Are we innovating ourselves out of our job?

A recent article by The Economist highlighted the potentially fundamental changes that may be coming to a work near you. Read the Difference Engine: Luddite legacy (1)! It may help you decide how threatened you should feel by new advances in computer AI.

Five years ago, I read a book by an economist Jermy Rifkin, titled provocatively, "The END of WORK, The Decline of the Global Labor Force and the Dawn of the Post-Market Era". Prevailing wisdom at the time (~circa 2000) was that 'creative destruction' of jobs mean workers have nothing to fear from technology. The thinking is that older jobs, like assembly line work, would be replaced by cheaper and more productive robots. But in this process of destruction, new jobs are created, such as the repair, design, maintenance of those robots. As long as workers can retrain and retool, they'd simply skip up the food chain to better paying skilled jobs.

Rifkin however, argues that: As progress and productivity marches inevitably forward, we're loosing more jobs to technology than we're replacing with jobs to service that technology.

At the time I found his statistics backed arguments vaguely persuasive, but it didn't hit home until recently...

Fast forward to the Great Recession of 2008 - 2011 (now)

It is now November 2011, the U.S. unemployment rate is still at 9%, the latest October job data shows the U.S. economical machine added a mere 80,000 new jobs. Europe is in a boatload of trouble stemming from their sovereign debt crisis, but also stemming fundamentally from the lack of productivity per capita in a subset of Euro-zone countries. China can't export to either of their biggest traditional trading partners, and has embarked on a massively expensive infrastructure investments whose consequences we have yet to witness.

With so much economical uncertainty, its no wonder workers of all collar colors are feeling the strain. So why do corporate financials showed record-breaking profits and productivity gains? My back-of-the-napkin calculations using the U.S. Bureau of Labor Statistics (2) productivity index suggest that companies have increased their productivity almost 10% since 2008. And since Americans aren't OT'ing 10% more since 2008, where are the gains coming from?

New productivity gains are from machines (not people)!

The New York Times (3) pointed out that after the Great Recession, companies are happily shelling out big bucks on hardware and software (steep exponential green line), but not on new (or existing) workers (flat blue line). There are many reasons why workers are more expensive than machines (the cost of healthcare and pension benefits for example). For this reason companies will keep investing in machines until they run into problems only people can solve, and only then will they hire more workers.

Is machine learning making people obsolete?

Language:

In the objective of providing services to people, the current bottleneck to have machines service people directly is the natural language barrier. Simply put, machines can't talk intelligently to people yet, nor understand people well enough when they talk back. But great strides have been made in recent years to address this issue.

Apple's Siri is already providing a spirited (albeit buggy) attempt to create a cheap secretary for the masses. You can be sure as Siri collect the oodles of data from current users, the Siri of the future will get spookly better until you can't tell the difference from a real secretary vs your phone. And where Apple goes, you can bet your lunch that Google and Facebook are also racing to use their massive stores of user data to create their own attempts to break the language barrier. Once machines can accurately understand the natural language, millions of service jobs relying on language expertise will become redundant overnight.

Medicine:

Recently my wife had her hand CT-scanned to see how well a recent medical procedure is mending. The radiologist was nice enough to let me observe the whole procedure. From my (non-medical) perspective, he simply pressed a button, and the CT machine automatically scanned up and down her arm. When the results came back, the computer highlighted the her cast and allowed the radiologist to exclude that part for the final report. When I asked him about the condition of the hand, he replied with a standard 'talk to your doctor' routine (although he was very professional about it).

This was a seasoned radiologist with over twenty years of field experience and a six-figure salary, but the only thing I saw was his photoshop skills as he methodically deleted the cast from the report. I left his office wondering if radiologists would become redundant once the CT system can do their own photoshopping. The Canadian Radiology organization and doctors would probably object, so those jobs are safe for now, but it makes you wonder what jobs in the medical field can be eliminated with the proper incentive?

Bottom line:

These anecdotal evidences suggests that in the pursuit of the bottom line, companies will not hesitate to outsource, or outright eliminate jobs using cheaper technology. Evidence also suggest that machines are becoming more capable of doing jobs currently done by people, from fields as diverse as language and medicine. While the geek in me celebrates "progress" and our increasing standards of living, the Luddite in me hopes the jobs I'm good at aren't machine replaceable.

