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Tuesday, May 31, 2016

The Economics of Robotics and AI: Insights from the Top PGDM College in Delhi NCR

Two months back in a lecture session on strategic management, the PGDM final year students and an academic were engaged in a discussion on the steps that Dr.Vishal Sikka, the new CEO of Infosys has taken to script a turnaround for the IT behemoth. At Ishan Institute of Management & Technology, one of the top PGDM colleges in Delhi NCR it is a common practice for academics and students to deliberately stray away from and beyond the academic curriculum. Needless to say discussions such as the one stated above are like journeys into the centre of the universe in search of black holes and answers to the conundrums of the Big Bang theory. While not many students may accept and appreciate the method to madness of a Stephen Hawking at a business school in Delhi NCR, fortunately the PGDM program is designed for intellectual and academic activities that are contemporary and trendy unlike the historic heritage based academic curricula of an MBA program. Coming back to the discussion though, we moved to design thinking and tried to identify the different upcoming trends in the Indian IT industry. We spoke of social media, cloud computing, big data, data analytics, robotics, artificial intelligence, embedded systems, BITCOIN and block chain technology. The lecture was indeed productive to the extent that it gave rise to a conclusive footnote on the rise of SMAC while also posing a few unsolved questions on the impact that robotics and artificial intelligence is likely to have on the economies of nations that have been frontrunners in the race for office and production process automation. What is also interesting to watch is the effect on key economic metrics of employment, income generation, displacement of labour, economic growth rates and also marketing indices like customer satisfaction, user experience, and marketability of a brand using robotics and so on.

Robotics: The Terminator of Jobs for Humans?

Just a few months ago there was an unfortunate accident in Gurgaon, wherein a giant robot that was installed in the assembly line of an automobile manufacturing unit malfunctioned. The program of the robot failed and then the robot disobeyed instructions, went into autopilot mode and finally killed the worker employed at the workstation of the robot. While this may sound scary, the truth is that humans are not the most efficient workers on planet earth. A report published by Techcrunch.com suggests that 57% human workers are at risk of losing their jobs to robotics in the U.S.A and Western Europe. It is hardly ant rocket science to anticipate that jobs of customer service and manufacturing are the most likely to be affected within the next 20 years. Artificial intelligence threatens to wipe out the jobs of front desk executives, receptionists, retail sales persons working in house stores and travel agents.
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Economic and Technical Efficiency of Robotics and AI

The microeconomic analysis of the use of robotics and AI is based primarily on the parameters of economic and technical efficiencies. First economic efficiency of robotics and artificial intelligence stems from the fact that these applications can be optimized for achieving a very large scale. In the long run when corporate enterprises have to take decisions for foreign direct investment and thus transfer of technology becomes an important consideration, the scalability of operations is likely to be the most important consideration. Irrespective of the nature of the investment project and the production automation required therein, robotics and AI offer the highest possible economies of scale through continuous operations for 24X7 working conditions, uninterrupted work ethic, unwavering focus unlike human beings and a learning by doing knack that is very much like humans. Moreover modern industrial psychology shares the view that learning in itself is a process with three steps: unlearning the past, learning the present and putting to practice the learning of the present. This is exactly what challenges human learning ability and exposes the limitations of humans. Artificial intelligence gets robots, devices and machines to understand think and feel like human beings but with a far superior technical efficiency. Machine learning raises the bar for organizational learning, knowledge management and the development of new core competencies based on the use of knowledge as a key asset or resource. This is where robotics, artificial intelligence and machine learning can combine to revolutionize workplace rules and raise metrics like total quality, acceptable level of defects, and adherence to six sigma and sky high productivity. The combinatorial impact of economic and technical efficiency of robotics and artificial intelligence can indeed break the rules of human workers in verticals that require repetitive tasks and follow an algorithm bound by standard operating procedures for work.

The Rent Element in Skill and Walrus Law: Optimizing Across Markets

While standard microeconomic analysis can explain the reasons behind embracing robotics, machine learning and artificial intelligence, it also does explain the reasons behind the attainment of equilibrium in the labour markets. For every positive supply side shock that is generated by a new wave of technology or disruptive innovation, a new frontier opens up with an increase in demand for that technology and skilled manpower to operate, troubleshoot, innovate, build and sell that tech based application. This has always been the case since the times of industrial revolution. It was observed in continental Europe that in the year 1908 when automobiles first swept across markets, blacksmiths lost jobs for horse shoe making while new jobs were created in thousands for work that had to be done in factories producing cars. This is the general exposition of the Walrus Law in microeconomics and is bound to hold true for robotics as well.

Moreover there is a rent element involved in the compensation received by highly skilled professionals. Take the case of surgical medical science. Surgery is one of the front runners in the race for automation and use of robotics. Yet it is very difficult to imagine a scenario where surgeries would be performed by high precision robots in the absence of a senior surgeon. At best a robot can be a personal digital assistant in ferrying tools, equipment, measurement and diagnosis of the effectiveness of a surgery but cannot replace the context specific learning and experience acquired by a senior surgeon through hundreds of operations and years of experience in medical science. The unpredictable element of intuition that is based on experience is impossible to emulate for the best of programmers working on AI, machine learning and robotics.

At Ishan Institute of Management & Technology, the top PGDM college in Delhi NCR we inject contemporary tracks and upgrade our academic curriculum each year to offer cutting edge managerial know-how. The above piece is dedicated to the final year PGDM students Alka Mishra, Samir Akhtar, Pawan Sinha, Utsav Kundu and Damini Bansal pushed the envelope during that lecture on strategic management, by bringing design thinking to the centre of corporate strategy.