The Emperor’s New Jobs

January 29, 2017 |

BD TS 013017 jobs cover sm

Among biodiesel’s amazing growth stats is word from LMC International that the 2.1 billion gallons of biodiesel and renewable diesel used by Americans in 2015 supported $8.4 billion in economic impact across a wide variety of economic sectors. But here was the weird news. There were 47,400 jobs.

It reminds us of a trend in the general economy and especially in the bioeconomy, and that is the death of jobs. Or at least, the dearth of them. Work will go on forever, but I am not so sure about jobs.

Not long ago, a bioeconomy player announced a $250 million project that would convert up to 300,000 tonnes of waste agricultural residue to biofuels and renewable chemicals. There were construction jobs that would come with the project, and work in the design and procurement phase for engineers and suppliers alike, and after opening there would be more work for harvesters of biomass. But there were far less than 100 full time jobs on site. Even with a healthy jobs multiplier that took into account the total economic impact a project has on a community, the ratio of capital to jobs is going to be something like $500,000 to 1. And that does not account for initial inventory and working capital.

Now, the jobs that have been eliminated over the years in the rural sector have generally been the most back-breaking, repetitive and low-paying. The jobs at the biorefinery we mentioned here are almost all skilled, good-paying jobs: operators, engineers, project management, lab techs.

But still. At these ratios it would cost $500 billion to create a million good-paying jobs — and that’s not sustainable with our current economic structure.

Why does any of this matter?

Pretty hard to get public support for an innovation, if there’s next to no jobs created by it. And in a nation more replete with fracked oil and gas, and that has (at the most recent elections) turned away from the hard yards of greenhouse gas emission reduction — Employment is the only E left standing in the old triad of Employment, Energy Security and Emissions that used to drive support for renewable fuels.

The Death of Hands-on in the Manufacturing Sector

A friend shared this image and post with me:

BD TS 013017 jobs

“In this photo are three structural nodes, intended to hold cables above a road in The Hague.,” the friend writes. “The difference is the node on the far left was designed by a human, and on the far right by a computer. More importantly, the node on the far right supports the same weight, but weighs 75% less and is 50% smaller. It makes you think where design and aesthetics will shift toward, in a future where computers design our world.”

Now, engineers amongst the Digest’s readership are already reacting — for the design on the right — to potential manufacturing issues, inspection and repair difficulties, performance under torsion or bending (vs. load), fatigue cracking, and more.

So, the image above may not be a sign that the human era in manufacturing in design is quite over. But it is a milestone along that path.

The Death of the Service Sector job

And let’s not assume that jobs in the service sector are completely safe — whether from the volatility imposed by economic cycles, or replacement brought on by innovation.

Clearly, jobs in the service sector are much lower cost to create. This source says that it costs about $380,000 to build out an average Starbucks, and this source says they average 20 jobs each. The capital to jobs ratio there is around $20,000 to 1.

But consider this report that appeared recently in USA Today:

Amazon is testing a grocery store model in Seattle that works without checkout lines. Called Amazon Go, shoppers scan their Amazon app when they enter the store, and then sensors register items that shoppers pick up and automatically charge them to the Amazon app. If a shopper puts the item back they aren’t charged. The store offers ready-to-eat meals, staples like bread and milk and meal-making kits. The store is in testing and is open to Amazon employees on a trial run. It is expected to open to the public in early 2017.

And, many readers will have experienced Apple Stores that do not have check-out lines. Or the widespread disappearance of toll-booth workers as electronic toll payment has gained traction.

An Amazon Go promotion.

An Amazon Go promotion.

The Decline of the Financial Sector job

If you think the financial sector is safe, consider this report from Investorpedia:

In the last decade, algorithmic trading (AT) and high-frequency trading (HFT) have come to dominate the trading world, particularly HFT. During 2009-2010, anywhere from 60% to 70% of U.S. trading was attributed to HFT, and the number today hovers around 50-55%.

The Decline of the Agricultural Sector job

UAV-precision-agricultureOver the past several months, I’ve been in a series of conversations with friends and sources in the world of IT. Most specifically in the world of automation, which has lately begun converging with agriculture in the form of drone tech, robotics, advanced sensors, 3D printing and the development of advanced logistics. Simplest way to imagine it — a sprinkler system that knows to put three drops of water on this part of the plant at 2pm, and two drops of water at 4pm on the plant next to it.

