[00:00:00.240] David, how are you doing?

[00:00:01.140] I’m good, Hugh.

[00:00:01.910] Good. It’s the end of the week. How can you not be in a good mood?

[00:00:04.400] It’s the end of the week, End.

[00:00:06.070] Of election week down in the United States. Yeah, correct, obviously. And actually even that election week result ties in to this behind the headlines topic this week.

[00:00:20.010] It does. Please explain how.

[00:00:21.510] Well, let’s get into it as we get into it. So we’re going to do it behind the headlines. And behind the headlines we took an article from the very local Montreal Gazette and the headline, I’m going to read it to you all. A political party in Quebec, a traditional governing party along the left leaning governing party of Quebec against the right leaning Liberal Party Quebec. The leader of this party, which is called the Parti Quebecois, wants robots rather than immigration to address manpower shortages. And that’s a pretty stunning headline.

[00:01:01.710] Yeah.

[00:01:04.260] And you know, none of us really want to bore ourselves with the vagaries of Quebec politics. That’s not the point. The point is you have a party that is decades old and decades long in its allegiance to unions, the worker, the interests of labor, coming out with this stunning idea that rather than maintain or even grow immigration numbers in Quebec, they would rather spend government dollars incentivizing companies to invest in automation as a means of filling manpower shortages. And it is part and parcel with a phenomenon across North America and in other countries. But North America, I think we should just, we have to remind ourselves this is a continent built on immigration. And we have for centuries used immigration as a way to take advantage of natural resources, whether it is the development of the prairies or here in Canada, the develop of the mines and lumber in Northern Ontario. Just in general, we have taken advantage of immigration as a way to solve manpower shortages. And in the last couple of years, the default, and I would say continent wide consensus of being welcoming and encouraging of immigration has completely broken down. And that’s why when I say the election results in the US this week reinforce this, you know, if we talk about a small but not, but not insignificant political party in the province of Quebec, which is famous for being the pro worker party, is saying, I don’t want any more workers, we got to get companies to invest in automation.

[00:03:22.280] And then you move all the way to the presidential election down south where absolutely immigration was a number one issue and the feeling that it is out of control. Right. And then if you look Canada wide, and we talked about this at the rendezvous, the lid rendezvous, where I encourage anyone who wasn’t there this year to come Next year, because I think it was a pretty smashing success of very fascinating speeches. But one of the tidbits that sort of set the context for the show and thinking about automation in general is we’ve In Canada, in 24 months, we’ve added to our population the equivalent of the greater metropolitan Vancouver population, which would.

[00:04:18.550] Be about four million people.

[00:04:20.470] Two and a half million. Okay, yeah, yeah, two and a half million. Montreal is more like four and 4.4 million and Vancouver’s two and a half. But two and a half million people, the third largest city in Canada in 24 months, we’ve added it in population, but we haven’t kept pace with schools, hospitals, road networks, all the thing, housing, all the things you need, the social infrastructure you need to accommodate that population. And so the mood, the public mood has turned very sour as they are feeling the pinch of that missing infrastructure. And so much so that again, a pro worker party has said to everyone, this is it. We’ve got to switch from an immigration disposition towards solving worker shortages to an automation disposition. And the ramifications in the supply chain are enormous. I’m going to pontificate for one more second, David, and then I hope the thing underneath all of this, the United States has a birth rate of about 1.78 children per women, which is below the replacement rate, the natural replacement rate of the population. Canada is 1.4, something like that. I think we wrote it down. And if you go to the extremes, which are the East Asian countries, most developed economies in East Asia, Japan, Korea and China.

[00:05:55.700] But Korea has a fertility rate below 1, as is, I believe, Japan, as well as below. You know, Korea is on track to half its population in a generation, which is kind of shocking. And they already live in a manpower shortage crisis, their economies built around a crisis in manpower. I remember when we first started working in Korea, all, every large and small, every company, automation was their first priority. And coming from the pre pandemic attitude where we’d say, yeah, okay, we understand, but. But there’s no payback in it. This is not an economically efficient investment to be making. And they look at you like you’re crazy. And I thought they’re crazy. But once you understand the context that if you have a 7 fertility rate with 50 million people becomes 49 million people in a span of two years, and then 48 and then 40s, that you are losing the very, the very population that you use to run a supply chain. And so it’s just this. I’m just gobsmacked by this headline and how there is a real shift, a real turn in the zeitgeist that we better, as folks in the supply chain, we better get behind pretty quickly because we are going to see, I know in Canada, we forecast 2027, 2028, no population growth.

