As software automates more white collar work, does this mean there will be less white collar jobs? This weekend’s New York Times Magazine features Nathanial Popper’s interesting article “The Robots Are Coming for Wall Street.” It is primarily a case study of Kensho, a heavily-funded fintech startup that builds software “capable of answering complex financial questions posed in plain English.” In even plainer English, according to the article, Kensho appears to automatically create research reports which previously might have taken days of human effort to create (or not been done at all, a critical point). The article posts that as “Hundreds of financial analysts are being replaced with software”, white collar workers are in a lot of trouble.
Within a decade, [Daniel Nadler, Kensho’s founder and CEO] said,
Between a third and a half of the current employees in finance will lose their jobs to Kensho and other automation software. It began with the lower-paid clerks, many of whom became unnecessary when stock tickers and trading tickets went electronic. It has moved on to research and analysis, as software like Kensho has become capable of parsing enormous data sets far more quickly and reliably than humans ever could. The next “tranche,” as Nadler puts it, will come from the employees who deal with clients: Soon, sophisticated interfaces will mean that clients no longer feel they need or even want to work through a human being.
I’m assuming that the majority of those people over a five-to-10-year horizon are not going to be replaced by other people,
he said, getting into the flow of his thoughts, which, for Nadler, meant closing his eyes and gesticulating as though he were preaching or playing the piano.
“In 10 years Goldman Sachs will be significantly smaller by head count than it is today.”
Like Kensho, Kira Systems (the company I co-founded and run) automates white collar work. Our software helps professionals (lawyers, accountants, businesses, consultants) accurately analyze contracts in 20–90% less time. After more than five years at this, I’m quite unconvinced that automation software will cause net high-end job loss anytime soon. In fact, automation may create jobs.
For example, in M&A due diligence work, lawyers typically review <5% of a target company’s contracts. Terrible things (exclusivity, indemnification, most favored customer pledges) can lurk in the unreviewed 95%, but there is little appetite to have $420/hour junior lawyers review these at ~20–60 minutes a contract. But we have started to see much larger software-enhanced reviews. Some of our clients, who once might have reviewed hundreds of contracts, now sometimes review tens of thousands or more. Even though these clients are much more efficient, they do not necessarily use less people on reviews. They review more. In fact, they may now be able to do work that would have been uneconomical, which could lead to new bigger projects and more jobs.
This fits with a broader trend: people and businesses tend to be underserved by professionals. Despite a perceived oversupply in lawyers, for example, there are many who need lawyers and don’t get them. Status quo (automation-free) techniques for doing legal work are so expensive and inefficient that these underserved consumers can’t or won’t pay for them. Automation has the potential to unlock this market, creating more white collar jobs in the process.