Apr 11, 2018

Axios Future

By Bryan Walsh
Bryan Walsh

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1 big thing: Amazon isn't retail's vanguard

Illustration: Rebecca Zisser/Axios

In January, Amazon attracted intense attention when it opened Go, its cashless convenience store in Seattle. And it's poised to open six more of them on the U.S. West Coast, according to Recode. But that still leaves the e-commerce giant far behind its Chinese rivals, which are already staking out new ground in the future of retail.

What's happening: Go arrived about five months after the appearance of such stores in China, where tens of thousands of shoppers have already tried them out. They are part of a dizzying transformation in which Chinese internet giants led by Alibaba are becoming online-offline behemoths, investing in or acquiring some 30 physical retailers in the nation since the fall, says Sanford Bernstein, a research firm.

"It would be like Amazon buying a stake in every major offline retailer in the U.S.," Bernstein's Bhavtosh Vajpayee tells Axios.

Why it matters: The future of retail in the world's leading economies is increasingly expected to be not online shopping, but a melding of e-commerce and physical stores. And Chinese Big Tech appears to be in the vanguard of how to pull this off. Bernstein calls it the "digitization of retail."

"Whoever gets their online and offline stores right will become a gravitational black hole sucking up everybody else."
— Vajpayee
  • Walmart and Amazon are the leading contenders to play this role in the U.S.
  • In Europe, it's not clear who has the inside track.

Go deeper: Read the whole post here, and check out The Economist's piece on Alibaba and Tencent trying to dominate China supermarkets.

2. The pernicious robots

Guided robots in Yiwu, China. Photo: Zhang Cheng/Xinhua/Getty

Some of the more optimistic forecasts on robots say that it's not jobs that will vanish, but tasks. That is, about half of the things that make up current occupations are automatable, according to a recent report by McKinsey, but that just means the workers will retrain and transform those jobs into something else.

But, but but: According to a new report by Barclays called "Robots at the gate," those little tweaks to jobs are precisely what makes automation so pernicious. Wages, says report author Ajay Rajadhyaksha, end up suppressed because automation happens in steps, steadily eroding the value of a job as it assumes control of the tasks required to do it.

The bottom line: This is the case for the best new technologies, sometimes continuing even decades after their release, says Rajadhyaksha, who heads Barclays' macro research team.

"Technology frequently ends up lowering the skill-set needed to do a job," he writes, "in turn expanding the pool of potential workers, which then acts as a drag on wage growth."

When a new technology is released, Rajadhyaksha tells Axios, small things that may not seem important end up being primary to their impact.

  • As an example, he cites the introduction of rear cameras and power steering to semi-trucks. Since the trucks were now easier to navigate and required less strength to steer, driver wages fell.
  • "You see this over and over," he says.
3. "You are on your own"

Baltimore. Photo: Spencer Platt/Getty

The new age of automation is almost always discussed as a future problem, but another new report says it's already the subtext for much of what ails the West, from stuck wages to populist politics.

Quick take: The report, released yesterday by the Council on Foreign Relations, says that if the U.S. does not figure out how to retrain workers displaced by automation, politics are sure to grow even uglier than now.

  • In an op-ed at USA Today, report co-chairs Penny Pritzker and John Engler tell President Trump that, in lashing out against China, his economic priorities are misplaced. Figuring out automation, they argue, is the strategic priority.
  • Edward Alden, who co-authored the report, tells me that negative byproducts of automation are already visible in worsening U.S. inequality and a plunge in living standards in community after community.
  • "If you don't give most Americans better paths to well-paying work, that's a recipe for political unrest," Alden says. One huge problem is that the safety net in the U.S. is weak. Often, he says, "you are on your own."

Read the whole post.

4. A 1,000-year rear-view mirror on work

Cover of Andrea Komlosy's book "Work: The Last 1,000 Years"

In the 17th century, Europeans worked largely from their homes, often as artisans and farmers. Each family member had a hierarchical place in the flow of tasks, attuned to their age and skills, and were acknowledged for that contribution.

