About once every three months, a fever erupts over fears of a robot apocalypse. It usually coincides with new images of scary robotic dogs, or talk of autonomous killer drones.
This week Microsoft (MSFT) revealed it was in talks with Walmart (WMT) about cashier-free stores. Shoppers add items to their carts, then leave the store. Their store accounts are billed later.
The real apocalypse has always been about software. And it is coming.
The software angle should not be a surprise to investors who have been paying attention. Game-changing code is the common denominator at Netflix (NFLX), Alphabet (GOOGL), Salesforce.com (CRM) and Amazon.com (AMZN). In the process, these companies disrupted media, advertising, sales, marketing and retailing.
What Microsoft wants to do with Walmart would blow-up current brick and mortar business models.
Reuters reports that the technology is a combination of custom cameras, scanners and tracking software guided by artificial intelligence. Most of the heavy lifting would take place in the Microsoft Azure cloud, but the system would shift some of the processing to the edge of the network, where the data is being collected. That would defray costs.
It would be an important new business for the Redmond company. Gene Munster, head of research at Loup Ventures, a Minneapolis-based venture capital firm, estimates that automated checkout systems is a $50 billion market.
Unfortunately, it is also an employment killer. According to the latest Bureau of Labor Statistics data, more than 15 million people work in retail sales and related occupations. There are more than 3.5 million cashiers.
Not all of these jobs will be lost. The cost of deploying cashier-free technology will be too onerous for small employers. However, if the tech does wind up at Walmart, the world’s largest retail chain, it is going to profoundly impact one of the leading occupations in America.
It’s widely believed robots only threaten manufacturing jobs like industrial painting, welding and assembly work. However, software is capable of replacing wide swaths of blue and white collar jobs.
At Amazon.com, software is now replacing salaried executives that used to make decisions about inventory. Bloomberg reports the e-commerce pioneer is using algorithms to predict which products will sell best, and how much inventory to stock.
In the future, the company will use its automated marketplace platform to let anyone with an Internet connection to price, market and sell goods on Amazon.com, without talking to a human.
While this will mean far fewer white collar employees, the company says it still has 16,000 corporate positions open, and that it hired 130,000 people last year. Overall, the headcount at Amazon.com has swollen to 566,000.
The push toward more automation is all about greater efficiency. High salaried white collar positions are being replaced with powerful software, and increasingly, artificial intelligence.
In the financial services industry, similar algorithms are replacing securities traders, analysts, loan officers and lawyers. JPMorgan Chase (JPM) the largest bank in the U.S. recently turned on software that does finance work in seconds that previously took lawyers 360,000 hours to complete.
The program, called COIN, or contract intelligence, uses machine learning algorithms running on a private cloud system. In addition to shortening the staff hours required, COIN has dramatically reduced the number of contract errors.
In 2017, McKinsey and Co., a global research and consulting firm, found that 800 million jobs will be at risk to automation by 2030. Half of all occupations fall into this category.
Investors should prepare by taking positions now in companies likely to benefit.
Workday Inc. (WDAY) develops cloud-based enterprise software used mostly for human resources and capital management. This week the Pleasanton, Calif., company acquired Adaptive Insights, an industry leader in business planning. Together, the companies will offer a best-in-class, one stop solution for enterprises looking to streamline.
Business has been brisk. Sales growth increased 36% in 2017, to $2.1 billion. And the current market capitalization is $27 billion, less than half the $60 billion valuation of Automated Data Processing (ADP), a company growing sales at only 6%.
The robot apocalypse is real, and it’s coming fast. Investors who wish to participate should buy enterprise software vendors like Workday.
Jon D. Markman