There's a story floating around about the time Ford CEO, Henry Ford II showed Walter Reuter, leader of the United Automobile Workers a newly automated car plant and said "Walter, how are you going to get those robots to pay your union dues?” Without skipping a beat, Reuther replied, “Henry, how are you going to get them to buy your cars?”

To put it another way, in our drive to create life-improving products and services with technology, are we impoverishing the very customers we're hoping to attract? It's definitely a dilemma of our generation.

A prototype office robot coming to a Japanese office near you. "Yes yes, laugh at me now, but I'll eventually take over your job! Mu-Ha-Ha" Says the Evil Robot Office worker as he does the evil robo-dance.

References:

(1) Difference Engine: Luddite legacy - The Economist

(2) Major Sector Productivity and Costs Index -U.S. Bureau of Labor Statistics

(3) Man vs. Machine - New York Times

(4) Facebook vs. Google: The battle for the future of the Web - CNN

Through the Looking Glass: An Alternative View of the BC Real Estate Market

By Yi-Jeng Huang


During a recent trip to Las Vegas, I realized how big of a price gulf existed between our respective real estate prices. Imagine a 1,600 square feet, 3 bedroom house in Las Vegas’ nicest neighbourhood, bracketed by new malls and great elementary schools. Neighbors of this master plan community sported SUVs and trimmed lawns, the essence of a picture perfect suburb.

Fig 1. One of the many 1,500+ sqft, 3 bedroom/ 3 bathroom houses in Summerlin for a mere $150,000 USD, -Trulia.

This place is called Summerlin, and the house in Fig. 1 is on the market for $150,000. As a BC resident, I can’t remember the last time $150,000 meant something more than a down-payment. While Las Vegas and Vancouver are very different cities, it got me thinking about the underlying assumptions behind our real estate boom.

Fig. 2 Average listed price of houses in the Greater Vancouver Region, The Real Estate Institute of British Columbia

So what is the current state of British Columbia's Residential Real Estate Market?

As of 2010, there are 45,000 properties listed for sale on the MLS, averaging a hefty price of $550,000 - $600,000 per unit (1). This works out to almost $25 billion dollars’ worth of real estate up for sale!

So my question to readers and real estate experts alike is: Who’s our sugar daddy? Is it domestic demand? Is it rich new immigrants? Is it those mysterious foreign investors?

Can the average BC resident afford a home?

What if historically low interest rates enticed BC residents to buy real estate, creating genuine demand? Let’s run the numbers and see how likely this scenario is.

Fig 3. BC Average Weekly Wage -Earnings & Employment Trends, BC Stats

The resident earns $827 a week as of 2011 (Fig. 3)(2). To put it another way, two average working parents make bit more than $6,600 a month before taxes. Saving for the $100,000 down payment would take 3-6 years depending on how much they can set aside, especially if they are renting. They then borrow $500,000 from the bank. Then, assuming they set aside half their income ($3000 a month) to pay off the mortgage, the amortization period will be 25 years. In other words it takes almost 30 years for a middle class family own a home free and clear! Meanwhile, with $3000 a month left after taxes, they’d have some major problems saving for retirement, their kids’ college fund and buy a car, let alone that tropical vacation they always wanted.

I offer this view simply to illustrate that: The average BC resident earning today's wages cannot easily afford a home at today’s prices, even with the absurdly low interest rates.

Demand From New Immigrants?

International immigration accounts for a good 70% of BC’s population growth. Conventional wisdom suggests an almost mythical belief that Asian immigrants, especially the Chinese, are driving up the price of real estate in BC, bringing a flood of demand into an otherwise sleepy market. Is that what’s happening?

Fig 4. BC Population Highlights, First Quarter 2011, BC Statistics

According to BC Statistics, a net total of 32,830 new international immigrants arrived in BC from April 2010 to April 2011 (Fig. 4)(3). A third immigrated under the ‘family class’, the rest as individuals. Surprisingly, only 20% of these immigrants are actually from China. Assuming an average BC household size of 2.5 people (4), an influx of 32,830 new immigrants really means an influx of 13,000 new households, each requiring only one house. As a new skilled immigrant myself, I vouch that BC homes are too expensive at my current income level unless I have substantial financial support from my family overseas. But for argument’s sake, we’ll assume that every single immigrant family can afford a house at today’s prices.

