The Bot Brief

                               "There is no force on earth more powerful than an idea whose time has come."     Victor Hugo

 

 

The Bot Index gained only 71 basis points in trading last week. That trailed the broader index by 76 basis points. Notable weakness in Tesla, Azenta, Cognex and AeroVironment contributed to the underperformance.

 

 

 

It has always been the hope that this new ‘Robotic Revolution’ would dramatically alter the world’s economic course for the better. By making labor less dangerous, dirty and demeaning, robots could improve the lives of all citizens. It was also the intent that, like economic ‘revolutions’ in the past (agriculture, industrial and data) advances in technology would improve the productivity of labor. Unfortunately, like the previous ‘revolutions’ recent advances in technology have yet to manifest itself in production. There has always been this lagging benefit to technological innovation, however, it is our opinion that the delivery of AI (via ChatGPT and the like) to the individual consumer will accelerate the positives of automation advances.

 

After almost half a century of sliding productivity growth, the trendline is starting upward. In fact, labor productivity increased in 2023 and 2024 to an annual rate of 2.3% and in the third quarter of 2024, productivity reached an all-time high of 114.48 points, 2.2% higher than the previous quarter and 3.8% above the previous year. This surpasses the long-term average of 2.18%.

 

So why is productivity so important? According to a McKinsey report published in February of 2023, ‘Returning US productivity to its long-term trend of 2.2% annual growth rate would add $10 trillion in cumulative GDP over the next ten years.” Anything above that rate would provide even more impactful acceleration. Productivity also goes hand in hand with inflation. As Elon Musk and his DOGE initiative is focusing on the efficiency of government spending, corporations are expending billions to enhance AI’s efficiency in the workplace. Any systemic improvement in either endeavor will undoubtedly serve as a brake on the inflation rate.

 

So, whether you are a supply sider, monetarist, Keynesian, free trader or McKinley tariff touter, you must agree that productivity growth is a very favorable economic force. The old theory that intrinsic economic growth of any economic system is a function of the labor force growth rate together with the productivity of that labor. Half that equation is moving in the right direction.