Amazon, Uber, Automation, and CSR
By: Brian Ratajczak
Tags: Amazon, Uber, Automation

Job Creation — The Age of Innovation

Amazon and Uber are consistently mentioned as two companies creating tons of job growth in the economy right now. Amazon has been adding new fulfillment centers relentlessly, and Uber has created an entirely new industry for individuals to give rides in their cars.

Some stats on Amazon:

340,000 employees worldwide, which is 3 times larger than Microsoft and 18 times later than Facebook

110,000 employee additions in the past year, with 40,000 of those being full-time roles

Opening second headquarters in North America which will create up to 50,000 more jobs

Average pay in fulfillment centers is 30% higher than average retail wage

Some stats on Uber:

Uber generated $20B in ride revenue in 2016

400,000 drivers in the United States and 1.5 million around the world

Uber enables flexible employment where you create your own hours, with average salary of $15.68 per hour

Jobs Decimation — The Age of Automation

Amazon and Uber are consistently mentioned as the two companies that may displace the most jobs in the future. Amazon is introducing robots into its warehouses and creating retail stores with far less employees than traditional brick-and-mortars. Uber is trying to automate its entire driver fleet with driverless cars. To be clear, at both companies, automation is used to reduce prices for consumers and improve overall consumer experience.

Automation in the world today

According to McKinsey, 60% of all occupations have at least 30 percent of activities that are technically automatable based on technologies that already exist. Adapting this technology could affect 50% of the world economy, or 1.2 billion employees and $14.6 trillion in wages.

Some jobs are more susceptible to these changes than others. The chart below highlights risk of automation by sector (note that Uber drivers and Amazon warehouse staff both fit under the “Transportation and Warehousing” sector; Amazon is also displacing jobs in the “Retail trade” sector).

Automation at Amazon

Despite all this job growth, Amazon is also at the forefront of automation. Jeff Bezos has said that “it’s probably hard to overstate how big of an impact [automation] will have on society over the next twenty years.”

In 2012, Amazon spent $775 million to acquire Kiva Systems which designed robots to do the work once handled directly by warehouse employees. In 2014, Amazon began rolling out these robots and now has more than 100,000 robots in action around the world.

That said, since introducing Kiva robots (now branded “Amazon Robotics”), Amazon has added 80,000 warehouse employees in the United States and the hiring spree is continuing at a rapid clip. The robots have been used to increase the efficiency of its order fulfillment process, allowing human workers to perform higher value-added activities while the robot takes over the more routine aspects of the job.

Automation at Uber

Travis Kalanick, the Founder and ex-CEO of Uber has described the development of autonomous vehicles as “existential” to the success of Uber. In 2015, Uber opened its Advanced Technologies Center in Pittsburgh after poaching more than 40 researchers at Carnegie Mellon University.

In 2016, Uber continued its ambitions with a $680 million acquisition of Otto, a self-driving truck company. Since then, Uber has developed over 40 active autonomous cars that have driven over 20,000 miles. To be sure, Uber has experienced difficulties, notably a ~$1.8 billion lawsuit from Waymo, a company owned by Google which also has a significant investment in Lyft.

Succeeding in autonomous vehicles could be critical for Uber. Right now, Uber (and Lyft and others) share 70% of the fares with the drivers. Any platform connecting users to rides (whether with a driver or driverless) is at risk of getting enveloped by a different platform that could offer these rides for much cheaper, which could become the case if one platform has autonomous vehicles exclusively on their platform.

One point that is worth flagging, is that Uber is looking to displace the jobs it created whereas Amazon is displacing jobs that have always existed.

Can we blame them?

Do Amazon and Uber even have a choice? If it’s not them automating these jobs, it will be someone else.

Even if we halt the pace of automation (perhaps via taxes as proposed by Bill Gates), this is a trend that is bound to happen since there is no stakeholder large enough to stop it:

Governments : Stymieing progress of developing innovative automation technologies will inhibit growth in one of the fastest growing, most important industries for national competitiveness. Likewise, stopping companies from adopting these technologies will disadvantage their cost structures relative to international competition, reducing the national GDP and thus the wealth of its citizens.

: Stymieing progress of developing innovative automation technologies will inhibit growth in one of the fastest growing, most important industries for national competitiveness. Likewise, stopping companies from adopting these technologies will disadvantage their cost structures relative to international competition, reducing the national GDP and thus the wealth of its citizens. Business : Companies want to develop these technologies since they are in high demand by other businesses, and they want to implement these technologies so they can remain cost competitive with their competitors.

: Companies want to develop these technologies since they are in high demand by other businesses, and they want to implement these technologies so they can remain cost competitive with their competitors. Individuals: While some want to slow progress of technology (luddites), history has shown that those who adapt to new technologies (which are propagated by government and business) secure larger salaries and fare better in the new society, essentially creating an incentive structure to adapt.

Should there be a sense of responsibility?

Amazon’s Response — Career Choice

While Amazon is not required to do anything about the jobs that it will potentially be replacing with automation, they do go above and beyond by offering Career Choice.

As described by Amazon:

After associates have been employed by Amazon for as little as one continuous year, the Amazon Career Choice Program will pre-pay 95% of tuition and fees for them to earn certificates and associate degrees in high-demand occupations. So far, more than 10,000 employees have participated in Amazon’s Career Choice program, from ten different countries. Amazon’s first Career Choice graduate is now a nurse in her local community.