[00:07:43.670] The population is going to be stalled. And if we don’t open the levers of immigration, that stall will suddenly start to become a descent in population. And whether we like that or not is not the point. The point is this is the labor environment in which we’re building out supply chains. And so we go back to this whole point of automation is not a luxury, it’s not even an option.

[00:08:14.040] Well, exactly. And that’s the point that you make around the context where I remember as a kid, you know, you would think about countries with declining population. It was Germany, Italy and maybe probably a few other countries, but that was about it. But now with this phenomenon being across many regions of the planet, you have as an organization to shift that mindset, which is obviously the traditional like, does this make financial sense have to be looked at. But it’s not just that element. It’s just your ability to produce or handle a certain workload. Whatever you’re doing as an organization becomes so important in your analysis of what should I automate? Because as you said, even the when should become the answer to when is, well, it’s now. And now means start planning, start thinking about it.

[00:09:24.130] Yeah, yeah, right.

[00:09:25.250] It doesn’t mean, okay, I need to automate everything right now.

[00:09:28.140] Exactly. It just has to now become a part of your common vernacular. It has to be just part of the language, your planning language. You just have to prepare for it. You have to understand what is the technology envelope that I’ve got to build out to be prepared for this. What kind of human resources strategies do I need to deploy in order to attract the kind of folks who can maintain and operate automated systems? Like it’s, it is not just buy a robot and bolt it into the floor and there you go. I mean, it’s, it’s a whole different operation, one that will be more complex by definition because robots are never going to be smart like people. So, you know, things we forget is when you have a warehouse run by with workers, you actually have to explain a lot less, you have to do a lot less deliberate prescription of tasks to them because they’re humans and they, you know, we are the most incredible computers that we know of in the universe at this point. And sorry, ChatGPT, you are really not that close. No matter what A salesman is trying to tell us that they aren’t that close yet.

[00:10:49.530] So very important to start thinking about it now. This is a paradigm shift. You know, it’s interesting you brought up France and Germany, and I was just thinking how. Well, and there’s J.M. i was just thinking about Korea and France are both countries that are top 10 origins of Canada’s immigration base. You know, and like the pool of immigrants from Korea is shrinking and drastically. Because when the population drops, people don’t. It’s the young people who are disappearing, not the old people. So it’s like, you know, at both ends. Yeah. That demographic pyramid where we get our immigrants from that younger end. And if that’s the. If it’s an inverted pyramid, Well, a net 1% loss in population is much more dramatically expressed at the younger slices of the demographic. And France is this. I don’t think France’s population is declining, but it’s not growing. So it’s just funny, you look at these countries where we accept immigrants from or who come to Canada, and you’re looking that they’ve got a worse problem than us when it comes to demographics. And so, you know, 10 years from now, this problem is going to be exacerbated, not alleviated.

[00:12:18.990] So the time to start thinking about it is now, you know.

[00:12:23.390] Absolutely. And I’m sure we’ve discussed this on other times, but you brought up the human resources, the technology that in order to be able to automate these things have to be in order. Right?

[00:12:42.740] In place.

[00:12:43.130] Absolutely in place, absolutely. And these elements, maybe more so I’ll say the technology that in itself, depending on where you are, on that scale of sophistication and where you are in that digital transformation, you might be a good year, if not more away from starting to automate anything. So. Meaning that the benefits that you’ll eventually reap from evolving into or shifting into this context might be fairly far away.

[00:13:20.440] Yeah, right. Or said the other way. If you don’t take the kind of deliberative steps that you’re describing and you just plunge yourself into it, well, you’re guaranteed to have a disaster on your hands. A disaster on your hands. I do have to leave a special spot in my heart because being the. This back to the headline of we’re in the province of Quebec. Right. Kind of like talking about the governor of Massachusetts. Right. It’s important, but not world shaking. But they, of course, want to come out with government incentives, so a sort of a corporate welfare program that will incentivize companies to.

[00:14:12.190] Automate which can come with, well, you know, diminishing some of the benefits that completely. Yeah.

