Automation at Goldman, The Computer takes out four people

Today, nearly 45 percent of trading is done electronically, according to Coalition, a U.K. firm that tracks the industry.

Pay:

Average compensation for staff in sales, trading, and research at the 12 largest global investment banks, of which Goldman is one, is $500,000 in salary and bonus, according to Coalition. Seventy-five percent of Wall Street compensation goes to these highly paid “front end” employees, says Amrit Shahani, head of research at Coalition… Investment bankers working on corporate mergers and acquisitions at large banks like Goldman make on average $700,000 a year, according to Coalition, and in a good year they can earn far more.

Automating those $700,000+ meat-sacks:

Goldman Sachs has already begun to automate currency trading, and has found consistently that four traders can be replaced by one computer engineer, Chavez said at the Harvard conference. Some 9,000 people, about one-third of Goldman’s staff, are computer engineers.

Finding the things to automate:

Though those “rainmakers” won’t be replaced entirely, Goldman has already mapped 146 distinct steps taken in any initial public offering of stock, and many are “begging to be automated,” he said.

To be all double-turns-out about the grim automation stuff, in theory, this could mean hiring more programmers and people who support those robots, bringing down those big chunks of cash from “rainmakers” and spreading it down to “lower” grade staff. Of, you know, the bank can just keep that money and trickle it up to execs and share-holders.

Source: As Goldman Embraces Automation, Even the Masters of the Universe Are Threatened

Global IT spend at $2.4 trillion in 2017, 3.5% growth, IDC

Worldwide revenues for information technology (IT) products and services are forecast to reach nearly $2.4 trillion in 2017, an increase of 3.5% over 2016. In a newly published update to the Worldwide Semiannual IT Spending Guide: Industry and Company Size , International Data Corporation (IDC) estimates that global IT spending will grow to nearly $2.65 trillion in 2020. This represents a compound annual growth rate (CAGR) of 3.3% for the 2015-2020 forecast period.

Link

Onshoring manufacturing, shoes edition

A nice scenario’ing of brining manufacturing back to the US, told through Under Armour. For example, with factory-automation and higher labor prices, you don’t end up hiring 1,000’s of people:

Plank has lamented that we’ve been making clothes the same way for 100 years, and he hopes to change that with the innovation happening at UA Lighthouse. But a huge innovation in the footwear industry, as in other industries, is automation. Adidas now has two Speedfactories, its automated robot-helmed sites. According to Fortune, these only require 160 employees, cutting out many of the humans formerly needed for this kind of factory work.

Plank is fully aware of this tradeoff. When asked about creating jobs in the US, Plank told Footwear News, “It’s not pegged to have 175,000 of those jobs come back to America. I just wonder if there is a way that we can be more thoughtful, creative, and innovative. What if we could bring 100 of those jobs or 500 or 1,000 or 10,000 here?”

Productivity!

There’s also a nice discussion about a border tax’s effect on retail.

The summary is: on shoring manufacturing will create jobs, but probably much less than “like back in the good old days” notions. Further, in the overall retail system, it’ll require much investment and change.

As ever, for an administration that wants to “shock the system,” it fits what’s on the tin. Get some rubber shoes.

Link

More numbers on 2016 tech M&A, foreign cash hoards

A bit of a jumbled article for general audiences
, but some more numbers of tech companies’ cash on hand and numbers around 2016 acquisitions:

The value of software deals in 2016 topped $115 billion for acquisitions closed or pending, according to data gathered by Bloomberg. That’s up about 19 percent from 2015.

But:

Overall in 2016, the value of merger-and-acquisition business software deals totaled $117.6 billion.

And:

That doesn’t include the blockbuster tech deal of the year: Microsoft paying $26 billion for LinkedIn. LinkedIn does not fit neatly into the category of business software because of its professional networking tools that are used by workers outside of business hours.

Tech companies have lots of cash abroad. If the Trump folks reduce the tax down to 10%, the theory is many companies would bring that cash “back home” and could use it to buy things, and likely pay our dividends and do share buy backs:

Oracle and Microsoft have more than 80 percent of their cash, near-term cash and short-term investments in foreign subsidiaries, according to recent filings.

Who knows? It’s all a bit of a lamp-post analysis, but, sure: ¯_(ツ)_/¯

Source: Companies Anticipate Big Software Deals, With Help From Trump

NYTimes ads 276k subscribers in Q4, now at 1.6m

the NYT added 276,000 net subscribers to its news products during the fourth quarter, finishing the year with 1.6 million. The Times called it “the single best quarter since 2011, the year the pay model launched.”

I’m one of those subscribers. I have to say, the editorial culling and feeling of completeness when I scroll through the stories in the app is nice. I wish they would fill out their categories more: they don’t have much content compared to how much I read each day.

Link

More on “grim” automation – Notebook

https://pixabay.com/en/rusty-robot-osnago-italy-sculpture-1505297/

A few weeks back my book review of two “the robots are taking over” came out over on The New Stack. Here’s some responses, and also some highlights from a McKinsey piece on automation.

Don’t call it “automation”

From John Allspaw:

There is much more to this topic. Nick Carr’s book, The Glass Cage, has a different perspective. The ramifications of new technology (don’t call it automation) are notoriously difficult to predict, and what we think are forgone conclusions (unemployment of truck drivers even though the tech for self-driving cars needs to see much more diversity of conditions before it can get to the 99%+ accuracy) are not.