Some additional color offered by Inside Higher Ed:

Once employees have been with Amazon for a year, they only need to cover 5 percent of tuition and fees — Amazon covers the rest up front and also reimburses 95 percent of textbook costs. Full-time employees are eligible for $3,000 in tuition assistance a year up to a maximum of $12,000; part-time employees, half that. Of course, there’s a catch. The tuition assistance can only be spent on certificate and two-year programs, for one. Additionally, Amazon employees can’t study whatever they want, but rather pick from a list of what the company — looking at data from the U.S. Bureau of Labor Statistics — has deemed to be “high-demand fields,” broadly speaking, in the U.S. job market. Examples include accounting, engineering, health care and information technology, among others. But Amazon isn’t using Career Choice to primarily train workers for the company’s own needs. In fact, the program invites employees to study a topic they are “passionate about, whether that’s at Amazon or elsewhere.”

To be sure, Inside Higher Ed also calls out that this may not be all altruistic:

Amazon’s labor practices — among both blue- and white-collar workers — have been closely scrutinized and harshly criticized as the company has become the most valuable retailer in the U.S. The company has one of the highest turnover rates among Fortune 500 companies, and the average employee reportedly stays with the company no longer than 11 to 18 months. Benefit programs such as tuition assistance are sometimes seen as a way for a company to improve its image — especially since only about 5 percent of employees participate in such programs. A high turnover rate might further drive down the participation rate.

Expanding Career Choice beyond Amazon

Amazon has open-sourced Career Choice and expressed a strong desire to spread this to other companies. They have offered to share the program blueprint along with lessons they have learned over the past four years. Jeff Bezos has mentioned he is eager for others to build upon Career Choice, tailor it to their own use case, and improve upon it.

And now to Uber

Nationwide, there are 5 million people who make their living driving taxis, buses, vans, trucks, and e-hailing vehicles. That is nearly 3% of the national workforce, and is composed of a demographic similar to factory workers — men without college degrees.

Currently, they do not have any plans to support drivers (cars, or trucks) that would be replaced by automation. Based on their current thinking, the burden of creating and finding new roles should fall on the broader economy (and if that fails, the government).

Should Uber be more like Amazon?

So the question comes down to whether Uber should assume a responsibility to pay it forward and create a model of sustainable capitalism that supports these soon-to-be displaced workers. As we have seen, Amazon does this by offering Career Choice.

Does Uber have a responsibility to offer anything? If yes, should they implement Amazon’s Career Choice, or start something different?

Appendix

Should we even be concerned about Automation?

“Robot apocalypse” is a modern expression, but the underlying anxiety goes back centuries. In 1589 Queen Elizabeth I refused to grant the inventor of a mechanical knitting machine a patent for fear of putting manual knitters out of work. In 1930 the British economist John Maynard Keynes warned of “technological unemployment…due to our discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor.”

Despite fears of automation replacing more jobs than we can create, history demonstrates that automation commonly creates more, better-paying jobs than it displaces. A McKinsey Paris study found that while the Internet destroyed 500,000 jobs over a 15 year period, it created 1.2 million others; meaning 2.4 jobs were created for every job destroyed.

Also, by taking over labor-intensive chores, machines should be improving our quality of life, by freeing human workers to focus on more “creative” and fulfilling tasks.

However, this time may be different. Leading economists and technologists who are aware of the history of automation are more concerned this time around. Bill Gates has proposed taxing robots to slow their job-destroying potential, and Elon Musk has called for the government to regulate artificial intelligence.

Culture

This module’s seminar focused on Companies & Culture. We explored the idea of whether a company could exist without people, and then what binds these people together beyond a common vision.

One of the company cultures we spent some time discussing was Netflix, which is known for being performance-based and treating its employees like “fully formed adults.” In addition to Netflix, several other successful companies exhibit similar cut-throat, performance-driven cultures. To name a few, Apple, Amazon, and Uber are also known for this.

The purpose of this case is to examine how companies should approach supporting their workers displaced by automation. To begin answering this question, we will explore the cultures at the two companies we will be investigating: Amazon and Uber. While culture is not the only factor impacting a decision, our class did reach the consensus that culture is one of the most important aspects of any business, so it’s worth factoring into the decision of these companies.

Culture at Uber

When beginning a job at Uber, employees are asked to subscribe to 14 core company values. One of these is “always be hustlin’” which embodies the top stated priority of Travis Kalanick: achieve growth and revenue targets. This culture catapulted Uber to one of the top technology companies of all time, revolutionizing the transportation sector and work as we know it.

However, the company also became an environment that “valued and rewarded hard-charging, hard-working, and even hard-partying employees” at any costs, “literally ranking them above others who weren’t seen as aggressive enough.” This created a Hobbesian environment, in which workers were sometimes pitted against one another and in which a blind eye was turned to the infractions of top performers.

This case does not explore ramifications of this type of culture, but if you are interested, the optional supplemental reading includes some resources that dive a bit deeper into how this culture has become problematic for Uber (under the “On Uber Culture” section).

Roots from Amazon

Not only does Uber’s cutthroat, high-octane work culture mirror several core components of Amazon’s culture, it was actually inspired by it. Uber’s 14-point value system is said to have been derived from Amazon’s, though Amazon’s — which includes “insist on the highest standards” and “have backbone; disagree and commit” — are slightly more subtle. Moreover, Jeff Bezos is an Uber investor, and Uber’s CPO was a nine-year Amazon veteran.

Similar to Uber, Amazon has both been regarded as a titan of industry, and been criticized for how it treats its employees — both white-collar and blue-collar. That said, companies are transparent about these cultures to the public and potential new hires (similar to how Netflix shares its culture deck). While these cultures are not right for all types of people, they attract an abundance of highly capable individuals that thrive in these environments.

If interested, here are some additional readings:

On Amazon Culture

On Uber Culture

On Culture

On Automation

On Amazon Career Choice

This case was prepared for the 2017 MissionU class Navigating a Complex World, to increase awareness and perspective around automation, and whether companies should play a role in supporting automated jobs.