A humanoid robot just fought a human in an MMA match.
And won.
It sounds like a novelty — right up until you start running the number…
Today, a capable humanoid robot costs roughly $100,000. A human employee doing repetitive physical work could cost a company about that much every year once wages and benefits are included.
Over five years, that’s potentially $500,000 for the worker versus a fraction of that for the machine — and the robot can work around the clock without breaks.
That’s why we may be approaching one of the biggest economic shifts since the arrival of the internet.
But the biggest winners may not be the companies manufacturing the robots themselves.
Just as Microsoft captured enormous value by becoming the operating system for the PC era, the real prize could belong to whoever builds the software platform that tells millions of humanoid robots what to do.
Watch today’s video for the full story:
Video Transcript:
All right, it’s time for some Moneyball economics. I’m your host, Andrew Zatlin.
The other day I was reminded of a cartoon from a long time ago that featured Kermit the Frog. Kermit, Sesame Street Kermit. And in it, he’s whipping out a laser gun because it turns out that Kermit’s actually a space alien sent to the planet earth to conquer us. And not just Kermit, all of the Sesame Street characters, we’re talking Miss Piggy, Big Bird, we’re talking Fozzie Bear, Cookie Monster, Burt and Ernie. Burt and Ernie sent here to conquer us.
And the premise is that they come over, they’re so adorable and cuddly. We couldn’t possibly sit there and fight them. And can you imagine? “Sarge, you killed Elmo!”
All right. In a similar vein, I feel that humanoid robots are becoming more and more familiar to us. They’re popping up more and more in pop culture.
They are getting normalized. For example, a couple of months ago, I mentioned that there were some humanoid robot mixed martial arts competitions where you have a robot versus a robot. We’re not talking the old ESPN robot war type of crap. We’re not talking like a Roomba that’s been dressed up with a spear and another Roomba with a club and they’re going at it. We’re talking humanoid robots that can perfectly mimic human dexterity and motion and mobility.
Well, guess what? It’s evolved even more in just the past couple of months. Now it’s not robot versus robot, it’s human versus robot. There’s another video making the round, a mixed martial artist human against a humanoid robot. They’re going at it full-blown and the human loses. He has the stuffing kicked out of him. Quite literally, this robot has an amazing power kick.
And to add to it, the robot is done to look exactly like the robot from the Terminator movies.
It’s so amusing. And that’s kind of the point. It’s novel, it’s cute, it’s amusing. It’s like a video where there’s this race going on, foot race, and they enter a robot and the robot’s winning and then it kind of veers off course and hits the wall. Ha ha ha. It’s almost like us.
It’s like watching a kid, the reaction you get to an infant learning to walk and then tumbling over and it’s so cute. They’re almost real.
And I think that points to where we are with humanoid robots and how we have reached probably the most important historical milestones since the internet emerged. The economic and social ramifications of humanoid robot adoption is unlike anything we’re ever going to see, the speed, the pace and the impact.
Let’s start with the economic impact. So humanoid robot today costs about $100,000 and the physical stuff is already done.
They can mimic any motion that a human being can do, but even better because they’re going to be stronger. What’s needed is a lot of the software. You got to tell it what to do. The path and motion has to be taught.
But let’s say you’re Amazon.com. You’ve got a hundred thousand people, hundreds of thousands of people rather, who basically are just moving boxes around. Pallets come in, they get on the shelves. You take the pallets down, you break them open, you sort them, you send out packages, very highly repetitive tasks. A human at Amazon probably costs about $100,000 per year. We’re talking salary, benefits, fully loaded.
A robot, $100,000 today and prices dropping because volumes are going to be going up, but that’s a one-time payment, some software along the way. Over five years, that person costs half a million dollars. The robot, maybe a couple hundred thousand dollars.
But the benefits go beyond just the price point.
A person works 40 hours a week, takes breaks. Sometimes they’re injured.
A robot works 24 hours a day, seven days a week. That robot is the equivalent of three human workers and they don’t need a cafeteria. They don’t need breaks. If something breaks down, you swap out the part, they’re back in action.
So if you’re Amazon, the economics are beyond compelling.
Now let’s pull it back. It’s not whoever makes the physical robot that’s going to make the money. The money’s going to be made there too. This is a repeat of the software hardware that we saw with a personal computer. Yes, Intel and all these other companies make a lot of money off the boxes, but the real money is in the software, the operating platform.
Whoever becomes the next Microsoft for robots is effectively going to dominate the world’s economies because the world is going to do what Amazon’s going to do.
They’re going to migrate more and more to humanoid robots. Think of it everywhere. It’s not just manufacturing. It’s not just highly repetitive, high volume jobs. You’ve got things like almost 700,000 people in the United States work doing landscaping and janitorial stuff.
Okay, you’ve got a 50 story skyscraper in New York City and you have to constantly vacuum and wipe things down, clean the bathrooms. Hey, you don’t need a full-time janitorial crew anymore. Buy a few robots. They’ll do it all nonstop.
