Implications of a Robot Economy for Startups: How is your startup like a robot?
A robot economy is simply the idea that machines are starting to displace human workers. The term has been popularized most recently by Paul Krugman who argues that it is a large driver in our rising income inequality and class immobility in the US. He also states, because income is moving away from labor, that
If this is the wave of the future, it makes nonsense of just about all the conventional wisdom on reducing inequality. Better education won’t do much to reduce inequality if the big rewards simply go to those with the most assets. Creating an “opportunity society”, or whatever it is the likes of Paul Ryan etc. are selling this week, won’t do much if the most important asset you can have in life is, well, lots of assets inherited from your parents. And so on.
Let’s think about why he may be wrong.
Microsoft Office Robot
I’d say the most prevalent example of robot economy in effect is the introduction of Microsoft Office. All of a sudden, a machine could enable a single office worker to compose, edit, publish, print and distribute his or her work. In this case, many of the functions of traditional office work (printing, copying, text placement, publishing, etc etc) were disrupted by a group of technologies that automated those worker functions, i.e. a “disruptive technology.” The market embraced Office because it displaced inefficiencies companies didn’t know existed.
Opportunity’s are abundant in the United States for people who think like a robot, as demonstrated by Microsoft. Imagine if Henry Ford never perfected the manufacturing line, or, imagine if Al Gore (kidding) didn’t invent the internet.
Today’s most successful entrepreneurs accumulate capital because they can introduce and rapidly bring “robot effects” at scale to the world through software. Software, unlike the manufacturing lines of the industrial revolution, requires very little capital, and far less people.
We know that software startups are cheaper than ever to start, and if they have more potential to create ROI than any other investment, so why is Krugman so naive? My theory is our education system is promoting degrees that don’t justify their expense and not promoting enough qualified candidates for the “robot economy.”
What we are really seeing is a shift towards a world where labor has to be creative, resourceful and trained in technical ways that can manage and create robots. Unfortunately, as we undergo this structural shift, the low income workers will be harmed in the short-term, because, we no longer need to pay someone fulltime to typeset letters for us (plus the millions of other examples of technical efficiences).
I feel like Krugman would argue that technological change is bad if it replaces jobs. I think he is looking at correlations, not causations. That’s a scary concept for anyone in the tech industry, but shows, that maybe, he isn’t trained to be creative in a world that is undergoing technology-driven structural changes.
Implications for Startups: Think Like a Robot
Startups in the enterprise space are hot right now. I’d say good investors and good founders need to answer the simple question:
How is your startup a robot?
At VividCortex, the answer is: we automate system administration. Any startup that is selling to businesses must be able to answer this question, because as much as Krugman ignores the opportunity, we all know it’s here to stay. Microsoft Office was just the tip of the iceberg when it comes to disrupting inefficiencies, and we’re likely to see many more inefficient workers replaced, until we give them the tools they need to create and manage those robots.