Will job losses from robots lead to more fraud?

Technology futurist Martin Ford ponders how job losses and stagnant wages can lead to an increase in fraud, waste and abuse. His research indicates that anti-fraud professionals would do well to become amateur seers.

Can we find a relationship between the loss of hamburger-flipping jobs and fraud? Possibly.

Meet the robot that produces burgers and replaces workers. The company called Creator (formerly known as Momentum Machines) opened the first restaurant in June in San Francisco that offers fully automated gourmet, made-to-order hamburgers in about five minutes for $6 each.

The Creator restaurant employs only nine compared to about 15 workers in a typical McDonald’s restaurant. (See Six things to know about Creator, San Francisco’s new burger robot restaurant, by Justin Phillips, San Francisco Chronicle, June 27, and statista.)

Now, Ronald isn’t about to begin buying hundreds of the 14-foot conveyor-line, burger robots for McDonald’s. But if he did, where would those thousands of laid-off workers go? Good question.

“Those [robot-made] burgers might sound very inviting, but they would come at a considerable cost,” writes Martin Ford in his book, “Rise of the Robots: Technology and the Threat of a Jobless Future,” Basic Books. “Millions of people hold low-wage, often part-time, jobs in the fast food and beverage industries. … Historically, low wages, few benefits, and a high turnover rate have helped to make fast food jobs relatively easy to find.”

Source: The Future of Employment: How Susceptible are Jobs to Computerisation? by Carl Benedikt Frey and Michael A. Osborene.

Ford said we could be on the leading edge of a massive disruption of global economies and societies — precipitated by technology — that could decimate jobs and increase fraud.

The unemployment rate, at least in the U.S., is the lowest in decades. In June, the U.S. government said employers added 213,000 jobs. (They added 157,000 jobs in July.) But looks can be deceiving, Ford says. “The statistics are a bit misleading in the sense that the top line unemployment rate only counts people who are actively looking for jobs,” he says. The U.S. unemployment rate actually rose from 3.8 percent to 4 percent because more of the unemployed looked for a job, but not all found one. (The rate, however, slipped to 3.9 percent in July.) Conditions like this can still lead people to give up, Ford says. 
“And wages can stagnate,” he says. “Fair to say right now that the impact of technology is not manifesting as unemployment at least not headline unemployment but primarily as stagnant wages and also people just dropping out entirely.”

Ford says it’s not a stretch to say that some who drop out of their job hunts can become despondent and turn to drugs, theft and fraud. “The opioid epidemic is tied, in part, to the elimination of the good, solid middle-class jobs that give you dignity and a sense of accomplishing something important — the feeling that if you weren’t there at work you’d be missed. These are important to well-being. If that kind of thing disappears and people don’t feel it anymore, they become more susceptible to drugs and crime. It’s a real problem. It’s already a disaster.”

Underemployment places an enormous stress on society, Ford said. “Gaming the system becomes a big deal,” he said. “People focus on making money in other ways including fraud. It’s basically an unhealthy situation where either the economy is not growing, or the growth is so highly focused on a few at the top that most are getting nothing, and then people have to look around for other ways to survive.

“It’s a huge problem when labor becomes worth less than capital. ... That in itself makes things much more unequal and that’s going to cause trouble. Political and social,” he said.

“Many experts talk about a paradox where a lot of the numbers in the United States look good. The unemployment rate looks okay. Economic growth isn’t that bad. The stock market is booming. And yet there’s this sense of dissatisfaction. Too much of that progress is being captured at the top,” Ford said.

Will robots replace fraud examiners?

Will hungry job-chomping robots devour fraud examiner positions? Probably not, Ford told attendees during his conference keynote. “In terms of your own career, the best advice I can give is to avoid doing something that’s routine and repetitive; you want to be good at something that involves engaging other people or something that involves creativity,” he said.

So, if you engage in say, interviewing subjects, there’s a good chance that no computer — hyped up on artificial intelligence (AI) — will replace you. But if you sit in front of a screen analyzing routine numbers, watch out.

Ford says that many experts, especially economists, are still doubtful that we’re in for high-tech disorder. The U.S. federal Ad Hoc Committee on the Triple Revolution — consisting of prominent academics, journalists and technologists — gave its report to the U.S. President that warned about the dangers of technology. The report, Ford writes in “Rise of the Robots,” predicted that “cybernation” (or automation) would soon result in an economy where “potentially unlimited output can be achieved by systems of machines [and] will require little cooperation from human beings.” The committee prepared that report in 1964. And the president who reviewed it was Lyndon Johnson. You can see why economists would suspect a crying wolf.

However, Ford believes that this time the prognostications might just come true. He says these are the different, crucial factors in technology now:

Ongoing process of exponential acceleration: “Moore’s Law says that every two years or so computers roughly double in power,” Ford said. This acceleration has been going on for decades. Since the 1950s’ integrated circuits, we’ve seen something like 30 doublings in computer power. “You get into your car and start driving really slowly, like 5 mph, and you gradually double your speed to 10, to 20, to 40. If you do that just a handful of times, you’ll soon need a race track and a faster car. If you could do that 30 times, it would be something out of science fiction. You’d need some kind of spaceship that we actually haven’t built yet that would be traveling billions of miles per hour. … In coming decades we’ll probably see things that astonish us.”