So you can see the economics, whoever comes up with the best platform and they’re working towards that, which is why given the opportunity and given the long term generational impact of whoever has the control points here, Donald Trump’s administration has raised the flag and put out regulations stipulating can’t be Chinese. If you’re going to have robots operating in here, can’t be Chinese.
And it’s not just because of the economics, which is incredibly important. It’s because also there’s China spies, national security stuff is going on. Imagine you’ve got a robot that can sense everything. It knows where everybody is, what they’re doing, what they’re saying. Eventually these are going to be consumer products. You’re going to have a robot at home doing a lot of your housework and drudgery.
This is dangerous.
In fact, recently, one of the Scandinavian companies did a test with a Chinese public transit bus, a Neo. They put it in a mine, in a place where it couldn’t possibly send out any signals. And the Chinese Neo bus, which is all over the world now, relentlessly tried to ping Chinese servers.
They weren’t trying to, for example, download firmware. They were uploading information. Now, if this was legit, then they would’ve been uploading it to say the European base of operations, the headquarters. Hey, there’s some firmware. Hey, there’s some information that needs to be uploaded. There you go. 90% of everything they were doing was going back to the mothership in China. Now imagine that that’s harmless, but imagine that there are situations where it’s not harmless.
As a result, there’s a big move going on.
We are going to do some industrial policy that kind of designates an American or several American companies as the winners. So as an investor, you need to start listening in. It might not be Microsoft. You might have one of these AI companies emerging that becomes the official platform. I believe that’s a distinct possibility.
Now, social ramifications are equally huge. Let’s again use Amazon. They fire a couple hundred thousand people. Every company, GM and so forth, they start firing hundreds of thousands of people. We have a few million people in the United States whose jobs are now fully at risk and not distant horizon.
We’re talking two to three years. That’s very disruptive to have millions of people on the streets. In fact, I would go so far as to say a lot of the social disruption that we’ve been experiencing over the past decade has been a follow-on to the hollowing out of the US manufacturing base.
We already outsourced a lot of manufacturing jobs and that was painful throughout the 80s and 90s. However, as we got into the 2000s and 2000 teens, that same streamlining of workforce that was enabled by the internet hit white collar jobs.
And so the luxury of having kids go to college and becoming majors in Amazonian macrame, we no longer have the ability to afford those kinds of nonsense jobs. Instead, you actually have to work and contribute. And the internet has streamlined a lot of the processes out there shedding a lot of jobs.
This has been a very disruptive process dealing with how the internet has driven efficiencies and cut jobs. And you can see it in politics, in civil discourse and so on.
Now imagine that overnight you start dumping millions of people out there. It’s very disruptive and it’s disruptive for the United States. Remember, we’re bringing in millions of people every year. We’re used to migrants coming in and working their way up from a lot of the manual labor and moving upwards. We won’t really need those workers coming in when we’re firing a lot of the workers as is, but the United States is not the most critically affected. It’s China.
See, China has a problem demographically. They’re an aging population, but more critically, they are super reliant on manufacturing, on these manual labor tasks that are directly in the line of sight of humanoid robots. And in a race to the bottom for costs, China has to start adopting humanoid robots as well, except China has hundreds of millions of people, much more of their society dependent on this kind of labor.
You jettison tens of millions of them, that’s a problem.
You’re talking a major social disruption on the horizon for China. This is not guess. This is inevitable. We’re already seeing those cracks form before humanoid robots come out. The unemployment among youth in China is already double digits and rising, high double digits, 17 to 20%.
Now you take away their future prospects. Oh, you’re talking civil war and I am not being hyperbolic. A third country to consider would be Japan. Japan’s very similar to China. They’re okay with adopting technology. They’re also similar in that they are very much a manufacturing base and they’ve got a disproportionately aging population.
All of these are very different from the United States. We’ve got a more distributed economy. Our demographics are not so top loaded with old people. The difference though between the United States and China and Japan is we’re used to people moving in.
We are a country built on migrants. China and Japan don’t like migrants. They tend to think of themselves as much more of a homogenous society. And so when migrants come in with different habits and lifestyles and ways of thinking, there tends to be a lot of friction.
Now what makes Japan interesting and is different from China is that Japan is much more willing to embrace robots, not just economically, they’re about the same. They have to in a race to the bottom of cost, but socially, they want robots because they don’t want the migrants coming in. Migrants have been brought in to offset this gap in the worker force and that can stop.
What we’re talking about is the economics of robots is powerful in and of itself, but the disruption to societies, societies that are not used to migration can use robots to block migration.
Societies that are accustomed to migration are going to be faced with challenges because a lot of their citizens will be losing jobs at the same time as migrants are moving in. Very disruptive, but it’s kind of an inevitable fallout and the consequences are going to be evident, but focus on the economics.
We want to start looking at companies that make the hardware, make the sensors, but essentially make the operational software platforms. If you know of some, please, please drop me a line. We’re in this together, teamwork. There are so many potentials out there. You’re probably going to see them and you’re going to notice them. Start looking for this pattern of who’s contributing to an automated workforce. The humanoid robot age has arrived.
We’re in it to win it, folks.
Zatlin out.
Andrew Zatlin
Editor, Moneyball Economics