We have a ways to go before interesting technology is aggregated into solutions, and deployed as an everyday reality in the field by a generation of growers who can realize feasible economic benefit. But you can see the Smart Field coming a mile down the road.  It’s a path to enhanced yield and reduced environmental impact — less water, fertilizer, run-off, and so forth.  That’s good. But where’s the benefit that reaches the worker – where’s the job, exactly?

But where exactly are the jobs? Let’s look at NAFTA and off-shoring

Recently I spoke with a manufacturer about a planned offshoring move — in the light of NAFTA. Here’s what he had to say.

“It just makes economic sense to move the jobs to where the labor prices are lower. It’s not because of greed. It’s competitive pressure. Those who do not make the move to reduce costs will have to suffer lower margins. Over time, that means less money for investment to modernize a plant or improve wages. In the long-run, the company’s business model will be simply unsustainable.”

Now, we live in different political times. After all, we have a President committed to an America First jobs policy – global free trade be darned and all that. So I asked what would happen if NAFTA were cancelled. Would the jobs stay at home, then?

He said, not in the long-term. Instead of the competition between Mexican and US labor prices, the competition would rapidly become one of US labor prices vs the cost of robotics.

“Right now, skilled labor still wins most of those battles. But it’s like that IBM chess system, Deep Blue, that started beating IBMers, then chess whizzes, and finally grandmasters, and now no one can beat Deep Blue. If the Mexican market is cut off to us, the investment is going to be be increased in automation and it will only accelerate the day when there are no Mexican jobs or US jobs, either.”

So, the jobs won’t come back if NAFTA goes?

“Not for long. It’s hard to see what jobs will survive in the long-term for anyone, anywhere. So, no, cancelling NAFTA doesn’t alter history. It changes the timing but not the direction.”

So the jobs will be lost?

“The jobs are already lost. It’s coming like nightfall. You can extend daylight savings all you want, but no matter how sunny it is outside, the dark is coming and nothing can stop it. All you can do is adapt to it.”

I asked another IT guru — this one directs a massive Amazon-like logistics and warehousing system.

“I think about it a lot. I have a one-year old son, and I don’t know what exactly I am going to steer him towards when the time comes, in terms of education and work. Our system is an example. Today we have 1500 people here, and almost 1300 of them are skilled workers in areas such as picking and packing, loading and receiving. All of that will be gone, eventually. Where will these people go, with the skills they have?

The bioeconomy and computational biology

Over in the bioeconomy, consider the case of companies like Zymergen and Ginkgo BioWorks. They optimize (Zymergen) or develop (Ginkgo) production molecules for clients. Need a higher rate, titer or yield for your fermentation process? Zymergen and Gingko are two top shops to work with. But consider that in many ways that Zymergen is avowedly a Big Data shop. They uses high-speed robotics and computers that develop algorithms and metabolic pathways designs. The computers use brute force computing speed to test millions of permutations.

Zymergen's lab

Zymergen’s lab

It’s a field broadly known as computational biology — biology replaces the standard chemical refining process, computers replace the artisans in design, and robots replace the lab techs.

Or, you might take into account that the average land per farming householder in Roman times was around 10 acres — and Roman productivity was considered a wonder of its age, and powered the Empire by freeing growers to serve in the armies on the frontiers. By the time the Homestead Act was passed in the 1860s in the United States, a farmer could obtain up to 40 acres, considered then a reasonable amount of land to support a farming operation. Quickly, the number was raised to 160 acres as automation arrived in the form of combine harvesters, seed drills and more. By the 1920s, a farmer in frontier Wyoming could obtain up to 640 acres as a homesteader. Fewer and fewer people were needed to farm the land, driving the populations farther west in search of new lands, until they could go no farther west and were producing so much product that world agricultural prices collapsed, as they did almost continuously between 1870 and 1930.

Not to mention the design example with which we began — a computer competing with human design. And the critics of the computer’s design shortcomings (i.e. ability to tolerate stress, manufacturing difficulties and so forth) miss the boat. The computer’s failure’s are really the human failure of not setting the design parameters in place, properly. The computer could easily have taken into account the stress of bending and torsion; you just have to write programs that way.

The rise of Computational retailing and marketing

In almost any direction you look, jobs are becoming more scarce. Not just good-paying jobs, either. Today, automation is impacting the rural bioeconomy far more — because efficiencies in the agricultural and manufacturing supply chain offered more tempting targets for the innovations of yesteryear.

