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Former McDonald's USA CEO: $35K Robots Cheaper Than Hiring at $15 Per Hour

Forums - General Discussion - Former McDonald's USA CEO: $35K Robots Cheaper Than Hiring at $15 Per Hour

LMU Uncle Alfred said:
Netyaroze said:

 no we do not have systems that come even close to this kind of computing power. just simple decryption can take the fastest computer thousands of years. deep mind won by studying human games and applying creativ thinking. read up on it. its impossible to calculate every outcome in this game. the capacities needed is trillions (just a place holder actually we dont have words for it) times higher than all computing power on earth. there is trillions ocf atoms in a grain of sand. imagine all planets and suns wich are sextillions. this game was chosen to prove computer ai evolved.

I think people will be able to emphasize with an R2D2 like robot more than with other random people. I can only speak for myself. The Human interaction is not the reason why I go to Mc Donalds. I do not feel isolated and I could not careless about emphaty from a McDonalds worker. I really really Doubt people care if the food is prepared by a Human they can not even see in the back of the restaurant. Actually its more sanitary if robots prepare the food. And to be honest a always friendly robot might also be the better cashier.

Edit: We do have some words that describe a similar number for the numer of atoms in the universe: A googol: 10^100.  According to some sources the number of atoms in the known unverse is about equal to 10^80.  A googolplex is just insane and I can barely wrap my head around how we could use that number.  It's equal to a 1 with a googol number of 0s behind it!

It's not necessarily about computing power though.  The fact is we hardly know that much about the brain to begin with..so what algorithms could we even use in the many other parts of the human condition?  There's the essence of unpredictability in each person's day by day reactions as well which we also empathize with and in which would be extrememly difficult and maybe even dangerous to put in a robot.  I guess this is where Skynet comes in.. Oh shit.

 

I know I said McDonalds, so yeah maybe people would be ok with not getting human service there or other fast food places; hard to say.  I know many of us who linger on the internet are ok with it, but you'd be surprised even then.  In other places that require more interaction it's an impossibility at this current time.  We first would need a grasp of all of the reactive possibilities of every person that has ever existed.  But even after that it gets much more complicated.  The current problem is our understanding of the brain.  Until we can fully grasp that, robots will never replace humans in the working world.

 

It would be neat though.  We'd never have to work again :)....there would only be artists.  Maybe even robot artists, but imo it would be wise to leave that out so we feel important somehow.

 My point is that AI evolved over the years and our understanding of the brain got much better over the past years ofcourse there is alot of work left but we are slowly expanding our understanding of the Human Brain and Intelligence we will be able to create am human like intelligence at some point in the future and I think we might even withness it before we die.

I believe in the progress of technology as I have seen how much changed over my lifetime and it even gets faster each year and I still have way more in front of me than behind me.

 

 



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They need to tax robot purchase for commercial use, yep that goes for car industry as well. But I doubt they are going to go anything.



I hate the future...



I really hope they have manager and CEO robots too!



Replace them for Robots and see how many customers revolt again you



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bowserthedog said:

Replace them for Robots and see how many customers revolt again you

Do you really think McDonald's biggest (pun intended) customers will care? 

Joking aside I think there is a general disdain for McDonald's workers by the people who actually eat food there. Generalizations are bad and all, but there is a reason why most people don't go running to the aid of fast-food workers. Most of the commotion about McDonald's workers not being paid enough is created by middle class white people who have nothing better to do, and probably have visited a McDonald's fewer times than they have fingers. Hell, half of them are probably vegans. I doubt the caliber of worker there has enough motivation to organize themselves to strike. 



It's strange that the $15 an hour conversation is being talked about here since a month ago here in California governor Jerry Brown pass a state law that will increase the hourly minimum wage each year until it hits $15 in 2022. 



Proud to be a Californian.

And reading almost all the posts here... seems like our regular vgc folk knows as much of economics as they know about game development, which is nill.

They have just 0 knowledge of the impacts of macroeconomy and the cost of the free things politicians promise to give, the effects of taxation (even the so much liked tax on rich) or the impact of higher minimun wage.

Also the perspective that someone have to live for 30 years as burguer flipper.... and having unrealistic high payment for flippers will just get them settled there for life instead of looking up.



Norris2k said:
Nuvendil said:

Ok so let's get down to brass tacks here with the whole $15 thing and examine it in relation to McDonalds.

So McDonalds has a variety of different pay levels with some entry positions making sub 8 and middle and lower-middle management making 11 or 12 so let's say the average $9 an hour. So assuming a 30 hour or so week (McDonald's standard for full time), an increase to $15 an hour would result in a 3.93 *billion* dollar increase in payroll costs alone for McDonalds from their 420000 direct employees (remember that, that's important). This is before taxes so that means this 3.93 billion comes out of McDonalds' operating income, which sits at 7.1 billion. So before taxes, that brings us down to 3.2 billion dollars. Taxes and interests and other post-operating income expenses currently takes up 2.6 billion dollars. So we are looking at a total of 600 *million* left over in true profits.

And that's only from the impacts of the pay raise for the direct employees. It does *not* factor in the rest of the employees in the states. The vast majority of McDonalds' 1.7 million employees through franchises and company owned and operated locations are in the States. So let's say roughly 1,000,000 more employees are in the States. That means that there's a total payroll cost expense cumulatively of 9.63 billion dollars. However, each franchise will bear the weight of it's cost increase largely on its own. Meaning many locations of middling business will become unsustainable and thus close. Which means McDonalds the company will suffer losses as a result of loss of franchise fees and sales cuts. Which brings us lower than that 600 million dollar bottom line. We're talking sub 500 or even 400 million. And that's being awfully generous and assuming the vast majority of McDonalds locations at this time make more than enough to support the payroll cost increase.

