In a recent issue of The Economist, the prospect of increasing use of robots was discussed and its implications for life as we know it. (Rise of Robots – The Economist: March 29).th, 2014)
Although robots have been in wide use for many years, their usage has typically been focused on relatively simple tasks and jobs that humans cannot do or are unwilling to do. However, according to many, that is about to change. Some of the new breakthroughs in robotic technology are due to factors such as: silicon chip capabilities, investment by major corporations, and creative people who dream up new ways of using the innovations.
Some examples of new robotic tasks in use or proposed include: package shipment, handling the work of porters, aiding journalists, monitoring traffic, looking for infrastructure in need of repair, driverless cars, and many others.
The implications of all of these possibilities are profound. Often change invokes fear, because we tend to shrink in terror in the face of the unknown. However, change more often leads to opportunity for the person who can visualize what “can be” and prepare for the change.
As I was thinking about this, I was reminded of lessons that had been learned from times of previous innovation. After all, it is best to learn from other’s mistakes and successes as a shortcut to your own achievement.
As an investor in stocks, the increased use of robotic technology can have a couple of different benefits. One is that it can reduce labor costs. Let’s face it, paying employees is one of the major drains on corporate profitability. As an owner of companies, which you are if you own stocks, any reduction in expenses leads to more gain for you and other shareholders. During the most recent economic downturn, stocks soared in value in the midst of that downturn, because companies were reducing expenses. Much of that expense reduction was due to mass layoffs and other forms of reduction in spending. The purpose of a company is not to provide jobs; its purpose is the pursuit of profits. While this may sound cold and heartless, the result, as I will explain, is that jobs end up being created.
One trap to avoid is concern that the technology will put you or your friends and loved ones out of work. This, no-doubt, was a concern when the car was invented. Those who made buggies, horse-implements, bicycles, etc., were no longer in as much demand and many lost their jobs. However, the automobile ushered in the need for: roads, bridges, gas attendants, mechanics, more motels, etc. People who had to keep their work close to home were now given the ability to travel longer distances for higher pay. There is always a transition to a new type of economy created by technological advance, but that transition does take place and those of us who prepare are always best positioned to benefit the most.
Another side-effect of technological change is often referred to as “creative destruction”. When change takes place it often leaves a trail of broken and outdated ways of doing things. If you look at the list of the biggest and most important companies of the 1930s, for instance, you will notice something startling. Many of them no longer exist. In some cases, new inventions displaced the need for their products; in other cases, they were supplanted by more nimble competitors who produced the same products more cheaply.
There are two additional lessons to learn from this. One is that you should never invest in single stocks. The company or small group of companies you buy today may be the very victims of creative destruction in the future. And don’t fool yourself into thinking that you can sell when it looks like the writing is on the wall. When bad news comes out, the buyers of your stocks will be nowhere to be found.
Another lesson is that those who benefit most from change are those who utilize the new technology to their benefit. I will frequently see articles written to investors encouraging them to buy stock in the companies who are on the forefront in developing new methods of solving problems. However, it is more often the companies that use that company’s products and developments that stand the greatest chance of growing. The result of implementing the new, better ways of doing things is increased productivity, new industries, and the jobs that come with them and profitability. Embrace the change. The best is yet to come.