[00:14:22.170] So I just want to say it here, a dirty little secret. In the consulting world, it is one of my deepest frustrations when state, provincial or federal level incentives to improve productivity or automate when those programs come out, it is a pork barrel. It’s a circus of abuse. All it means is if the government thinks that they are subsidizing, you know, 30% of the investment in an automation project, they are not. They are just inevitably inflating the cost of these projects by 30%. The government should not be fiddling, in my opinion, with the market pricing on these things because once you get the consultants like us in and you get the equipment companies and you get the government’s own cost to administer those programs, it’s just going to. All that subsidy money is going to get eaten up on nothing useful. My thought, and you know, I’m not an economist. There are. But my thought is why wouldn’t you just speed up the allowable depreciation for these investments? So instead of depreciating over six to eight years, you know that you’re allowed for tax purposes depreciate over three years so that companies can get a much bigger benefit rapidly.

[00:16:02.440] Right? Rapidly.

[00:16:03.550] To compensate for the fact that as we started this conversation, that the financial justification might not be a slam dunk.

[00:16:11.110] Right.

[00:16:11.830] Then make it.

[00:16:12.910] The economics haven’t changed until wages really substantially grow. You’re still looking at payback periods that we don’t in North America traditionally say great. And I think you and I both noticed this because you’ve brought it up with me so many times. Our customers who are very good pulse of the general supply chain market, it’s not that they think they can finagle the economics of the project to make it look like it’s a four year payback period. They’re not kidding themselves. They’re just tolerating longer, longer or lower returns on investment because of this. Because there just isn’t going to be a pool of available labor to get all the work done that we need to get done.

[00:17:06.150] Yeah. And that mindset now just has to spread to as many organizations as possible.

[00:17:12.410] So yeah, I say forget the subsidies, find some way right through the tax code to let people kind of recover savings or benefit from the savings through tax credits of some sort just to not create these massive programs where company access to fill out 50 pages, then some government inspector takes six months to figure out whether they approve it or not. And then by that Time. Oh, the project has inflated by 30% anyway and the company is paying what they would have paid out of pocket to begin with. But there’s this mysterious funny money that went into the project and disappears into a hundred different pockets.

[00:18:01.260] Yeah, well, with this podcast becoming so.

[00:18:05.250] So someone’s going to hear.

[00:18:06.630] So important. Yeah. Maybe some government officials are actually listening and. Well, we do know.

[00:18:12.360] We do know. We do have government officials listening.

[00:18:16.530] We do.

[00:18:17.150] Yeah.

[00:18:17.740] Okay.

[00:18:18.600] Yeah, we have a large audience and we get all sorts of statistics.

[00:18:23.870] Statistics from.

[00:18:24.730] Okay. Yeah, we don’t really know who, where.

[00:18:27.580] Or what, but you know, you based on domains.

[00:18:31.040] Domain. We can look at the domains. It’s still very fun to do that, you know.

[00:18:37.080] Well, good. So let’s see.

[00:18:39.290] Do you remember, though? I just remember on the domain thing. Do you remember we used to do. And I wish we did it still.

[00:18:46.560] I know what you’re going to talk about.

[00:18:47.740] What am I going to talk about?

[00:18:48.680] When we started business. Yeah, when we will look at those. Well, who would visit the website we.

[00:18:55.840] Used to post trivia quiz. Like little quizzes.

[00:18:58.470] Oh, yes.

[00:18:59.440] And they were a lot of fun. And then you could look at who was going to those pages and filling up the quizzes. And I remember for two years our biggest hit to those trivia games was from the city of Samara in Russia. And I remember looking. I have no idea if this is true or not. I just remember being so curious. You kind of go into Wikipedia. What is the town of Samarra? Where is it? How many people live there? Why would there be like 30 hits and on a routine basis. It was like the Friday after we published the next quiz and there was a university with a logistics department. And so my theory is some professor found it. Found it and made the students for fun or whatever do the trivia question.

[00:19:49.670] Yes, I do remember that.

[00:19:50.800] I like to think that’s. And that was our little step to making peace and in the world and.

[00:19:56.160] Bringing them together before. Yeah, exactly. All right, well, thank you, Charles.

[00:20:00.210] Great. Have a great weekend.

[00:20:01.050] Yeah, you too.

[00:20:01.770] Take care.