April 19, 2017
PUBLISHED BY Nathaniel Krasnoff
Through parts 1, 2, and 3, we’ve covered a lot of information around the displacement that’s going to occur as a result of AI, but we’ve also talked about the fact that people are going to be in the loop for decades to come, and that AI is going to empower new job classes while radically changing the role of people in the workforce from industrial to creative. Independent of what has happened to get us to this point, today, and every day, we have the opportunity to decide how we are going to work with AI and automation and it guides our investing decisions here at Wildcat.
Sticking with the physics theme here, let’s break up the response to AI into two categories- inelastic and elastic collisions. Imagine for a moment two pool balls being slung at each other from different directions and colliding. In this situation, an elastic collision would result in the balls shooting off into different directions, whereas the outcome of an inelastic collision would, for better or for worse, result in the balls absorbing each other’s energy and flying in a new, third, direction together. In the context of AI, there is no argument around whether it will leave certain cohorts and industries out to dry (hint: it will), but it will also empower others to shape this landscape and drive industries forward together.
An example of an inelastic collision is Cosabella Lingerie (don’t worry that hyperlink takes you to the article not their website so it’s ‘safe’ for work). They were able to fire their agency in order to focus their efforts internally on the core business and it worked with fantastic results:
- “In the first month alone, Albert increased Cosabella’s search and social return-on-ad-spend (ROAS) by 50% and decreased its ad spend by 12%.”
- “By month three, Albert had increased Cosabella’s ROAS to 336% — a 155% increase over the previous quarter.”
The task they automated required relatively basic optimization and was a simple task for machine learning and statistics to nail by automating the dial tweaking.
For comparison’s sake, let’s take a look at the elastic story about my favorite manufacturing plant, Changying Precision Technology Company. Only joking; everyone knows my real favorite is Hon Hai Precision Industry Co., Ltd. The former has replaced 90% of their workforce with robotics, going from 650 employees to 60, with a roadmap to get down to 20. Despite this reduction in staff, not only is the factory producing more equipment (a 250% increase), but it’s also ensuring better quality (80% improvement). The latter, also known as Foxconn, (the largest manufacturer in the world and maker of your iPhone), in the most meta decision ever is having its current workers build the robotic workforce that will displace them in Foxbots. According to the article they are up to 40,000 Foxbots and can ramp up to 10,000 more each year.
In these cases, what happens to the people that are being displaced? This is the same problem that is radically affecting the US as manufacturing jobs become less and less likely to return to the US for anyone other than robots [sources abound]. As such, we need to find ways to help the people getting displaced. It’s not just baby boomers and blue collar workers that need this retraining, but it’s also college grads, white collar folks looking to change careers, and life-long learners, etc.
Which brings me to my core point: Education Technology can be the antidote to AI. Edtech can serve as the ultimate inelastic agent melding AI and work together to drive society forward. Ultimately what this comes down to is investing in people.
Here are the two big components of this theory:
1. Edtech is a mechanism to retrain the workforce
2. AI is a source for custom learning
With regards to point one, what do we do for people being displaced by automation? At Wildcat, we believe in investing in meaningful solutions that work towards creating skills and training for in-demand jobs. This isn’t to say that we know what the next “good job” will be because that target changes with time, however, what we are certain of is that we are in the fortunate position to empower companies creating that workforce of tomorrow. In that vision, not only are people a major part of that workforce, but our companies are also going to have a hand in enabling them to thrive in it.
At Wildcat, we are so bullish on this that three of my General Partners are working on this problem as we speak:
1. Katherine Barr has developed a core investment thesis around Workforce Innovation. She explores how we apply technology to augment and enhance the workers of today to create the future of work. Highlighted Companies: Workfusion
2. Bryan Stolle focuses on Edtech beyond K-12. His efforts center around how to educate and retrain adults as well as fixing infrastructure gaps in education like student loan refinancing. Highlighted Companies: Tuition.io, Earnest
3. Bruce Cleveland has founded a nonprofit based in Oregon that focuses on training people how to be successful in the high demand roles of product managers and product marketers. Highlighted Companies: Bend Poly
By now I think you’d agree that this problem is a doozy, but if you weren’t quite sure here are a few more tidbits for you:
- The WEF’s Future of Jobs Report, states that ~35% of core skills required by occupations will change or be wholly new by the year 2020. Adult training and learning opportunities are thus vital in unlocking trapped human capital.
- Globally, we are facing a 3-billion-person workforce that does not have the tools to navigate current technological disruptions and prepare for new skill requirements in their current, or future, roles. This will lead to a rise in adult, professional-focused training programs in conjunction with our current education system, which is currently built around educating children.
- The WEF further states that “employers should work with governments and industry associations to manage current disruptions through concerted efforts at reskilling and upskilling within at-risk or high-demand job families.” Additionally, McKinsey, BCG, and the WEF have calculated the odds of specific classes of jobs being automated and technology companies, both startups and incumbents alike, have answered the call and begun to automate them. What this means for Wildcat is that there could be eight or ten Bend Poly’s and each could be a large company.
One stat we throw around at Wildcat is that people who are born now are being set up to have 6 careers in their lifetime… careers NOT jobs. We often debate about the infrastructure required to make the transition happen more smoothly and it shakes out to a couple of things the WEF sums up nicely:
1. Move away from the emphasis of front loading education and make it continuous and accessible. There are companies working on this, which is great to see.
2. Move beyond multi-year degree programs as they default towards a system of accreditation based on “micro-credentialing”, a category Wildcat champions as “Micro Universities.”
3. Transfer the ownership of learning back to the students.
For point two, I’d like to challenge you to a thought exercise. I recently heard Danny Lange (formerly Amazon and Uber, and now Unity) talk about his past AI projects and how they boil down to solving a problem for a cohort of one, and Edtech has the same opportunity. What I’d love to hear your thoughts on are how we leverage AI to tailor education to the individual and maximize learning potential.
Thanks for reading!