Machines, in a limited sense, are beginning to think: “Machines are taking on cognitive ability,” Ford said. “They’re making decisions, taking on problems, and, most importantly, they’re learning.” Ford explained that Google’s DeepMind division mastered the ancient Chinese board game, “Go,” about 10 years before most computer scientists thought it was possible. The game is extraordinarily complex — much more than chess. The number of configurations in Go are greater than the number of atoms in the universe, he said. No computer could be constructed to compete in Go as those that have been built to play chess. A Go champion says that she often uses her intuitive feelings and not her logic to compete and win. And yet, Google has designed a “system that not only taught itself through machine learning but rapidly became superhuman,” Ford said.

AI is increasingly becoming applicable for every use: Information technology, including AI, will impact every sector and industry and become as ubiquitous as electricity.

“Many industries will be upended by technology, but at the same time there will be entirely new industries that will arise as the result of technology progress,” Ford said. But many of these new industries might not be labor-intensive. In 2012, Google, for example, generated a profit of nearly $14 billion while employing fewer than 38,000. He said at General Motors’ peak employment in 1979, the company had nearly 840,000 workers but earned only about $11 billion — 20 percent less than what Google earned. And that’s adjusted for inflation. GM created a lot of opportunities for average people, he says, but Google is creating far fewer jobs for just elite employees.

Ford shared that new technology is increasing productivity but is probably stifling wage increases. Those who are losing their jobs because of technology might not be able to assume the newly created jobs, regardless of available retraining. The current low unemployment rates might be indicative of people taking low-wage, low-status jobs and those who have given up looking for jobs that are comparable to those they lost. Conditions like this can breed fraud, Ford advised.

He said that the inevitable solution might be for governments to explore some type of “universal basic income” so that economies won’t have large numbers of unemployables who can’t consume and sustain healthy economies. However, Ford said, even liberal Scandinavia is having trouble implementing that type of program.

Fraud examiners, he said, must be prepared for disruption in marketplaces as automation eliminates jobs and upends lives. When uncertainty increases, so does the propensity for fraud. Anti-fraud professionals can’t be locked into the present but must also become futurists.

Dick Carozza, CFE, is editor-in-chief of Fraud Magazine. Contact him at dcarozza@ACFE.com.

Martin Ford is working to understand the future

Martin Ford is a researcher into the increased mechanization of work across various fields, the rise of increasingly capable information technology, and the nature of work, education and the value of human capabilities. He’s the consulting expert for Societe Generale’s new “Rise of the Robots” equity index, which is focused on investing in companies that will be significant participants in the artificial intelligence and robotics revolution.

Ford is the founder of a Silicon Valley-based software development firm and the author of The New York Times bestseller “Rise of the Robots: Technology and the Threat of a Jobless Future” and “The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future.” “Rise of the Robots” received the Financial Times/McKinsey Business Book of the Year Award and was named one of Business Insider’s Best Business Books of the Year.

He has more than 25 years of experience in computer design and software development, and holds a computer engineering degree from the University of Michigan, Ann Arbor and a graduate business degree from UCLA. He says his upcoming book, “Architects of Intelligence,” slated for late November, will consist of a series of in-depth conversations with foremost researchers and entrepreneurs working in artificial intelligence and robotics.

Ford, a high-tech futurist and one of the keynote speakers at the 29th Annual ACFE Global Fraud Conference in June, says that fast-food and low-skill retail positions have provided “a kind of private sector safety net for workers with few other options: These jobs have traditionally offered an income of last resort when no other better alternatives are available.”

But what happens when even these jobs are scarce? Or worse, a fast-food job can’t begin to provide enough money for monthly rent? A recent National Low Income Housing Coalition report says that those who want to rent a two-bedroom unit would have to make at least $20 per hour in several states including Washington, Oregon, California, Colorado, Illinois, New York and most of New England. (See nlihc.org/oor.)

“The main message I have is that any kind of job that is fundamentally predictable can be in danger,” Ford says during an interview with Fraud Magazine the day before he gave his keynote message. “Any job where you’re doing the same kinds of things again and again.” These jobs could include not just hamburger flippers but accounting clerks, truck drivers, cashiers — the same types of challenges where basically what you’re doing is encapsulated in the data, Ford says. “So, an algorithm could conceivably go through data that reflects everything done in your job in the past and figure out how to do things in the future. That kind of job is going to be susceptible to automation whether it’s an algorithm or an actual robot.”

According to a 2017 McKinsey Global Institute report, some 375 million workers globally will likely need to transition to new occupational categories and learn new skills because of automation displacement by 2030. (See Jobs Lost, Jobs Gained: Workforce Transitions in a Time of Automation.)