Business needs to think of society when introducing AI

06 September 2019

Maja Korica, Associate Professor of Organisation, answers our questions on how AI and the fourth industrial revolution will impact society.

Core: Why do you think automation is a particularly important issue? Automation has been here for a while. Is this something new - are we approaching critical mass? 

Dr Korica: "A number of industries have been automated for years, and that automation continues at pace. What is perhaps most concerning is the speed at which the biggest players are introducing these changes. If you take a company like Amazon, for instance, in 2017 it introduced more than 50,000 new robots, a 100 per cent increase from the previous year. Estimates suggest some 20 per cent of its workforce may already be made up of robots.

"This shift is highly visible, and of course highly effective. After all, robots can work 24/7, 365 days a year, they do not have unions, they do not complain, there are less costs associated in terms of providing an acceptable working environment, they come with great efficiencies. As such, they present a powerful incentive for other firms to do the same."

Core: So the rise of the robots is underway and with it comes some profound challenges?

Dr Korica: "Whether it’s AI or robots, the impact on work is similar. There may be humans involved still, but fewer and fewer. And this is not just in Western economies. In China, for instance, the scale of investment in robots and displacement of workers is huge."

Core: And the usual response is that other jobs will be created to make up the losses - that is what has always happened before?

Dr Korica: "That is the traditional doctrine. This time, the suggestion by some is that these jobs will mostly move to the service industry, specifically where empathy and judgement is involved, for example. However, some of these traditionally better paid jobs, like lawyers, surgeons and financial advisors, are increasingly a target for automation too."

Core: So is this a new paradigm - different from technology advances that have eradicated jobs in the past?

Dr Korica: "I am relatively convinced that it is. It used to be the case that with new technological advances came new opportunities, and often better, and better paid work. I think that is no longer necessarily the case, and this has significant consequences.

"Not just in terms of economics, because of reduced purchasing power spread across fewer people, but also in terms of social and political consequences. What happens when millions of people discover they no longer have long-term careers, or a stable job at all?"

Core: However, from the perspective of a shareholder in a corporation deploying automation - lower headcount, lower costs, greater productivity, equals more profits. That’s a positive for shareholders.

Dr Korica: "Well, if you are just looking at the bottom line, then you are absolutely right. Cutting workers is one obvious solution. The robots pay for themselves in a short time, so the investors might expect to do very well.

"The problem is that calculation is no longer appropriate for the modern world. You can fly under the radar and hope for the best, but already we can see some of these things having well-publicised broader social and political consequences.

"National publics are increasingly living those consequences, so losing patience with this type of thinking. Couched in those terms, it becomes clear that here investor interest doesn’t match the interest of the public, nor of national governments, certainly not in the longer term."

Core: What are some of the suggested solutions to this challenge?

Dr Korica: "There are a few. One that I have researched and written about is the ‘robot tax’, for example. The idea is to use tax as a disincentive for automation, or more realistically, as a redistribution mechanism of corporate gains from automation.

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"Of course, some policymakers and business leaders object on the basis that a levy against automation is a levy against progress. Here, the argument goes that technological advances are inevitable and essential, so we need to avoid any kind of tax that would make business less likely to invest in technological progress like AI and robots. There is also the fear that nations would be at a competitive disadvantage if they levied such a tax."

Core: But if we accede to the “don’t tax progress” argument then we bow to the inevitability of ever greater wealth inequality?

Dr Korica: "Well, the capturing of wealth created by automation has been clearly shown to go almost entirely to business owners in recent years, certainly in countries like the UK and US. And it is not really being redistributed. Not to employees through increased employee ownership options, for example, nor more broadly.

"For many average workers in such countries, their wages have stagnated or fallen over time - whole communities struggle to find work. Social structures begin to buckle, especially if at the same time governments have less tax income, or political desire to provide safety nets for displaced workers.

