressive program that gets disadvantaged young adults from urban neighborhoods into the workforce. Year Up students spend six months in a classroom, learning both technical skills and “soft skills” – interviewing, workplace behavior, etc. – and then six months in an internship. The majority end up with full-time jobs, starting at an average of $38,000 a year. President Garrett Moran, a former Blackstone executive, says the program, which this year had 3,000 graduates, attempts to prepare the students for lifelong learning – a skill they’ll clearly need, given the changes mentioned above.
More news below. And if you want to stay on top of how coming changes in Washington are going to affect business, sign up for our newest newsletter, the Trumponomics Daily, here.
• Amazon Does its Bit on the Jobs Front
Amazon said it intended to hire 100,000 full-time employees in the U.S. between now and the middle of 2018, an announcement that some saw as designed to pre-empt pressure from the new administration as it leans on big U.S. companies to create jobs at home. The announcement contrasts sharply with the mood music from the brick-and-mortar retail industry, and is a welcome upbeat note after its latest slip in India, where it got into hot water for selling doormats with the design of the national flag. If Amazon fulfils its plans, it will employ 280,000 people in the U.S. alone by mid-2018, many of the jobs being created in growth areas such as machine learning and cloud computing.
• China’s Export Motor Goes Into Reverse
China’s exports fell for a second year in a row in 2016, posting their second biggest decline in modern history, a 7.1% drop to $2.1 trillion. The full-year trade surplus checked in at $510 billion, after a surprisingly sharp 6.1% drop in exports in December. The numbers underline the vulnerability of China to more assertive U.S. trade policies, increasing the pressure on Beijing to seek alternative ways of supporting growth to maintain order in a country where social upheaval – through internal migration, urban development and the accommodation of the middle class’s aspirations – still surpasses anything being experienced in the West.
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• Wall Street Reports
Today sees a flurry of earnings from U.S. banks, and expectations are high after the election of Donald Trump promised a new age of higher interest rates, looser regulation and easier deal-making. The key news will therefore be how much of that optimism the banks feel confident enough to bake into their outlooks for 2017. The ‘Trump Bump’ in stocks has already flattened out and shown signs of crumbling at the edges (defense and pharma stocks being two cases in point). But bank stocks have been seen as some of the safest bets out there for 2017, and the stock market could use some reassurance after the last few trading days.
• Stop Me If You’ve Heard This One Before
Shares in Fiat Chrysler fell 10% after the Environmental Protection Agency accused it of using illicit software to hide excess emissions from over 100,000 diesel-powered trucks and SUVs sold in the U.S. since 2014. The EPA has been refusing for months to certify FCA’s 2017 diesels for sale. At a maximum $44,000 per vehicle, FCA faces a possible fine of $4.6 billion. Meanwhile, Loretta Lynch’s desk-clearing is reportedly set to continue with a guilty plea and a $1 billion deal from Takata to settle a criminal probe into its faulty airbags. Meanwhile in Europe, France launched a preliminary investigation into Renault over the same issue.
Around the Water Cooler
• A Bad Day For Drones
Google parent Alphabet shut down a project to use drones to provide wireless Internet connections across the world. It’s the latest display of Alphabet imposing tighter cost discipline at X, its venture capital arm. Many of the 50 employees affected will move to Project Loon, which aims to use a network of hot air balloons to provide wireless internet to remote areas. It wasn’t a good day for drones in general. Lily Drone also said it was shutting down after running out of cash, despite taking $34 million in pre-orders for its $499 selfie-taking drones.
• Boeing Gets Another Big Order From India
The Asian-driven boom in the airliner industry may be mature, but it’s not fading yet. SpiceJet, India’s fast-growing budget carrier, has ordered 100 new MAX 737 airplanes from Boeing, worth up to $22 billion at list prices (although a sizeable bulk discount seems in order). That follows an order for up to 105 aircraft from Boeing only two and a half years ago. Right now, it only has a fleet of 40 planes. Whether actual demand will justify such a huge expansion of capacity is still an open question. SpiceJet has already run out of cash once and intense competition is still stopping airlines from reaping the margin-expanding benefits of low fuel costs.
• Tata Goes Back to an Insider, With a Difference
India’s giant Tata conglomerate named veteran insider Natarajan Chandrasekaran as the new chairman of its holding company Tata Sons, hoping to draw a line under a bruising public spat over the ouster of his predecessor, Cyrus Mistry. Chandrasekaran, 53, currently heads IT outsourcing giant Tata Consultancy Services (TCS), India’s most-valuable company with a market capitalization of $67 billion. Although the appointment of a group lifer shows a desire for continuity, Chandrasekaran is not related to the Tata family and will be the first chairman of Tata Sons to come from outside the tight-knit minority religious community of Parsees in Mumbai.
• Oh, Technology. It’s Not You, It’s Us.
At CEO Daily, we always try to send you into the weekend with some uplifting thoughts. But some days are harder than others (and Friday 13th is a prime example). To wit: in a poker contest in Pittsburgh right now, a machine developed by Carnegie Mellon University is beating some of the U.S.’s best human players. “The reason this…is important and not just scientifically interesting is that it will show we can program computers to be deceptive,” says professor Tuomas Sandholm. Exhibit B: Facebook is posting job ads for “neural imaging engineers” to bolster its efforts to read users’ minds. Breathe deeply and recite into the mirror – no technology is inherently either good or bad. And enjoy the weekend.
Summaries by Geoffrey Smith Geoffrey.email@example.com;