A Blog by Jonathan Low

 

Jul 31, 2017

In a Robot Economy, Will All Humans Be Marketers?

Of course not. But in a world of undifferentiated automated services, marketing will be more important than ever. JL

Tyler Cowen comments in Bloomberg:

Cultivating client relationships has never been more important. Machines and software are good at “making stuff” and, at delivering well-defined services, such as when Alexa arranges a package for you. But machines are not effective at persuading, at developing advertising campaigns, at branding products or corporations, or at greeting you in a charming manner. Don’t be surprised if you see a lot of robots in daily life, and in news stories, but not huge productivity gains in the statistics. That’s exactly the economy right now.
The fear that robots, or more generally smart software, will put us all out of work is one of dominant economic memes of our time. But that fear is misplaced. We’re unlikely to see mass unemployment; rather, workers will shift into new economic sectors -- albeit with transition pains -- as has always been the case. The real risk is that the robots will push too many of us into less socially productive jobs -- especially those in marketing.
Let’s consider the ATM. Contrary to what many people think, the widespread adoption of automated teller machines in the 1990s didn’t significantly diminish the demand for bank tellers. ATMs made bank branches easier and cheaper to operate, and that led banks to hire more staff, including tellers.
These tellers play a smaller role in counting cash and handling deposits than before, so what are they doing instead? Economist James Bessen explained: “Their ability to market and their interpersonal skills in terms of dealing with bank clients has become more important. So the transition -- what the ATM machine did was effectively change the job of the bank teller into one where they are more of a marketing person. They are part of what banks call the ‘customer relationship team.’”
This shift toward marketing, in the broad sense of that term, isn’t just about bank tellers. More legal work is done by smart software, but cultivating client relationships has never been more important. Some functions of medical assistants are being automated, but hospitals and doctors are still trying to improve the patient experience and reach new customers. Amazon
Inc. warehouses use robots to pull goods down off the shelves, but someone has to persuade consumers to buy the stuff.
Above and beyond these specific examples, consider the general logic of labor substitution. Machines and software are often very good at “making stuff” and, increasingly, at delivering well-defined services, such as when Alexa arranges a package for you. But machines are not effective at persuading, at developing advertising campaigns, at branding products or corporations, or at greeting you at the door in a charming manner, as is done so often in restaurants, even if you order on an iPad. Those activities will remain the province of human beings for a long time to come.
How much is this shift of labor into marketing a step forward? To be sure, a lot of commercial persuasion is useful. Marketing informs consumers about new products and their properties, or convinces them that one product is better for them than another. It was marketing that got me to stop watching baseball and switch to the more exciting NBA. Sometimes the very existence of an ad -- even apart from any direct informational value -- makes a product more enjoyable. If a particular basketball sneaker is associated with LeBron James, through an endorsement and TV commercials, some people will enjoy wearing that sneaker more.
That all said, a lot of marketing is a zero- or negative-sum game. Each business tries to pull customers away from the other brands, and while the final matching of customers to products is usually closely attuned to what people want, more is spent on these business battles than is ideal for social efficiency. My bank might make me feel better about being a customer there, but its services just aren’t much superior to those of the nearest competitor, if at all. Maybe Coke really is better than Pepsi, or vice versa, but it’s not that much better -- and billions are spent trying to persuade consumers to make one switch or the other. By one estimate, the Coca-Cola Co. spent about $4 billion last year on global advertising.
The more a sector exhibits economies of scale, and thus some monopoly profits, the higher wasteful advertising spending can rise. Although consumers enjoy these panderings to some degree, there’s a limit on value added. As workers shift from serving tables to greeting customers, many diners will feel just a little more welcome. Going to the bank will also be a more fun experience, as tellers who used to count cash are now trained to sell us on how the bank is managing our savings. Still, that’s an uninspiring vision of what we will do with the human labor freed up by robots. There’s a darker vision too: Some of those marketers may look toward fraud, such as the Wells Fargo employees who signed up unknowing customers for new accounts.
Don’t be surprised if you see a lot of robots in daily life, and in news stories, but not huge productivity gains in the published statistics. That’s exactly the American economy right now.

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