Dean Barber

Providence Protects but the Machines Don’t Care

In Uncategorized on April 28, 2013 at 6:35 am

“There is a Providence that protects idiots, drunkards, children and the United States of America.”

So said Otto von Bismark, the father of a modern, unified Germany. The quote would suggest that Bismark believed there was indeed something special and different about America.

And so there is. I continue to subscribe to this concept of “American exceptionalism,” even as our great middle class has been hollowed out with the loss of millions of jobs.  I am now convinced that many if not most of the midpay, midskill jobs that were lost will never return.

Yet still I am hopeful that this 21st century can and will be an “American century.”  Of course, there is a certain hubris to predicting the future, as we will never understand all the consequences of history as it unfolds before us.

But in this blog, as some have discovered, I do make predictions on how things may play out. As a business consultant, I should not be so shy. You see, if I bill myself a “futurist,” I just might command more money and become in greater demand, even if my predictions fall short of reality.  Of course, this is predicated on the belief that few of you will be keeping score.

A Return Performance

So I am in the process of building a rather ambitious speech/PowerPoint presentation that I will give next month at LiveXchange, a forum where site selection consultants and corporate executives meet with economic developers from around the country. I spoke at this event in 2012, and must have said something of interest that warranted me to be invited back again.

Jack Rogers, the editor at Business Facilities magazine, which sponsors the event, said he found my presentation last year to be “zappa-esque,” a reference to the late Frank Zappa. I took that as a compliment, knowing full well that Jack viewed my presentation as weird but somehow satirically biting. 

Generally, I pay editors no mind. They are a tiring, bombastic class of opinionated, shallow-thinking neer-do-wells who should be rounded up and barged out to sea, were it not for a First Amendment. It is but more proof that the Lord protects drunkards and idiots.

I can say that with some authority because I once was a member of this despicable class. But I cannot help but like Jack, because, well, he asked me back.

Without giving away too much of my upcoming presentation, which is a work in progress, I will tell you that I am coming to this not-so-remarkable conclusion that technological change and innovation both creates and destroys, some for good and some for ill.

Now we all know this. Smallpox has been eradicated in the U.S. because of the implementation of a vaccine. Advances in medical technology, particularly when they actually work, is a good thing. A nuclear weapon that could be hijacked and used by a terrorist group or rogue country, now, that’s a bad thing. Let us pray we never see it happen.

A Disturbing Premise

But I am thinking more about how technology both creates and destroys jobs. This has long been happening, but for the first time maybe in world history, I am now wondering if technology may be killing more jobs than creating. Some experts agree with this premise and some disagree. But this will be the topic that I broach at LiveXchange, May 19-21, in Frisco, Texas.

As I reported in my Barberbiz blog of two weeks ago, which I would recommend that you read, Sometimes You Get and Sometimes You Get Got, it is by virtue of technology that we are only now coming to realize just how much vast reserves of natural gas (and even oil) that we are sitting upon here in the U.S.

The Potential Gas Committee, an independent organization of geoscientists and petroleum engineers that is affiliated with the Potential Gas Agency at the Colorado School of Mines,  now estimates the country’s potential natural-gas resources at 2,384 trillion cubic feet. That is a whopping 26 percent increase from the group’s previous calculation at the end of 2010.

That number of 2,384 trillion cubic feet is more than 90 times the amount of gas consumed in the U.S. last year, according to federal data. Hydraulic fracturing, also known as fracking, is the technology that it made this possible. It is the technology, which was pioneered and advanced not far from where I live here in Texas, that has unlocked gas from shale-rock formations all over this country.

Not surprisingly, the shale gas boom has created thousands of new jobs in Pennsylvania and Ohio with the Marcellus Shale and Utica shale plays; in North Dakota, Montana and Saskatchewan, Canada with the Bakken formation; and down here in Texas with the Barnett and the Eagle Ford shale plays.

Right now, there is about $62 billion in plant construction set to get underway in Lake Charles and along the Gulf Coast of Louisiana, driven by the ample supply of cheap natural gas in the Haynesville shale play in northwest Louisiana.

Also, not surprisingly, consulting firms are making bold predictions as to job creation caused by the natural gas boom, again spurred by the fracking technology. IHS Global Insight produced a study for America’s Natural Gas Alliance in 2011 that estimated the shale gas industry could eventually create 1.6 million jobs in the coming decades.

A December 2011 report by PricewaterhouseCoopers and the National Association of Manufacturers said fracking could help add 1 million manufacturing jobs in the U.S. by 2025, whereas a May 2012 study by the American Chemistry Council, which represents the chemicals industry, estimated that increased gas production could create 200,000 jobs in the broader manufacturing sector.

The Skeptics Among Us

Still, some remain skeptical and are taking a more wait-and-see posture. I would put myself in this camp. I have no doubt about the job growth in the energy sector created largely because of technological advances. It’s happening before our eyes. It’s hard to ignore billion dollar projects being announced with now some regularity in Texas and Louisiana.