The Real Estate Institute of BC states 74,640 properties were sold in 2010 and estimates that 80,000 will be sold in 2011 (1). Even assuming every immigrant family bought a house, that’s 5 houses being sold for every immigrant family! On top of that, 25,000 new houses will be constructed in 2011 (1). With supply far exceeding the number of new immigrants, who will actually live in these newly sold properties?

Last hope, the Foreign Investors?

Fig 5. Residences foreclosed before completion, in Las Vegas (2009)

One tantalizing possibility to explain this pricing madness is a genuine influx of non-resident investment from Asia. People with pockets full of cash, who won’t be living here, aren’t restricted by local earning limitations, aren’t planning on renting their empty houses to anyone. Are they the culprits of BC's high-flying real estate?

Since there is no hard numbers detailing the scale of these investments, one can only speculate (pun intended) its effects on BC real estate. Of course, another problem arises in this scenario, namely an excess supply of empty ‘investment’ units reminiscent of Las Vegas’ boom years. When the investment soured there in 2008, underwater investors simply walked away from their properties, leaving behind a devastated moonscape of foreclosures.

Who's really driving up the Real Estate market in BC?

I’ve outlined reasons why new immigration realistically accounts for a mere fraction of the real estate demand. I’ve illustrated why I don’t believe the current market price is affordable to the average BC resident. Yet my realtor insists the majority of properties are bought by BC residents themselves. Data shows that BC residents are paying 65% more per month on mortgages in 2011 compared with 2000 (1). Our wages definitely didn’t increase 65% in the last decade.

The only reasonable explanation why we’d borrow to the hilt and buy such unaffordable homes is the hope, nay, the expectation that as high as the prices are this year, it will rise further next year! Many of us speculate that if the real estate appreciates 3% next year, we’d have an instant payoff of $18,000! That’s right folks, we’re greedy! Some of us are simply afraid of being priced out for the next decade. But all of us are in effect, taking out ever bigger mortgages, tossing around 80,000 properties like hot potatoes, and all the while blaming it on rich international immigrants for the rising prices!

In other words, WE (the people of BC) are the ones driving up real estate prices.

Let’s hope for everyone’s sake that there are strong fundamentals supporting our $25 billion dollar real estate market. Because a 3% rise in home prices would mean somebody, somewhere will have to plunk down an extra $750 million in BC! So I invite all of us to reflect, lest we suffer the same fate as our overextended southern neighbours.

Updates: Corrections made. Thanks to Victor for spotting a calculation error. ;)

References:

(1) Real Estate Institute of BC: http://www.bcrea.bc.ca/economics/2011-02REIBC.pdf

(2) BC Statistics - Average Earnings: http://www.bcstats.gov.bc.ca/pubs/eet/eet1105.pdf

(3) BC Statistics - Immigration Rates: http://www.bcstats.gov.bc.ca/pubs/bcbi/bcbi1106.pdf

(4) Statistics Canada - Average Household Size: http://www40.statcan.ca/l01/cst01/famil53c-eng.htm

Plug into culture to avoid the shock. Get an understanding of the language, customs and food before you go and you can turn challenges into joys

http://www.montrealgazette.com/opinion/story.html?id=5096298

BY YI-JENG HUANG, FREELANCE JULY 13, 2011

An annoyed Taiwanese friend recently directed to me a story in The Gazette ("Seven strange months in Taiwan," Feb. 26) detailing someone's rather unfortunate experiences teaching in Taiwan. The story has spread virally among Taiwanese blogs, reaching even the Liberty Times, a mainstream Taiwanese newspaper. Many people have posted negative comments about the article's author, but I felt the story was really about a visitor's inability to understand a foreign culture, rather than an attack on cultural values. So with the help of Chuck, a Caucasian friend from Ontario who has taught in Taiwan for many years, I'd like to share experiences regarding the joys and challenges of travelling and teaching abroad.

In 2008, I returned to Taiwan after spending most of my life away from my country of birth. I speak rudimentary Mandarin at home, but can't read it to save my life. I was a definite tourist in my own country, without the benefit of at least looking like a foreign tourist. There was an initial fascination, followed quickly by cultural shock and frustrations, before I got used to it and started to have lots of fun. I imagine it was initially worse for Chuck.

Chuck says: In regard to my frame of mind for travelling to Taiwan, I was open to everything and prepared to abandon all my expectations and biases. I knew I would be in a vulnerable, disadvantaged position. To ease the blow of landing in a totally foreign country, I researched and began adjusting before I went over.

