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Despite the fact that we implement some very cool technology solutions – or perhaps because we do – we are ever-sensitive to the impact that technology has on people.  When our company began 30 years ago, we knew we could make companies much more efficient – the same principle that drives us today.  And a more efficient company has a much greater likelihood of staying that way, and staying in existence.

Still, as we flash forward thirty years hence, it’s important to pay attention to some of the job implications of technology.  Automation is a huge boon to the world’s workers, but only if companies and governments can manage the disruption that is often created.

According to a McKinsey Global Institute estimate, as reported recently in The Wall Street Journal, 375 million workers worldwide will “need to find new occupations or lose their livelihood to automation by 2030.”

That astounding figure represents roughly one in every seven workers on the planet, and the time line is only about a dozen years if the McKinsey folks are right.  One of its principals, Susan Lund, remarked that “The question is, what are we going to do to manage the transition for the people who do lose their jobs?”

While those of us in the tech sector bear responsibility to varying degrees for that displacement, it comes down to the choices made by policy makers and business owners about how to support those displaced workers.  This can take many forms, including investments in continuing education, training, new job-creation and the infrastructure-type projects that can support them.

Adopting automation tools, adjusting wages and reconciling regulatory issues all have an effect.  Ultimately, those higher wages create even greater incentives for companies to automate and innovate.  The transitioning of the affected workers creates a lot of potential for unrest – and remember, this isn’t just a national issue, but a global one.

In a sign of looking at the future in a whole new way, some countries are already experimenting with universal basic incomes – cash grants that provide a fiscal foundation in workers’ lives.  The idea is to see if, given a subsistence income, the basic support infrastructure can be put in place to free up workers to aspire to newer, higher or more entrepreneurial heights.  Or whether they’ll simply lose work incentive and just drop out altogether.

Support for displaced workers, Ms. Lund points out, can include guidance, career and skills coaching, and providing things like transportation and child care.

McKinsey estimates that about 15% of all hours worked globally could be automated by 2030 by using technology that is currently available.  “60% of all occupations could be at least partially automated with current tools,” though only 5% are at risk of total automation, they add.

Machine learning… artificial intelligence… and other advanced forms of automation are real, and arriving now.  Like past waves of technological evolution, they have the power to create more jobs than they replace.  As we noted in a recent post, it’s already happening as we transition from fewer retail workers to even more warehouse and logistic jobs.  This, as we noted, is already delivering higher paying jobs than the ones replaced, and more of them, which benefits all classes and sectors as the indirect result of technology’s contribution to higher productivity.

That increased productivity is what job growth, job creation and the benefits of automation are all about.  It’s why thirty years ago we made “Productivity” the first word in our company name.  And why the message is as important now as it was then.

 

 

On November 11th China’s Alibaba, the nation’s largest provider of cloud infrastructure, posted record sales of over $25 billion in a single day – known in China as “Singles Day,” a national holiday dedicated to the nation’s singles population.  The e-commerce shopping site hyped the day extensively, with 15 million products available from over 140,000 brands of merchandise.  They processed over 800 million orders, at rates said to be on the order of 175,000 transactions per second.

That’s a big deal, reminding us why the cloud is a big deal too.

Alibaba dominates the Chinese cloud, with about 60% of that market, but U.S. firms still lead globally, led by Amazon Web Services and Microsoft.  China won’t issue data center licenses for foreign customers, which gives local firms like Alibaba and Tencent Holdings a big leg up there.  And it shows.

Last year Chinese automaker Geely, which runs its operations in Alibaba’s cloud, ran a one-hour marketing promotion that resulted in the sale of more than 2,000 vehicles.  Clients like Geely know that Alibaba will spin up a lot of servers on short notice when they need the computing power.  They can make 10,000 computers available in a half hour.  Think about that.  Even if you owned 10,000 PCs, it would take you longer than that just to switch them on!

If anyone doubts the coming dominance and rapid build-up of cloud infrastructure, take note that Alibaba is just one of a number of companies with a massive investment in a state-of-the-art data center on the banks of a huge artificial lake.  It’s a massive complex that looks like a bit like a giant server itself.  It sucks and pumps water from the lake to cool down its seemingly countless servers.  Eventually the water runs through a canal and back to the lake.  In winter, that water is actually used to heat the office.  Amazon employs a similar approach in Seattle and also in Switzerland.  Data centers in Scandinavia, Iceland and Greenland are or will be employing their geothermal landscapes to much the same purpose, keeping those servers cool and humming non-stop.

As to why it’s a big deal: this is how people shop now.  China’s Singles Day event is proof of concept, where 500 million consumers now comprise its middle class.  That will only grow.  It’s already a $5 trillion market.  And within about 4 years, it is predicted that China will account for about 60% of global e-commerce.  Win China, and as Forbes Magazine recently noted, you win the world.

 

Who Owns The Cloud?

Cloud storage services have become big business.  And a handful of familiar names are quickly grabbing up ownership of most of it.

For starters, Amazon is by far the largest cloud provider today, garnering (according to Amazon Web Services CEO Andy Jassy) “several times as much business as the next 14 providers combined.”

