Markman Capital Insight

Amazon retraining workers displaced by robots

In early July, a team of Dutch engineers won the Amazon Picking Challenge. The international competition honors engineering teams for building robots with human-like dexterity.

It’s not tough to see why such robots appeal to Amazon. The company is a recognized leader in the drive for workplace automation -- and that’s a good thinggiven its razor-thin margins. Back in 2012 it bought Kiva, a robotic outfit, for $775 million. At the time the company was building out several gigantic warehouses. The Kiva implementation was eye opening because its tiny motorized robots moved entire shelves. Very quickly humans became the minority in the new state-of-the-art fulfillment centers, relegated to picking products from shelves whizzing by.

Now Amazon wants to replace the pickers too.

All of this doesn’t play well against the current political backdrop. With anxiety high, politicians on both sides of the political spectrum are looking for scapegoats. So they peddle a narrative steeped in gloom. The entire system is rigged, the forces of globalization are stealing jobs, destroying the future, they harangue. The truth is our system, capitalism, isn’t predicated on providing jobs or bright futures for workers for that matter. Those things are happy byproducts. Capitalists are supposed to innovate, mostly by looking for efficiencies, ways to replace jobs with machines. On that count, according to most, they’re about to really hit their stride. That may play even worse.

And that brings us back to Amazon. The Kiva acquisition in 2012 was an inflection point. The robotic company was building an ecosystem around its nifty little orange robots. Companies began to build software and hardware as layers. However, when Amazon scooped up Kiva it decided to use the technologyin-house. Existing contracts were allowed to expire. Competitors scrambled for new solutions. Thankfully, they innovated. San Jose, Boston and Europe are now fullof automation startups anticipation of the next wave of retooling. Honeywell (HON) bought a firm last week. These companies are stronger, smarter and more agile. They’re also ready to prune more humans than ever as they integrate drones and other logistics devices with artificial intelligence.

In fairness, Amazon has been a good corporate citizen. Founder Jeff Bezos talks with pride about Career Choice, a job training program started in 2012. It allows warehouse workers to train for high demand jobs beyond Amazon. In fact, the Seattle warehouse is home to a glass classroom visible to most parts of the worksite where workers retrain for jobs in nursing, aircraft mechanics and truck driving.

This year Amazon is open-sourcing the program, encouraging other Fortune 1000 companies to do the same. Clearly, it is under no obligation to help workers find other better jobs. According to Bezos, the reason this program exists is so workers can build careers in fields where demand is high and wages strong. He doesn’t want workers to feel trapped at Amazon. Putting the classroom in a glass box on the warehouse floor sends a clear message: The choice is yours.

Automation and other productivity measures will take a toll on the rate and quality of employment in the future. While a quirky Dutch robot with image recognition, two fingers and suction cup isn’t likely to change the world, it does set the tone. Many menial jobs of the future belong to robots. Humans will move up the value chain. Moaning about the loss of those jobs, or politicizing the process, will not bring them back.


About Jon Markman:  A pioneer in the development of stock-rating systems and screening software, Jon Markman is co-inventor on two Microsoft patents and author of the bestselling books The New Day Trader Advantage, Swing Trading and Online Investing, as well as the annotated edition of Reminiscences of a Stock Operator.  He was portfolio manager and senior investment strategist at a multi-strategy hedge fund from 2002 to 2005; managing editor and columnist at CNBC on MSN Money from 1997 to 2002; and an editor, investments columnist and investigative reporter at the Los Angeles Times from 1984 to 1997.

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