But that's not the end. You see the next issue comes up with crew management/leadership (swing/shift managers) costs. Many such managers at this moment don't make $15 either. So all these expenses are going to just be for bringing the whole crew at these places to the same exact level and it doesn't take a business wiz to see that's just not going to work. Right now, being a middle manager or leader in a crew brings you up some $2 an hour. So that's tens of millions or more in direct payroll expenses add to McDonalds from its direct employees and another burden to pile on to franchises.

So then we get to that last tidbit that people bring up: those greedy, grubby CEOs and executives hogging all that sweet cash. Well, to help you people out who are making this argument I am going to set aside the reality for a moment and give you the ideal situation. Let's assume - despite all evidence to the contrary - the executives at McDonalds make similar to the Chipotle executives, whose CEO makes upwards of 25 million dollars a year. That is less than 1% of the payroll increase cost caused by the $15 wage. 1/157 to be fairly exact. And the thing is, the McDonalds CEO doesn't make anything close to that as his base salary. So unless they are giving him hundreds of millions in bonuses a year (they aren't), he could lower his own pay to $15 an hour and effect next to *nothing* in terms of McDonald's bottom line. It would be a drop in the bucket. This idea that a handful of people at the top of McDonalds - or most big companies (almost all, actually) - are hogging enough money to pay their employees immensely more is just not accurate.

And this is *MCDONALDS*, the poster child for miserliness. And yet their bottom line would be devastated by a pay increase. Could they *survive*? Certainly, but it would require a LOT of changes. Thousands of locations would need to close, prices would need to go up, jobs and structure would need to be changed or cut. It's not like the 1.4 million US employees would just start making more $15, it is always, always, always more than that. Your talking about over 10 BILLION dollars in new payroll costs just to facilitate the new wage. Much less the other pay increases common sense demands. McDonalds and many companies would have to fundamentally change their business to accommodate this and they wouldn't all be pleasant changes.

All that to say this whole thing is not as simple as "make the rich people give us the money," cause as I just pointed out they don't have the money. Which is why I say we have to avoid the class-warfare mindset. It's a kneejerk reaction to find out x CEO makes millions and demand bigger pay checks but it is a mistake to assume that the former is the reason you don't have the latter.

Edit:  To be clear, I don't agree with the current minimum wage.  But I am trying to show two things:  1) this $15 an hour is no small change and 2) there's a reason I say Federal needs to low ball and States need to make the ultimate minimum wage decision.

I appreciate you put in the perspective of an argumentation and calculation, and clearly we agree it's not a small change, it's a big change with multiple secondary effects. You explain pretty well the impact it will have on other salaries. But you miss the point of the tremendous impact a rise of salaries would have on the society, fiscal system, investment, scholar system. Because all those working poor, they are a burden for the fiscal system (stamps, medicare), they can't contribute enough to the consumer society (can they even afford a mac donald ?), thier children will have it hard at school, and they divert companies like Mac Donald to invest because they can rely on cheap labor.

Perhaps it would be better for Mc Donald to think about and invest in their production chain, the way they did when they revolutionized the fast food market and influenced companies like Burger King or Tacos bell. Low wages made them lazy, they don't invest in robotic, the production chain is mostly the same for decades. And they didn't have any new product as successful as the big mac or quarter pander for the last 30 years.

Perhaps it would be better for Mc Donald to not lead to a government default, part because the State is required to spend so much on that that millions of working poor (not just their employees).

Perhaps it would be better for Mc Donald to have more clients because instead of relying on food stamps, every people will be able to eat at the Mac Donald.

And last but not least, perhaps it would be better for them to die... because  “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.” (Roosevelt) If very low wages is the base of their business, they don't really have a viable business model. We don't have to sponsor them with poverty and taxes.

Sponsor them with taxes?  Taxes are one of the largest expenses they face.  McDonalds and other large companies face a tax rate in excess 35% of taxable income (that's billions of dollars, their taxable income exceeds 7 billion) and that's just federal.  State goes on top of that and varies.  

As for the bits about raising wages and stuff, as I said I am fine with a raise to something survivable but that's not what people keep demanding.  They want a minimum wage that makes everyone middle class but my point is the cost of that plan is astronomical and it would have to be recouped somewhere.  And that somewhere is going to be product prices.  And if the cost of goods goes up on average significantly what's the point?  You can't forcibly make the economy pay out more than it is able.  Which is why it must fall to the States to set the minimum wage according to the cost of living and economic health.  Keep the federal low to allow for that.

And in the case of McDonalds, as I explained before they aren't looking to provide all their employees with careers or even most.  They are capitalizing on the fluidity of the work force, that there are always people either just entering the workforce or in between jobs or otherwise just looking for *some* work.  In other words, these are jobs and products that otherwise wouldn't exist, many currently working at McDos wouldn't have a job if not for that very business model.  It's not a model you have to agree with.  And as I said I would be fine with (and McDos could survive with) a moderate increase in minimum wage.

Also, food for thought, the old minimum wages were set in a time where one person per household supported the household.  Now a much larger percentage of households have two or more sources of income.  Which does effect the dynamics here.  Not only does that mean lower amounts support more, but also that more money is payed out via payroll than many think.  Not saying this swings the debate either way.  Just another thing to throw into the mix of highly complicated factors that go into discussing such large, impactful changes to laws regarding business.



*snip*

Double post