The rise of robots has long been a popular subject for science fiction books and movies. Novels from authors like Isaac Asimov and movies like the "Terminator" series have painted bleak pictures of a time when humanity is overrun or made irrelevant by advancements in robotics technology. Humans can probably hold off on developing time travel devices and reversing the rise of the machines for at least another few years, but the robot revolution has already begun. Companies like Google (NASDAQ:GOOGL), Kuka, and iRobot are positioning themselves for a future where robots are a part of everyday life.
Robotics manufacturer Kuka AG recently hyped up and released a video featuring one of its creations squaring off against a high-ranking table tennis player. The advertisement-styled demonstration has proven very controversial, but it's undoubtedly the latest sign of a big transition that's looming. What does this table tennis playing robot mean for the future of the global economy?
A fictional presentation of an impending reality
Kuka's recently released video was billed as a match between top ranked German tennis table player Timo Boll and a robot created to give ping-pongers a run for their money. The ad was released on YouTube and is largely cinematic; it does not depict an actual match between man and machine. That said, billing it as such certainly helped the company build a massive audience and bring attention to its name and robotics offerings.
The video had racked up over 1.5 million views a day after its YouTube debut. A behind-the-scenes video designed to show how the largely embellished showdown was created gives a much more accurate depiction of the Kuka bot's capabilities. The machine's ping-pong prowess lags behind its fictive counterpart by a substantial degree, but the implications for the future of industry are not hugely diminished. Robots will not need to have the reaction times and accuracy necessary to compete with a world-class table tennis player to revolutionize multiple sectors of business.
Robots don't strike or need health insurance
Fast-food chain McDonald's (NYSE:MCD) has been one of the companies at the center of the debate regarding whether the minimum wage should be raised. Company employees have instituted strikes and demonstrations requesting a wage hike to $15 an hour. While the stated desire to approximately double the minimum wage likely represents an "aim-high" bargaining tactic, it blissfully ignores the downward pressure that increasing robitization is already exerting on wages and work force requirement.
A McDonald's that pays its workers $15 an hour is likely one with fewer employees and more robots. The capabilities of Kuka's ping-pong playing robot do not match the depiction seen in the company's YouTube video, but they are already advanced enough to take over many of the food preparation duties at fast food chains such as McDonald's.
The International Federation of Robotics projects that the use of industrial robotics will increase 6% annually through 2017. The use of commercial robotics could grow at an even faster clip and would almost certainly be pushed along by minimum wage increases. Legislation like Patient Protection and Affordable Care Act has already pushed employers to reduce full-time hours and restructure their work force; robotization offers companies and franchisees a way around increasingly demanding employment standards.
There's a storm coming in
Boston Dynamics, recently acquired by Google, has gained public attention for creating robots that bring to mind the post-apocalyptic scenarios seen in the "Terminator" films. The firm's Big Dog and Atlas robots were developed with military use in mind and received funding from the Defense Advanced Research Projects Agency. Google's push into robotics is a good indication that robotization is no flash in the pan and that it could provide the impetus for the next big industrial and military revolutions. It also shows that the company will have an increasingly close relationship with governmental institutions and continue to shape the progression of technology. Boston Dynamics is the eighth major robotics acquisition for the company in the last nine months.
No fate but what they make
The bump that Kuka's share price received in the immediate lead-up to the much hyped video reversed upon the revelation that the ping pong showdown was mostly scripted affair. Still, the company's price has approximately doubled since March of 2012, signaling that there is strong confidence in robotics pure plays. Fellow robotics pioneer iRobot has seen comparable growth over the last two years.
These companies both have relatively small market caps at approximately 1.2 billion, meaning that major advancements are more likely to come from big tech players like Google, but there are great investment opportunities to be found in robotics in the coming decade. Meanwhile, companies like McDonald's will be able to improve their bottom lines by shifting to an increasingly robotic workforce.