Why Anxiety Around Automation is Absurd

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Hitendra Patil
Director of Practice Development
AccountantsWorld
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In his recent intriguing TED Talk, David Autor, Ford Professor of Economics and associate head of the MIT Department of Economics, identifies and explains the understanding of how technological advancement impacts employment – and how.

He generously shared with me the research paper that preceded this TED Talk. Here are my takes from how the intelligence from this research will apply to the accounting profession.

How Automation Impacts Employment and Types of Jobs

Autor’s research points out that while automation does substitute for labor, it also complements labor and raises output in ways that lead to higher demand for labor. “Changes in technology alter the types of jobs available and what those jobs pay.”

What’s out and what’s in:

  • Out: Advances in artificial intelligence and robotics allow computers to substitute for workers in performing routine, codifiable tasks.
  • In: It will amplify the comparative advantage of workers in supplying problem-solving skills, adaptability, and creativity.
  • Tasks requiring flexibility, judgment, and common sense are immensely challenging for machines to do.

More important than what is lost by automation is to recognize that automation raises the value of the tasks that workers uniquely supply.

What it Means for the Accounting Profession

In my previous discussions relevant to the automation-related anxieties for the accounting profession, I had deliberated: Automation Will Upgrade Accountants, Not Replace Them, Why Accounting Software is Not the Real Threat to Your Firm, and that The Future of Accounting is Not Defined by Technology. When we apply Autor’s research findings to the accounting profession, we will come to a reasonably logical conclusion that automation anxieties of accountants are, almost, absurd!

As Autor explains, with statistical proof spanning decades, tasks that cannot be replaced by automation are generally complemented by it. 

  • Judgment: Comes from wisdom developed from “practice.”
  • Discretion in decision-making: When you consider several factors that are at once surrounding a client’s particular situation.
  • Intuitive connection of relevant “dots”: This comes from judgment and wisdom in practice

All these “competencies of accountants” are NOT so easily machine-replaceable “skills.”

How Will Automation Shift Value in Accounting Jobs?

Autor cites the “O-ring model” which states failure in any one step in the chain of production leads to the entire production process to fail. Conversely, improvements in the reliability of any given link increases the value of improvements in all of the others.

So, when automation makes some work (job types) in the accounting profession more reliable, faster, and cheaper, it will increase the value of the remaining human links in the accounting work chain.

So, if “creating accounting data more efficiently and automatically” will create an improved and, hence, more reliable link (reducing review effort to ensure accuracy) in the accounting work chain, think of what will happen to the value of the next link(s) in the accounting chain.

Accountants will have more time to apply wisdom and judgment to client situations, thereby improving the value of insights accountants will deliver. Think of what new or enhanced value of these improved insights accounting clients will pay for. 

The New Threat and the New Opportunity

Autor observes that workers are more likely to benefit directly from automation if they supply tasks that are complemented by automation, not if they primarily supply tasks that are substituted.  

The threat: Why would clients pay top dollars for accounting work that computers and software will do?

The opportunity: When their “basic accounting needs” are met using automated technologies, arguably cheaper and faster and more accurately, accountants’ clients will expect different value to pay for. As a corollary, just like ATMs turned staff in teller roles to upgrade themselves from currency counting and reconciling to more of “relationship banking” skill sets, your clients will expect more customized, personalized attention to their business and financial situations.

The New Competencies Required for the Future Success of Accountants

Due to automation, over the years, accountants are spending less time and cost on “preparing” the information (i.e., collecting, inputting, and organizing the information). It has created opportunities for accountants to:

  1. Actually be able to handle much more volume of work within the same resources – by achieving better economies of scale to increase the number of clients serviced (and hence the return) per staff.
  2. Further specialize – by interpreting and applying insights to specific situations of clients. This specialization involves tasks that require:
  • Problem-solving capabilities
  • Intuition
  • Adaptability
  • Flexibility
  • Judgment
  • Common sense
  • Creativity
  • Interpersonal skills
  • Persuasion

These are simply the necessary characteristics of professional, technical, and managerial occupations, which employ workers with high levels of education and analytical capability. Such occupations place a premium on inductive reasoning, communications ability, and expert mastery.  

Automation anxiety of accountants is absurd because these are NOT new competencies. Accountants already have them. It is just that they will need to strengthen these skills AND (re)design their business models around these specific abilities.

Economic growth, for decades and centuries, has been driven by entrepreneurship. Entrepreneurial accountants – I call them the “accountaneurs” – are very much needed for the future, now onwards. Entrepreneurs whose business is accounting will thrive and lead the profession.

An accountaneur will also be the coach, the consultant, the business analyst, the business advisor, the mentor, the commercial counselor, or the business strategist to drive the future economic growth. Accountaneurs will integrate these capabilities in their own business models. 

Ironically, they will be the very catalysts powered by automation and artificial intelligence, not replaced by it.

Replies

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Jan 27th 2017 16:51

This is a fantastic piece, thanks Hitendra for sharing. I agree with your analysis and prognostication on the future implementation of both the technology and the changing role for professionals.

One issue not addressed in your piece (mostly because it is tangential not due to oversight on your part) is the required change to the accountant's business model in order to support this shift.

It is not possible in my view to charge for any or the following by the hour:

Problem-solving capabilities
Intuition
Adaptability
Flexibility
Judgment
Common sense
Creativity
Interpersonal skills
Persuasion

What are your thoughts around that? Perhaps it would be a separate article.

Thanks (2)
to ed.kless
Jan 31st 2017 18:32

Thanks, Ed! Glad you found value in this article!

You hit the nail on its head. It will call for changes to the business models of firms. Anything NOT repetitive and codifiable on computers can't be charged by the hour.

It will need to be charged "BY THE IMPACT" it can make in client situations.

I am sure that Accounting Profession will figure out the science of charging for such impacts.

I am doing some research on how "impacts" are quantified in the minds of human beings i.e. how humans perceive value and what in that perception is actually (somewhat) quantifiable. I am guessing that the hospitality industry has found some insights on "(quantifiably) pricing for (non-measurable) experiences". Interesting future!!!

Thanks (0)