But innovation is impacting the cities faster and faster now. Automated retailing is just one aspect. Computational marketing will be another — where campaigns to increase visibility and sales will be run via algorithms — one program to spit out random combinations of words, another to rate them for sense and cost, and a third to manage testing of campaigns across platforms like Facebook, and scale the winners while cancelling the losers.

You might think that’s a far-out technology that will never come to pass. But I myself developed such a technology in the mid-2000s and sold it successfully to a publicly-traded company. That technology is older than The Digest itself.

The depletion of jobs from retail to warfare

And we’ve seen already the impact of digital content on bookstores, movie theaters and Blockbuster video stores. And the impact of digital warfare on the numbers of volunteers needed for the armed forces.

These trends are well-understood and have been written about for years — to the extent that they have replaced large numbers of lower-skill jobs, or skilled factory jobs in manufacturing. We’ve all seen the images of robots in advanced manufacturing sites for automobiles, for example. Families that took note of the trends pushed their children towards higher education. A hundred years ago, a frontier schoolmarm would be likely to have completed the eighth grade, no matter what you’ve seen of fictionalized frontier schoolrooms in movies and fiction. Eventually, high school diplomas became common, then undergraduate college degrees. Now, more advanced degrees are being granted than ever.

The Few vs the Many

So what’s new?

The coming dearth of high-skilled jobs, and a move from the Have / Have Not Society to the Pretty Much Everyone Have Not Society.

There’s evidence all around of the growing separation of the wealthy and the poor, as more and more wealth is being concentrated in the hands of the few. We’ve already seen the rise of the billionaires. There were a handful of them a generation ago. Now they are becoming common enough that they square off in presidential contests – Trump, Icahn, Koch, Cuban, Buffett are household names widely evoked during campaigns, as candidates, surrogates, advisers and financiers.

And we see candidates like Trump attracting a lot of attention from voters who feel they have been left behind by the good times that others are experiencing.

And as a society, we’re not reducing the wealth or influence of the Haves — as Britain did in attacking its landed and established interests in the Peers vs The People campaigns of a century ago. Rather, we see the freedoms to operate — the freedom to make unlimited amounts of money and pay ever less in taxes — on the rise. Ironically, it’s the very people left behind by the drift of the economy towards concentration of wealth — disgruntled people who blame federal coercion for their troubles — who have placed more power than ever, in the hands of plutocrats. It’s their right to do so, and we’ll see how their experiment works out for tired, huddled masses of the middle class who spent most of 2016 chanting “Lock Her Up” as a mantra for national revitalization. Plutocracy is not inherently a failed strategy. George Washington, by some measures, is the wealthiest person ever to serve as President, and the Roosevelts and Jefferson were wealthy patricians. Lincoln made a small fortune serving eastern corporate interests as a railroad lawyer.

But the advanced bioeconomy is the tip of the spear when it comes to the general direction of the economy. Processes are getting faster, smaller, cheaper. Computation will ultimately supplant the artisan, biology will ultimately supplant the analog manufacturing process. Smart fields will require less and less human intervention as planting, fertilizing, watering, monitoring, crop protection and harvest are increasingly the province of machines.

Ultimately, the economies of scale and the falling cost of bandwidth will cause the number of technical operators to fall at biorefineries — replaced by automated monitoring and response and distributed monitoring facilities perhaps hundreds of miles from plants. With automated driving coming along— which will find success in agriculture long before it’s an everyday reality in urban settings — you can expect that truck transit of biomass will require fewer and fewer drivers. Given the problems associated with cellulosic biorefineries and biomass consistency, expect precision sensors to be developed to replace visual inspection.

The Bottom Line: Rise of an Asset Economy

In the end, there are the four great engines of the economy: interest on capital, economic rent, wages for labor, and the profit that accrues for the risk. Capital, rent and profit seem relatively secure in the advanced economy, but the death of jobs will put great stress on participation in the economy through labor.

We are moving from an income economy to an asset economy — capital, land and intellectual property. It is highly doubtful that “Draining the Swamp” in Washington DC and eliminating regulatory barriers will provide anything more than temporary relief. Even if the economy were to expand, and temporarily provide more high-wage, high-skill employment — over time, the trend-lines are reasonably clear and the role of labor in the economy will continue to dwindle, slowly like a dwarf star cooling off into nothingness.

And the bioeconomy, for the long-term, may well need to re-think the “three E’s” sales pitch.

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