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The Droids are Here, and They’re Making Lattes

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By Mark Fairbairn, CFA, B.Eng. 
Senior Investment Analyst, International Equities

Robots tend to elicit both excitement and fear—at least in Hollywood. Excitement about a future of helpful assistants who do all the chores like in The Jetsons … and fear that advancements in robotics will lead to a dystopian future of robot overlords like in The Terminator.

Last year while in Japan, I saw Toyota’s violin-playing Partner Robot, at their Toyota Museum and Factory. Originally unveiled in 2007 as part of the company’s development vision, the public was excited that a world of advanced robots working among us was just around the corner. Nine years later, many YouTube viewer comments reflect disappointment that we don’t all have personal robots doing our household chores. 

Robots can improve workplace productivity …

The truth is there actually has been exponential growth in robots and robotics since then. It is just that most robots don’t look like what we see in the movies. Most are found on factory floors assembling everything from cars to semi-conductors.

In emerging markets, the demand for further automation is driven by aging demographics, rising labour costs and rapidly improving technology. The robots being made today are getting smaller, more flexible and cheaper to produce.

Beyond the factory floor, smaller robots are increasingly being evaluated for service roles. In San Francisco, you can sip a latte made by a robot at the world’s first automated café. In Shanghai, you can enjoy a bowl of ramen noodles prepared by a pair of robotic arms.

But what will happen to all the jobs?

For me, what’s most interesting about robotics is how automation will affect society. Academic studies have estimated that anywhere from 10% to 40% of current jobs may be automated by 2030. That’s a lot of people that may need to find something else to do. The resulting societal challenges may be profound.

Japan is leading the robotic revolution

With its shrinking labour market and aging population, Japan is at the forefront of robotic and automation technology.

One Japanese company on the cutting edge of robotic innovation is Fanuc, which is held in MD Growth Fund, MD International Growth Fund and MDPIM International Equity Pool. The world leader in robots and robot components, Fanuc recently launched its first collaborative robot, or “cobot”, which is designed to work alongside humans. On the production line, this self-learning robot uses artificial intelligence to adapt to a changing environment, improving on the way it completes its tasks over time. Its potential to increase productivity is massive.

Adding automation in the healthcare field

Intuitive Surgical, a U.S. company we hold in MD Growth Fund, is an example. It produces the “Da Vinci” surgical robot, which allows the surgeon to control the robot’s tools and instruments from a workstation a few metres from the patient.

Intuitive Surgical illustrates how, in the healthcare sector, the benefits of automation and technology have the potential to balance productivity. Instead of displacing jobs, the technology works as a tool to complement human staff, improving both productivity and patient outcomes. This type of robotic, minimally invasive surgery has a much better safety profile (shorter recovery time, minimal scarring and lower risk of infection and bleeding) which results in cost savings for healthcare facilities.

MD funds are positioned to benefit in several ways  

While continued growth in robotics and automation looks promising, investing in this area does have risk, as growth expectations are factored into relatively high valuations. We’re focused on finding investment opportunities that will add value to our clients’ portfolios.

At MD, our actively managed funds are positioned to take advantage of robotic innovation in several ways: through direct investment in the companies producing the technology, by investing in firms further down the supply chain that feed into robotics, and in companies that use the technology to reduce cost, increase flexibility and reduce time to market. 

Although the workplace will have to balance automation with worker displacement, robotic advancements should ultimately lead to a future where mundane, routine and dangerous tasks are increasingly performed by robots.

A kinder, gentler human-bot interaction

And if you’re still worried about a terminator-style future, NAO—a 58 cm tall humanoid robot developed by Japan’s SoftBank (a holding in the MD Fossil Fuel Free Equity Fund)—should help ease your fears. This interactive companion robot is being used in several capacities, including by teachers and therapists to develop communication skills in children on the autism spectrum. Now if I could only get my own personal NAO to do my chores!


About the Author

Mark Fairbairn, CFA, B.Eng., is an Assistant Vice President with the Multi-Asset Management team at MD Financial Management. He is responsible for the non-North American equity funds and pools as well as the currency overlay program within the equity funds.

Profile Photo of Mark Fairbairn