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The hidden costs of automation

    · Opinions

    I was recently in Lebanon visiting family and, every time I’m there, I keep being amazed at the number of unskilled workers you see everywhere. The other day, at the mall, there were even guys at the parking door helping customers get tickets out to get in, or paying the parking before getting out. What's interesting is that in countries where labour cost is somehow low (like Lebanon), the cost of automating this process is still supposedly higher than the cost of managing an army of parking assistants. More specifically, every country has a different labour cost that machines will compete against.

    But, what if the low labour cost was not the only reason? What if there were hidden costs that were as powerful as labour cost and error reduction? I happen to think there are two important but usually dismissed costs: the power cost and the social cost.

    1/ The power cost

    What’s the difference between a parking manager, managing a dozen guards at the door and a parking manager making sure the machines work fine? The first one is an empowered chief, ruling his will over a dozen souls, the second one is a lonely technician waiting for the machines to eventually fail. You can easily imagine why the parking manager would never want automation to happen as it will definitely diminish their power and social status.

    2/ The social cost

    Automating the parking process would mean the end of the dozen of guards. The social cost to that, even in a country with limited labor protection, is enormous as unskilled workers losing their job has an immediate impact on the family. It’s like a discussion I had once with the CEO of a European industrial company about automation. He actually said that in family businesses like his, employees are like family and they would prefer lose some productivity (and margins) than losing them.

    While we're more and more rooting for automation as an engine for growth and productivity, I think that the awaited transformation will certainly happen less rapidly than expected due to the power and social costs I mentioned.

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