"In short, while the benefits of automation are clearly accumulated by the business owners, the externalities and the negative social and economic consequences presently fall on local communities and society more broadly."

Core: How then do you make a robot tax, or something similar, palatable to business? How do you reconcile these competing interests?

Dr Korica: "I think that the only counterpoint to those kinds of incentive structures, which are very self-interested, is targeted work at a pan-national level, based on a shared set of principles concerning the social contract. The EU, for example, can take collective action if there is enough political will.

"In the absence of this, expecting companies to be responsible is basically saying 'whatever you are happy to do, you can do'. Self-regulation may work in some cases, but given the powerful incentives to introduce robots in the present market environment, it is highly unlikely that they would choose not to adopt these technologies.

"They might of course raise the salaries of the people that remain, but this would still have limited impact more broadly. In short, governments play a key part in mitigating those effects, and working out solutions."

Core: Without intervention, the scenario you describe is one of an increasingly fractured world, as shareholders become considerably wealthier, while the majority of people struggle to earn a reasonable salary or find work?

Dr Korica: "Absolutely. This fracturing speaks to the wider world we find ourselves in. As such, what I believe policymakers and business leaders should be thinking about is how do we collaborate across organisational boundaries to deal with these so-called 'wicked problems'.

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"These happen in environments where we are resource-stretched, where political winds aren’t necessarily in our favour, when we are under constant media scrutiny, when timelines are incredibly tight, when best solutions aren’t immediately obvious, or practically possible without collaboration.

"The idea that, as a company, you can forget about other people, that as an entity you have fixed boundaries, and can therefore choose to engage in the world however you want on your own terms. That notion is crumbing before our eyes. Sitting on the sidelines is no longer an option."

Core: What are the barriers to the kind of co-operation you think is needed?

Dr Korica: "It has not always been this way. For instance, the so-called titans of business historically played a great role in public life of the US, based on the sentiment that we are all living together in this society, and so need to take some responsibility for what happens at our back door.

"Today, however, for many large multinationals, there is less sense of belonging: they are everywhere and nowhere. Their boundaries are so porous, they don’t even know who their employees are or aren’t, who or what they are responsible for, where they start or end.

"And there is also a much greater, detrimental focus on the bottom line in the short term."

Core: So organizations need a different approach?

Dr Korica: "Yes. This demands a different kind of leadership and management, of co-ordination. We need a stewardship model, where leaders and organisations are contributors to broader well-being.

"For a CEO, this shift means practical reorientations too. CEOs should be thinking whether their staff at all levels can meet this challenge - do they have the skills that allow them to work with others across boundaries to deal with 'wicked problems'?

"In a world where AI, machine learning, and robots are prevalent, organisations and its leaders will still need people who can exercise sound judgement within increasingly challenging environments.

"Do your staff have the capacity to create imaginative realities for different futures? Do they have the means to break through the ceiling of information that surrounds every executive without reducing complexity? Are they continually asking critical questions?"

Core: So to go back to the robot tax, that sounds like a bit of a temporary patch? These types of measures are merely a prelude to a fundamental rethinking of what a company and corporate model should look like?

Dr Korica: "Absolutely. For me, the question is who owns the gains and the losses.

"We need to train people to face a different kind of reality and/or train people for a future with less work. How are we going to do that and who pays?

"And even if we figure out the payment element, what does this mean for individual identity and meaning?

"We talk about dignity of labour. Today’s work is already short on dignity for many. What happens if we lose the labour part too? What will we do? Who will we be?

"These are some of the fundamental questions we need to answer for different contexts, and pretty soon too."

 

Maja Korica is Associate Professor of Organisation and was shortlisted for the Thinkers50 Radar Award. She teaches Management of Change on the Executive MBA and Executive MBA (London) plus Organisational Behaviour on the Full-time MBA. She also lectures on Organisational Change on the Executive Diplomas Series.

Follow Maja Korica on Twitter @DrKorica.

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