Robotics is going to change the world in ways we never imagined.
When these start to enter the economy on a large scale, things will be radically different. Before diving it, we have to be clear there is no forecast this will happen immediately. While the industry is moving at fantastic speed, we are still in the infantile stages.
That means we are likely looking at 5 years before we see mass production reached. By 2027, a guess of a few million robots makes sense, depending upon when the exponential progress point starts to slow. If it carries on, this will push the production back even further.
With that out of the way, get ready for deflation (technological) like you never imagined.
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Technology Is Deflationary
The interest in robots is the fact that is could, eventually, replace labor. With many countries facing demographic issues, there is obviously a built in need.
Most people follow the idea of a robot replacing a human, putting forth a cost savings. This is pretty straight forward.
Here is where people can embrace the most evident aspect. If we remove the labor rate, replacing with a robot that cost a dollar or two an hour, we could see how the cost of producing something is drastically reduced.
The same is true in the services realm.
What is a robot could mow and edge your lawn? How much more cost effective would this be?
At this point, it is impossible to predict where all this will go. The point to grasp is that replacing humans will provide a cost savings for the product or service.
Naturally, we cannot have a discussion about technology without having some exponentials.
Localized Production
The 1980s and 1990s saw what most refer to as globalization. This was the outsourcing of manufacturing to countries with lower labor costs, primarily China.
Here we are back to discussing the above scenario.
If China reduces its labor rate by replacing humans with robots, the products would cost less to produce.
The question then becomes, what other cost savings are there.
One of the things about building stuff in China is that it has to be shipped. For something like semiconductors, it isn't a big deal. When the product is an automobile, that can get a bit costly.
Robotics is going to allow for the production of goods on a localized basis. Why pay for shipping? It is easier to set up a plant near where the products are consumed as opposed to the other side of the world.
Removing the majority of transportation costs is extremely deflationary. It is one of the benefit of localized production (most likely regionally).
Supply Chain
Our tendency, unless we work in manufacturing, is to look at a product as a single entity.
The reality is most products are a series of smaller products. In other words, some company is selling its product to the manufacturer.
Using the automobile example, someone makes the tires. Another company does the seats. Windows are yet a third. Spark plugs come from a 4th entity.
You get the point.
What happens when each of these products experiences something similar as to what was describe above? The net result is these companies are able to offer their product for less, further reducing the cost.
Of course, this is compounded if dealing with something that is on its own S curve like battery technology.
Department Elimination
The piece that I want to cover here is auxiliary employees who are no longer necessary. At a minimum, these departments could be reduced.
For example, if the majority of the company is robots, do you need an extensive HR department? The answer is no. You also could likely get rid of the majority of legal, at least those who deal with worker related issues. Those who write policy and are responsible for overseeing the implementation can be gone. Robots are simply programmed with whatever is needed.
Consider the costs that companies incur to maintain people. Heck, even the coffee service can be eliminated.
Just think in the savings from not having to buy so many safety glasses since, after all, robots do not have eyes.
All of this means organizations are going to be much leaner in spite of having massively higher output. Costs such as healthcare, workman's comp, and other benefits are eliminated.
Ultimately, all of this makes many products commodities. The net result is massive downward price pressures.
Eliminating the labor costs are just one part of the equation. As we can see, there are many others.
Posted Using InLeo Alpha