But I think it may be premature to advance that it will necessarily translate into millions of new manufacturing jobs, although the unlocking of abundant supplies of domestic energy should present U.S. manufacturers with a cost competitive edge. (If only our policy makers in Washington permit.)

“Even though the U.S. is more competitive globally, manufacturing doesn’t give you the kind of direct job creation it did in years past,” said Joseph G. Carson, director of global economic research at AllianceBernstein, a Wall Street investment firm, in an interview with The New York Times. “At the end of the day you still want a strong manufacturing base, but there aren’t as many people on the factory floor.”

There aren’t as many people on the factory floor.

Why is that? Were most of those jobs essentially shipped abroad, off-shored to lower cost developing countries? Well, certainly many were, but I am now of the belief that the demise of most of those jobs – most of the people – on the factory floors across America were due to advances in technology.

Yes, there was a movement for cheaper labor by going offshore, but bigger yet was a movement to produce more with fewer people by employing state-of-the-art technology. Machines have long been a part of the process of manufacturing, but in a sense, the machines may soon rule the factory floor. The robots are here, they are getting smarter and cheaper, and they are coming.

There has been much talk of late about a “manufacturing renaissance” in this country. I happen to regard most of it as bandwagon gibberish that editors, the foul group that I was telling you about, permit to be published without casting a critical eye.

The truth is while the manufacturing sector has added 500,000 jobs since the recession ended and the production value of factory output is close to an all-time high, there are still nearly 6 million fewer manufacturing workers today than in 2000. Since the early 1960s, the share of U.S. manufacturing jobs has been on a nearly uninterrupted downward slope. Manufacturing now accounts for less than 9 percent of all jobs in this country.

The Real Job Killer

I used to blame the Chinese as the main culprit. And in many ways, they have not been the best trading partner.

But we did compete and we continue to compete with the Chinese and everybody else by employing more and better technology – robots, automation, new software advances.  You see, that’s the only way for our manufacturing sector to remain viable.

It’s why we must remain an innovation nation. We have to invent new technologies and continue to improve on existing technologies. It’s our only hope at remaining a world power and sustaining this idea of “American exceptionalism.”

And that’s your job killer right there. Advances in technology, almost by its very nature, means pushing the envelope in terms of productivity and efficiency.  It means employing machines to do things that people were doing, particularly repetitive tasks. It means replacing people with machines that can do the job better, faster and cheaper.

Factory floors in this country look radically different than they did not so long ago when “turning machines” were run by hand. The truth is that plants are increasingly devoid of people.

There’s a joke going around in South Carolina that a modern textile mill employs only a man and a dog. The man is there to feed the dog, and the dog is there to keep the man away from the machines.

But if you think that job loss due to technological change has been happening only in manufacturing, you are quite mistaken. It’s happening in service industries as well, much of it driven by how we conduct our lives. We’ll talk more about that in next week’s blog.

I think old Otto was right. Providence protects, as I am reminded by an old Irish fiddle tune, which says nothing about productivity. But the machines don’t care.

“Lord protect us, Saints preserve us. We’ve been drinking whiskey ‘fore breakfast.”

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com He can be reached at 972-767-9518 or atdbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.

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  1. Yeah, I get it, but…. this has been a point of discussion for a very long time. The first significant instance for me was in 1981 when my state ED organization put a picture of a robot welding a car frame in a GM plant. Apparently, we were supposed to make sure we used the image of a human welder to discourage the adoption of technology. At that point in time, none of those complaints were coming via email. My observation would be that productivity increases – and cost decreases – associated with technology has a continuing, but irregular impact on employment.

    I have to wonder if this isn’t another instance, like the introduction of rail and commercial use of electricity, etc., where technologies were job displacing but even more job-shifting, Of course, we can move jobs attached to technology all over the world with ease, today.

    Nevertheless, a your post is a good addition to the conversation.

    • It’s obvious that you get it. There has been and always will be a “shifting” with technological change. The question is whether the machines are becoming so smart that most jobs will eventually become obsolete. The experts are certainly not in agreement on this, but I have been on factory floors largely devoid of people, and I have to wonder.

  2. Interesting. Personally I feel that automation is good. Someone is creating, designing and building the machines that build the machines ad infinitum. All in all automation is always good. Also some of the drop in manufacturing workers is due to accounting. That is did you know that in the past all GM employees were counted as working in manufacturing? Truck drivers, ground keepers, et al were once manufacturing workers and now that they are out sourced they are still doing the same job just not now classified as manufacturing. These accounting flaws adds to the leitmotif that manufacturing is losing workers to the service sector while in reality they were always service workers. Of course mature industries with repetitive processes will continue to leave the US for locations where labor is a larger part of a product’s cost. See you down the road.

