December 1, 1913, is no ordinary date…
It’s the birthday of America’s middle class.
That’s when Henry Ford installed the first moving assembly line at his plant in Highland Park, Michigan, for the mass production of cars.
This cut the time to build a car from more than 12 hours to about an hour and a half.
It was so efficient, Ford was able to double the wage of his workers to $5 a day.
By 1926, he cut his workers’ hours from 48 to 40 hours a week while keeping pay the same.
It’s a story we know well today.
Ford’s assembly line increased efficiency. This allowed him to ramp up production, hire more workers, and pay them more money.
He was also able to drop the price of his Model T model. In 1908, the car cost $825. By 1925, it cost $260.
This 68% drop made it affordable to Ford workers. They could buy the cars they built and live a better life.
This spawned a new middle class. For the first time, workers could afford consumer goods once reserved for the wealthy.
But that wasn’t what many thought would happen.
At the time, people feared the assembly line’s efficiency would put people out of work.
It’s easy to look back and laugh at this idea. But those same fears are back – this time about automation.
Amazon, Walmart, and other retailers are unveiling warehouses run by robots. They will replace the backbreaking work of packing and moving boxes.
Workers’ rights advocates worry that robots are going to take our jobs.
They couldn’t be more wrong.
Today, I’ll share why automation will benefit America’s middle class as much as Ford’s assembly line did more than a century ago.
Our Automated Future Is Here
Amazon’s BOS27 warehouse is a test case for our automated future.
There you’ll see humanoid robots with strange names – including Sequoia, Hercules, and Digit – tirelessly sorting and moving items.
Here’s a clip of the Digit in action…
Digit, one of Amazon’s robots, carrying a crate of items (Source: Agility Robotics)
It’s the creation of Agility Robotics, an Oregon-based robotics company. And it uses artificial intelligence (“AI”) to navigate a world designed for humans.
That’s what’s so striking about today’s cutting-edge robots.
In the past, we pre-programmed robots to carry out one task in one location – say, lift a car door handle into place or spot weld a frame. They couldn’t adapt to tasks off the assembly line.
But thanks to AI, Digit and other humanoid robots adapt to the ever-changing warehouse landscape.
Amazon has more than 750,000 robots working in its warehouses. And those that use these robots have 15% fewer accidents than those that don’t.
That’s because these robots are taking the most mundane and labor-intensive roles.
New Jobs and Better Pay
I know there’s a lot of fear right now about robots taking away jobs…
But no one wants to spend their life doing backbreaking work in an Amazon warehouse. Workers are expected to scan and pack hundreds of items per hour… all while being tracked by cameras. Some workers have likened it to working in a prison.
So, it’s no surprise that the turnover rate for an Amazon warehouse worker is 100%. The Wall Street Journal reports that, over one year, the company replaced nearly every worker with a new one.
That’s twice the average turnover rate for similar jobs. And apart from the effects it has on the folks working in these warehouses, it costs Amazon about $8 billion a year.
Meanwhile, robots are creating new jobs that pay better and offer better working conditions.
For instance, Amazon has added 700 new positions to support its robotics programs.
Those aren’t just engineering jobs. It also includes software developers, operating managers, and technicians to keep the robots up and running.
I have two young sons. My hope for them is that they find fulfilling careers. Whether that’s running their own business or being a part of a bigger team.
I don’t want them breaking their backs in a warehouse moving boxes around.
I’d rather they use their minds to work on the robots that can do these tasks, day in and day out, without injury.
And like what happened when Henry Ford invented the moving assembly line, automation will bring down costs for goods and services. That will leave us as consumers with more money in our pockets to either save or spend.
How to Play It
As investors, that’s why we have to pay attention to automation.
It’s going to kick off a boom much like the boom Henry Ford kicked off with his moving assembly line.
Productivity will shoot higher. This will fatten margins. And more revenues will fall to the bottom line.
There’s no better way to capture the gains in productivity than by investing in the companies leading in robotic automation.
Amazon (AMZN) is one way to play this trend. It’s been working on automating its facilities for more than a decade. With nearly a million robots already in service, it will be the first to automate most manual work across its warehouses. That will cut costs and boost the profitability of its retail business.
I’m also researching smaller automation companies. They’re building the tech that Amazon is using. And because they’re still in their early stages, they offer the highest reward.
Over the coming weeks and months ahead, you’ll hear about them if you’re subscribed to either my Near Future Report or Exponential Tech Investor advisories.
Even if you aren’t a paid subscriber, I want you to remember one thing…
Don’t believe the pundits when they say AI, robots, or automation will cause mass unemployment.
This is a common fear tactic from the ignorant or market manipulators.
Regards,
Colin Tedards
Editor, The Bleeding Edge