The following is an excerpt from the RBC Wealth Management Client Note: "Is the Robocalypse Nigh? - A Special Report by the Portfolio Advisory Group - U.S. Equities":

"Humans have been worried about being replaced by technology since the invention of the shovel and the wheel. Automation unleashing mass unemployment is an old argument that can be traced back to the First Industrial Revolution. However, we believe that technology can invigorate GDP growth, spurring more jobs that evolve in tandem with advances in automation, as seen in past industrial revolutions. The growing integration of the broad range of robotics in the future is nothing to fear, in our view, and should be embraced as yet another technological leap that can save companies money, improve workplace safety, and enhance people’s lives.

The robotics industry is now worth $24.5B, according to VC firm Loup Ventures and trade group International Federation of Robotics, and projected to double in five years. Until now, the majority of robot usage has occurred within factories to automate menial processes, replace manual labor, or mitigate safety risks. Unsurprisingly, Amazon.com (see previous blog post) was in early on investing in this disruptive wave, buying warehouse robotics company Kiva in 2012 for $775M. Kiva’s technology automates the picking and packing processes within warehouses, and an Amazon executive has said that these robotic systems have cut operating expenses by 20%.

Hardly any occurrences in our digital lives happen by chance nowadays. The shows we watch on Netflix, the recommendations on Amazon, and the top items on Google search results are all strategically placed there through intelligence gathered about each individual and then processed by AI and big data. Machines seem to know about our needs and wants better than ourselves. And the ability to communicate with consumers, in terms of both intake and output, makes the intelligence more powerful and valuable.

Predictions can be wildly inaccurate at these early stages of change, so robotics’ ultimate penetration into our lives and the changes it may bring are still far from known. Looking back at how past industrial revolutions played out, we are optimistic that new jobs will be created in tandem with productivity growth as a result of advances in robotics. The Wall Street Journal projects AI to displace workers from 1.8 million jobs while generating 2.3 million new jobs by 2020. Robotics technology and AI are bringing exponential changes to how we live, work, and interact with the rest of the world. Change, particularly technological change, remains a constant in our lives, so we think it’s prudent to embrace and understand it."

 

Our Reflections:

While we tend to agree with the report above and the enormous positive effect it will have on many industries, we are not as confident in the timeframe for the coming change. For instance, the first mainstream usage of the Internet was in the early 1990's and it was revolutionary at that time. However, it can be argued that the true power of the Internet has only recently (in the last 5-8 years) begun to manifest itself with the worldwide adoption of social media and the ability to share information across the world. We are just starting to see mainstream usage of Artificial Intelligence in our daily lives, and we are always hoping for technology to impact our lives in a relatively short period of time, however, history suggests, that this change can take decades to manifest.

 

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