Lisanne Bainbridge in her seminal 1983 paper outlines what is still true today.

From that paper:

This paper suggests that the increased interest in human factors among engineers reflects the irony that the more advanced a control system is, so the more crucial may be the contribution of the human operator.

When things go wrong, humans are needed:

To take over and stabilize the process requires manual control skills, to diagnose the fault as a basis for shut down or recovery requires cognitive skills.

But their skills may have deteriorated:

Unfortunately, physical skills deteriorate when they are not used, particularly the refinements of gain and timing. This means that a formerly experienced operator who has been monitoring an automated process may now be an inexperienced one. If he takes over he may set the process into oscillation. He may have to wait for feedback, rather than controlling by open-loop, and it will be difficult for him to interpret whether the feedback shows that there is something wrong with the system or more simply that he has misjudged his control action.

There’s a good case made for not only the need for humans, but to keep humans fully trained and involved in the process to handle errors states.

Hiring not abating

Vinnie, the author of one of the books I reviewed, left a comment on the review, noting:

For the book, I interviewed practitioners in 50 different work settings – accounting, advertising, manufacturing, garbage collection, wineries etc. Each one of them told me where automation is maturing, where it is not, how expensive it is etc. The litmus test to me is are they stopping the hiring of human talent – and I heard NO over and over again even for jobs for which automation tech has been available for decades – UPC scanners in groceries, ATMs in banking, kiosks and bunch of other tech in postal service. So, instead of panicking about catastrophic job losses we should be taking a more gradualist approach and moving people who do repeated tasks all day long and move them into more creative, dexterous work or moving them to other jobs.

I think Avent’s worry is that the approach won’t be gradual and that, as a society, we won’t be able to change norms, laws, and “work” over fast enough.

McKinsey

As more context, check out this overview of their own study and analysis from a 2015 McKinsey Quarterly article:

The jobs don’t disappear, they change:

Our results to date suggest, first and foremost, that a focus on occupations is misleading. Very few occupations will be automated in their entirety in the near or medium term. Rather, certain activities are more likely to be automated, requiring entire business processes to be transformed, and jobs performed by people to be redefined, much like the bank teller’s job was redefined with the advent of ATMs.

Further:

our research suggests that as many as 45 percent of the activities individuals are paid to perform can be automated by adapting currently demonstrated technologies… fewer than 5 percent of occupations can be entirely automated using current technology. However, about 60 percent of occupations could have 30 percent or more of their constituent activities automated.

Most work is boring:

Capabilities such as creativity and sensing emotions are core to the human experience and also difficult to automate. The amount of time that workers spend on activities requiring these capabilities, though, appears to be surprisingly low. Just 4 percent of the work activities across the US economy require creativity at a median human level of performance. Similarly, only 29 percent of work activities require a median human level of performance in sensing emotion.

So, as Vinnie also suggests, you can automate all that stuff and have people focus on the “creative” things, e.g.:

Financial advisors, for example, might spend less time analyzing clients’ financial situations, and more time understanding their needs and explaining creative options. Interior designers could spend less time taking measurements, developing illustrations, and ordering materials, and more time developing innovative design concepts based on clients’ desires.

Highlights from: IBM’s continuing quest to refresh its revenue mix

TPM has one of his usual, great round-ups of IBM’s business:

For the full 2016 year, IBM’s revenues were off 2.1 percent to $79.85 billion, but its “real” systems business, which includes servers, storage, switching, systems software, databases, transaction monitors, and tech support and financing for its own iron, fell by 8.3 percent to $26.1 billion.

Changing the revenue mix:

IBM’s efforts to promote SoftLayer cloud and Watson cognitive computing, mobile and social and marketing software and tools, and security wares – what it calls its strategic imperatives – are almost filling in the gap left behind as the core businesses shrink. IBM wanted these strategic imperative businesses to reach $40 billion and 40 percent of revenues by 2018, and in this quarter it already hit the 40 percent mark, with $33 billion in revenues for 2016–as much because of its overall revenue decline as for the growth in these businesses.

And, some info on their hardware revenue:

IBM sold just over $8 billion in Systems products, and brought $934 million to the middle line as pre-tax income

Also:

Schroeter said that Linux-based Power Systems machines now drove 15 percent of revenues, and that is pretty good considering that two years ago it was a few percent of sales.

Source: ”Drilling Down Into IBM’s System Group”( https://www.itjungle.com/2017/01/23/drilling-ibms-system-group/)

TrumpTech: $450bn in annual fed spend in limbo

There is a lot of uncertainty in the air,” said one consultant close to the Office of Management and Budget’s IT efficiency initiatives who asked not to be identified. “The whole IT industry and federal IT operations are in a wait-and-see holding pattern,” he said, anticipating official word on key federal IT initiatives and leadership positions.

In my amateur analysis of Trump’s effect on IT spend, it seems like there’s three options:

  1. More of the same with big contractors and vendors, just wrapped up in myths of change.
  2. Complete shut down of everything with respect to growth; they just stop spending and let government IT age.
  3. Start working with new government contractors and doing things differently; the “Space X” option.

Who knows what’ll happen?

Link