Microsoft is next largest in terms of sales of the infrastructure services that store data and run applications.  But at last read, they were still less than one-fifth Amazon’s size.

And Google places third, even though they are now by market value the second-largest company in the world, though with only about one-fifteenth of Amazon’s cloud business revenues.

Still, Microsoft and Google aren’t standing still.  Microsoft’s cloud unit, called Azure, has won over some large customers lately including Bank of America and Chevron.  They are said (according to a recent article in Businessweek) to have done it by focusing on salesmanship and relationship building skills, something not necessarily the forte of the Amazon business model.  Microsoft CEO Satya Nadella has pushed his sales force into “a roving R&D lab and management consultancy.”  They’re hooking up smaller startups with potential investors and giving larger prospects access to a sales team that helps them market their Azure-based apps to their own customers.  Win-win.

Microsoft is also increasingly moving its traditional Office suite to the cloud via initiatives like Office 365 and the new Dynamics 365 products and branding.  This makes it more likely that when companies consider moving off their own data centers they’ll consider Microsoft favorably, exploiting that existing relationship when it comes to migrating to a public cloud.

To step up its game, Google recently hired the co-founder of VM Ware, Diane Greene, to run its cloud business, starting with a cloud sales force they are building from scratch.  Google also recently announced a partnership with Salesforce.com to take advantage of its list of preferred cloud providers, according to Businessweek.

One big advantage both Google and Microsoft will try to exploit over Amazon is the fact that Amazon often competes fiercely with many of its own prospective cloud clients.  Wal-Mart and others are not keen on seeing their AWS payments benefit the very retailer they most compete against.

It’s still too early to say who will end up on top, but the battle is fierce, and you can expect all three of these tech titans to be in that mix for years to come.  It’s already a $35 billion market that’s projected to grow to about $90 billion within four years according to Gartner analysts.

As AWS’s Jassy notes, “This is the biggest technology shift of our lifetimes.”

 

19 million employment positions in the U.S. will be automated out of existence in the next 15 years… while employers will create 21 million new roles.  So says Ben Pring, director of the I.T. services and consulting firm Cognizant Center for the Future of Work, in a new book titled “What to Do When Machines Do Everything.”

The question becomes – on both ends – what jobs go and what jobs will replace them?

We’ve already seen the massive disruption in retail, and autonomous vehicles are fast approaching, portending a grim future for certain transportation positions.  Taxi drivers have already been obliterated by the likes of Uber and Lyft.

For the future jobs, Pring and colleagues suggest titles as esoteric and wide-ranging as “gender diversity officer,” “virtual store Sherpa” and “personal memory curator.”  Don’t think so?  Then how about lower tech alternatives like “walker-talkers”: contract players (or “gig workers” as they’re commonly known today) who can answer calls to assist and provide companionship for the growing number of the elderly expected in the years ahead.

Robots, artificial intelligence and the march of automation give concern to many that machines will replace people.  But to a large extent we’ve been saying that since the industrial revolution replaced agriculture as the chief means of earning a living.  In fact, many studies have concluded that these new technologies will create still newer jobs – and in even greater numbers than the ones they replace.  To some, it feels like one of those watershed “industrial revolution” (or perhaps, info-data revolution) moments.

Recent efforts to control ‘fake news’ are just one example where AI can do part of the job, but it still takes real live humans to do the hard parts, like making the subtle discernments.  Facebook alone is hiring 10,000 such human curators, to manage the sprawl of news bots and fake news creators.  It seems that humans will have an active role in building and, especially, running AI tasks for a good while.  Just as in retailing, store jobs have been replaced by even more warehouse fulfillment jobs (usually at higher pay), jobs replaced by the various new forms of automation will be replaced by newer forms of work – which means that jobs lost are translated into new– and often better — jobs created.

In fact, according to Vanessa Fuhrmans in an article in the Nov. 16th Wall Street Journal, Pring and colleagues envision jobs that “involve helping companies manage artificial intelligence and automation” with “data detectives,” workers who dig into their firms’ data stockpiles and generate business recommendations.  This mirrors the “big data” movement today where companies (including ones right here in South Bend, Indiana) are employing Ph.D.’s and other so-called ‘rocket scientists’ to cleverly mine millions of bytes of computer and other machine-collected data, pawing through for trends that lead to sound business intelligence – and hence, the holy grail of competitive advantage to their owners.

In the end, as Pring concludes, “Work will change, but it won’t go away.”  Or as Bruce Springsteen once sang, “Them jobs are goin’ boys and they ain’t comin’ back.”

Ah, but newer jobs will – and the sooner we embrace them, the better for all.

“I think I can safely say that nobody understands quantum mechanics,” said Nobel Prize-winning theoretical physicist Richard Fenyman.  His sentiments were echoed by Bill Gates, who said recently that Microsoft’s quantum-computing project is “the one part of Microsoft where they put up slides that I truly don’t understand.”  Even Albert Einstein couldn’t wrap his head around it, so to speak, declaring that the thinking behind quantum mechanics was fundamentally flawed.

And yet… Scientists have since proved the theory repeatedly and conclusively.  More to the point, computers today are being built upon the principles of quantum mechanics – they actually exist.  And wouldn’t you know it, Google (a division now of Alphabet, Inc.) is taking a lead role.  (So is China.)