Then came the Industrial Revolution, which sent workers en masse into factories, and the accepted definition of work suddenly changed: Laborers earning cash outside the home were doing authentic work, while those at home — largely women and children — were not.

This lost status has plagued European and American women ever since. And it's relevant today, social historian Andrea Komlosy tells Axios. She is the author of "Work: The Last 1,000 Years," an original treatment of history that has just been translated from German.

Lessons for the current age of automation, per Komlosy:

  • The advanced economies need to reassess their definition of work and how people are paid.
  • It should include every task that allows advanced society to function, such as volunteering, caring for family members and household work.
  • All of these roles should be acknowledged with paid income.

Go deeper: Read the whole post and listen to an interview with Komlosy at the Financial Times.

5. A cry from the starting blocks

If not tech, how about leather? Training in Allenjoie, France. Photo: Sebastien Bozon/AFP/Getty

The most successful training courses through the decades have been organized by companies finding smart people, then skilling them up for specific positions. But this tradition is long passé — despite a yawning worker shortage, American companies today are only rarely prepared to spend the money to train their own workers. Instead, they want fully formed workers to show up at the door.

What's going on: One person vexed by this paradox is Kim Arnett, a software developer at Expedia. Two weeks ago, Arnett posted an open letter at LinkedIn to technology companies, tut-tutting them for setting up a potential future crisis by failing to create enough entry-level positions. As of now, it has 148 comments and 1,041 likes — not quite an avalanche, but the suggestion is that she may be right.

What Arnett said: "You see, there are NO entry level jobs ... and internships are also fading. Why? I'm not sure. I'm also not sure what's going to happen to the senior developer market pool in the coming years if no one is entering that pool due to lack of entry level positions and experience now."

  • Her suggestion: "As an organizer of a meet up that aims to help beginners and marginalized people, I ask you to back up. Start a training program, add internships and entry level positions to help fill the gap. People are here, give them a chance."

Read the whole post.

6. A course in the future of work

Rush hour. Screenshot: MIT video.

Tom Kochan, a professor at MIT, is teaching a course called Shaping the Future of Work, and is encouraging the Future of Work community to sign up. It's in its third week, but Kochan tells me "this would be a good time to join."

What it's about: "Next week we begin a 4 week online exercise to build a New Social Contract for work," he said.

Sign up here.

Bonus: Watch a video about the course.

7. Worthy of your time
Expand chart

The geopolitics of soy beans (Axios) (above chart)

Unprepared for AI (George Zarkadakis/HRDirector)

Walmart's future robot workforce (The Atlantic's Amy Merrick)

Mind-reading AI (Forbes' Eric Mack)

How the U.S. should prepare for AI (MIT Tech Review's Will Knight)

8. 1 appearances thing: How to know a trade war

Calm before the storm. West Lake, Hangzhou, China. Photo: Johannes Eisele/AFP/Getty

With billions of dollars in tariffs threatened on both sides, the U.S. and China look like warring nations. But experienced trade hands tell us these are only appearances — it's the chest-thumping brinksmanship stage of negotiations, they say.

Okay, but if so, when will we know we are watching war? After all, in a report this week, Brookings estimates that the Chinese tariffs threatened to date — a "shrewdly chosen 'hit list' of hallmark American industries" — could cost 2.1 million U.S. jobs.

  • "We are in uncharted territory," Chad Bown of the Peterson Institute for International Economics, tells me. "It’s more like we’ll know it when we see it."
  • Cornell University's Eswar Prasad says it's not all that inscrutable. "When both sides actually start levying the tariffs, then we will be in a trade war," Prasad tells me.

Bonus: The biggest example of out-and-out trade war is the 1930s, after the U.S. enacted the Smoot-Hawley tariffs. Read this description by Bown and his Peterson colleague Douglas Irwin.

Bryan Walsh