Preparation is key. No one was born riding a bicycle; you have to learn by trial, error and lots of practice. If you're not skilled at something before you go abroad - for example, map-reading - you won't suddenly become a walking GPS. You should start preparation at least half a year before you hop on the plane.

Preparing for the language shock: "Exotic" culture tends to mean non-English-speaking. I highly recommend a basic Mandarin course for half a year. Knowing the language enhances every aspect of your stay.

Chuck says: I made friends with some Chinese employees where I worked and learned basic Chinese pronunciation from them - numbers, hello, thank you, etc. I took a TESOL (Teaching English as a Second Language) course that included a component of adapting to a new culture - particularly Southeast Asia. I also went to Chinatown to get a "feel" for a Chinese environment.

Preparing for the food shock: Canada has some of the best Chinese restaurants outside of Asia, so take advantage of our multicultural heritage! Figure out your likes and dislikes. Once you get to Taiwan, definitely visit the many night markets with a local friend to experience the sheer number of delicious and scary authentic foods. If you miss a taste of home, go to the many Western-style restaurants in Taipei or cook your favourite spaghetti and meatballs from ingredients found at the supermarket. (I did, after my first week!)

Chuck says: I learned that fish and rice are staples of the Taiwanese diet. I didn't really like either, but I didn't want to go hungry, so I started eating it in Canada before I went. I eat rice almost daily now. I also went to Chinese restaurants and learned how to use chopsticks.

Preparing for the weather: Chuck says: On the Internet, I learned that Taiwan has incredibly hot summers, so I cranked up the heating in my apartment to maximum. Regarding bugs, Taiwan is an entomologist's paradise! Rhinoceros beetles, stag beetles, cicadas, hello! As for the cockroaches, it's all part of the adventure; I bought a pellet gun and went on roach safari in my apartment the first year I lived here!

I, err . never thought of hunting bugs with pellet guns, Chuck.

Transportation: So you've finally arrived in Taipei, armed with rudimentary Mandarin. At the airport you've exchanged the good old Canadian dollar for the New Taiwan Dollar (exchange rate roughly 1 to 30). You hop on the bus that will take you to Taipei, the capital and largest city in Taiwan. Then flag a taxi in Taipei to take you to your new residence.

Chuck says: As with travelling to any new place, the first thing you do is learn how to navigate. Make as many contacts as you can with other foreigners there, like the Canadian embassy. Take precautions, like having directions written in Chinese for a taxi driver. Also have backup emergency English service numbers (or friends you can call in a panic).

Chuck is absolutely correct. Before arriving in Taiwan, learn the correct pronunciation of the MRT, Taipei's world-class subway system. For bonus points, memorize "Where is the MRT?" in Mandarin. The system goes everywhere important, and it's fast, clean and cheap. To get to anywhere else, Taipei residents use scooters, an adventure category all by itself.

Meeting new friends: If you're aiming to make some Taiwanese friends, here are some helpful cultural insights. I find the Taiwanese to be "group-centric." If you are working together, or introduced by mutual friends, then Taiwanese people are pretty accepting. It is harder to befriend someone randomly on a bus, or sitting nearby at a restaurant (I tried) without any "group context." If you make a Taiwanese friend Canada-side, look the person up in Taiwan! Some of my best experiences came from these zealous friends taking me around town to all the restaurants and locales that only they would know.

Politics: Taiwan's official name is "Republic of China" (ROC), a bit confusing since the similar-sounding "People's Republic of China" (PRC) refers to mainland China. In 1996, Taiwan held its first direct elections for president, and it has since become a full-fledged democracy. Most Taiwanese are quite proud of their new political freedoms, so to avoid stepping on any landmines, here's a quick version of Taiwanese politics: Currently there are two main political viewpoints. The pan-green coalition supports the eventual independence of Taiwan, while the pan-blue coalition supports eventual reunification with mainland China. Discussion on this topic can be quite heated, much like our discussions regarding Quebec sovereignty. Keep a respectful tone and you'll get along fabulously with your new Taiwanese friends.

Taiwan's a great place to visit. The key to getting the most out of the experience is to prepare yourself - to get an understanding of the language, the culture and the food before you go. Keep an open mind about Taiwanese society. Before you know it, the year will be over and you'll wish you had more time to explore this fascinating island further.


Yi-Jeng Huang was born in Taiwan but has lived in Canada for more than 20 years. He works in the biotech industry in Vancouver.

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