  3. The new jobs are almost never where the old jobs were — machinists are replaced by computer programmers — much different physical and mental skills. Now sometimes, technology absolutely hollows out an industry — the corporate farm, with lots of machines and very few people, replaces a dozen or more family farms. But sometimes, we get enough new firms to pick up some of the slack. Dean’s man and a dog may be far fewer per factory, but if people use the idea of low labor costs to make much more and much different stuff, then we begin to see still one man and one dog per factory, but many more factories, doing left-handed wigits, and right-handed wigits, and ambidextrous wigits, and wigits for people with no hands, etc. If stuff is cheaper, we sometimes get more stuff.
    Similarly, if services get faster, better, cheaper, we may get more services. There is a wonderful book called “Women’s Work” that points out that the more gadgets for cleaning the home, the higher the standards for keeping it clean. Rugs that got beaten twice a year now get vacuumed once per week (or more, if the Roomba is on all the time).
    So I agree with Dean that there is no question the labor per output is going down; the question is whether we can have effective demand (willingness and ability to pay) to substitute by getting more or higher quality outputs.

    Rollie Cole, PhD, JD
    Founder, Fertile Ground for Startups, Small Firms, and Nonprofits
    “Think Small to Grow Big”

  4. We need to recognize that what we are experiencing in this world of increasing technology is very new. This is not at all the same phenomena as the steam shovel replacing twenty guys shoveling. The guys who used the shovels had options to turn to, they could go back to farming, become merchants, learn skills of a new upcoming industry. This is very different than what is happening today. There are no jobs to go to…and the situation gets worse everyday. Anything that can be reduced to a flowchart is, or soon will be, automated with little or no need from humans required.

    For more insights on this, you can see a powerpoint I did about the future of the workforce for the IEDC Leadership Summit this past January at: http://www.slideshare.net/colleenlarose7/future-of-the-workforcefinal-16174274

    The numbers are staggering…only 3.5 million jobs available and more than 12 million people on unemployment…not to mention the millions and millions of people who have exhausted their unemployment claims (like me) who cannot get a job to save their life. So the reality of the numbers is something like one job available for every 8 people who need a job! Therefore the numbers of 1.6 million jobs for the energy industry don’t even begin to fix the hole we have …not to mention the environmental devastation that will be unleashed by the fracking…largely effecting the poorest communities who will be left only to abandon their regions in search of water that does not catch fire (a conversation for another day).

    For now, some of the more capable middle skills people are finding themselves scrambling for “temp work” and “consulting jobs” trying to figure out what “sellable skils” they have in the new and dwindling marketplace. Those who are more entrepreneurial are finding opportunities to capitalize on new technologies, such as new ways to use the internet, and financing these efforts with the same technological advances by crowdfunding, etc. But as fewer and fewer people have jobs, fewer and fewer people can afford to pay for new services, nomatter how smack dab wonderful they are. and so these new business concepts are likely hurdling to the same place that all are going…nowhere (unless these businesses appeal to the few people at the very top of the ladder who are hoarding all of the cash reserves…but we will save that conversation also for another day).

    This “new economy” is at first devastating and then scary. We are becoming more and more a society the haves and have nots with both ends of the spectrum having increasingly “idle hands” and “Idle hands” as the old saying goes “are the devil’s workshop.”

    The cold truth is that we need less people now and yet we continue to add more people every year. And it is not that we need just less “of the “labor class” because even more frightening is that knowledge is increasingly of less and less value (why do you need to think, when all of the knowledge of the world is held in your mobile phone?)…so education is going to go by the wayside of a frivolous undertaking. Truly, it is predicted that very soon even jobs such as attorneys and doctors, the highest paid and most affluent in society, will become “unneeded” as technology will even be able to perform those duties.

    So what will we be left with…too many people, with too much time on their hands, who are dumb as a box of rocks. I am glad I did not have children. The desperate Madmax future I envision is stomach churning…and I am an optimist!

    • Thank you, Colleen. I think you nailed it and you stole my thunder for next week’s blog. “The cold truth” as you state it — that we need less people, which is an outgrowth of technological change — will really hit home when the doctors and lawyers find themselves “unneeded.”

      Now some folks would say that you and I are afraid of technology, that we are anti-technology. That is a simplistic charge. Technology is probably the main reason why we are living longer today and it certainly has created entire industries. The internet is a perfect example. But I believe you are saying that there are costs involved, that millions who want to work are left behind.

      I am not anti-technology. I just don’t necessarily believe it’s our savior. This is a tough subject, actually seldom discussed, and it tugs me in different directions. I want to see innovation. I really do. That’s “progress.” But if technology leaves growing numbers out in the cold, well, I think we ought to at least have understanding of that if at all possible. Maybe it’s not possible.

      My only disagreement with you would be on fracking. I actually do believe it can be done safely with proper regulatory safeguards. When there have been problems, it is because of shoddy practices in the casing at the wellhead, but that’s another story.

      Thank you again for you input. I’m going to check out your PowerPoint.

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