The oversimplified guiding principle here is that in the quantum world – the world at the atomic level – a strange phenomenon exists known as ‘superposition’ which states that a single atom can be in two locations at the same time.  In our ‘real’ world, that’s simply impossible, and so we can excuse Fenynman, Gates, Einstein and ourselves for not ‘getting it.’

But as Vijay Pande, a partner at Andreessen Horowitz, the Silicon Valley venture firm says, “If this works, it will change the world and how things are done.”  He’s not kidding.

How these things work is less important to most of us than what their working may portend for the future.  At the ‘how’ level, quantum computing involves using qubits rather than the traditional computer’s bits.  In bits, everything is either a one or zero.  In qubits, they can be a one and a zero at the same time.  This allows qubits to process a lot more information than bits, which are set in a specific state – exponentially so when they are combined.  Thus, while 1 qubit can equal 2 bits, and 2 can equal 4, by the time you get to 10 qubits you have the ‘equivalent’ (loosely speaking) of 1,024 bits.  And at 20 qubits, you have over 1 million equivalent bits.  You get the idea.

The practical application of this compounding expansion of computing technology becomes very relevant when you start looking at really deep and complicated problems, for example unbreakable encryption, or simply creating algorithms to calculate the fastest routes to the airport with minimum traffic.  A classical computer would take 45 minutes to take the data of 10,000 taxis and perform that task; an experiment with a quantum computer from the Canadian firm D-Wave (whose quantum PC is pictured above) did it in less than a second.

Because large-scale encryption can be enabled (reverse-factoring prime numbers is a common encryption technique) as well as unbound (or cracked), quantum computing power has attracted the attention of the NSA, where code-breaking quantum computers could be devastating to the national security.  NSA employees and vendors have already been put on alert that they will soon need to overhaul their encryption techniques.  Of course, the NSA (like Google) is building its own quantum computer.

The potential exists to upend entire industries, which of course is why Google is employing its quantum computing powers in the realm of AI.  Word is they already have a 22 qubit chip, frozen inside ‘cryostats’ in Santa Barbara, and that they plan to use their complex (and expensive) setup to deliver quantum computing via the cloud, possibly charging by the second according to reporters at The Wall Street Journal.

There are still some very real hurdles to overcome, from error-checking to the expensive containers for the chips used to power then, but if computers have taught us anything the past 50 years, it is that the future will always be faster, and hence more powerful – and the sky, or perhaps more to the point, the atom – is truly the limit.

 

In the warm afterglow of Thanksgiving, let’s give thanks for Indiana’s manufacturing sector.

Recently, Brian Burton, CEO of the Indiana Manufacturers Association noted in the Northwest Indiana Business Quarterly (Fall 2017) the importance of manufacturing to our home state of Indiana, and the lofty position that’s placed us in the national picture.  Following are a few highlights…

Most people, even in Indiana, have little idea how important manufacturing really is to the state.  In fact, it’s the driving engine behind Indiana’s economy.  Last year it accounted for $98.4 billion, or 29% of our GDP.  That dwarfs everything else we do: for example, coming in at a distance second place with only half the GDP impact was finance, insurance and real estate.  Retail stood at 6%, wholesale industry at 5% and construction at 4%.  For the record, the “information” industry recorded 2% of the state’s GDP, and farming was just 1%.  That might surprise a few folks.

In terms of that $98.4 billion GDP, Indiana ranks 6th in the nation overall, behind only California, Texas, Ohio, Illinois (barely) and North Carolina.  Moreover, on a per capita basis, Indiana ranks number one overall in the nation, with nearly $15,000 output of GDP per person.  That’s about two and a half times the national average.

From a jobs standpoint, Indiana is actually the most manufacturing-intensive state in the country, and the number-one manufacturing employer with over 528,000 residents employed in the sector.

Indiana also pays some of the highest wages, and manufacturing is the largest supplier of benefits, particularly healthcare.  When you combine wages and benefits the average annual compensation for manufacturing in 2016 was almost $74,000, compared to about $46,000 for all “nonfarm businesses” in Indiana.

Drilling down for a second, metal fabrication is the top category of manufacturing, with machinery manufacturing ranked second.  While transportation ranks fifth (think: Recreational Vehicles) from an employment perspective it’s number one by far, employing over 130,000 Hoosiers (metal fab employs 59,000).

Is there a downside to all this good manufacturing news?  Well, maybe.  Most folks here know that finding employees is a big concern, and that appears true across the state.  Finding qualified employees remains a top challenge, notes Burton, who wants to ensure that everyone in the state from elected officials to schools, parents, students and everyone else know of the many opportunities and bright future in our state for manufacturing.  In that regard, there is clearly still much work to be done, as Indiana strives to maintain its high national ranking in one of the key job-building forces in the nation.

But on the upside, we’re starting that effort from a very high place.

Happy Thanksgiving!

Everyone at PSSI wishes all our customers, partners, friends and families a peaceful and restful Thanksgiving holiday!

 

 

(We’ll return to more serious business next week.)