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OCR for page 154
Computers and Business
THEODORE J. GORDO.N
Computers and automation are so irrevocably entwined with business
that it is hard to imagine what business would be like without them.
These technologies computers and automation—are ubiquitous, ex-
pected, and necessary, appearing in almost every facet of business
enterprise: from recruitment through layoff, from raw material ordering
through the manufacturing of products, from identifying sales prospects
to order entry and delivery, from competitive analysis to strategic
optimization, and from innovation to design applications of computers
and automahon. They permeate business life, and in doing so have
changed it for all time. Yet there is more to come, not only with
respect to business applications of computers and automahon, but
perhaps more importantly with respect to their impact on business
itself and on the people who run it.
This is a vast and literally boundless topic, so some structure is
necessary if we are to discern even the highlights of prospective
change. A three-dimensional space serves as the organizing principle
for this paper: Business functions comprise one axis; on another axis
lie the technologies; and on the third, the impacts. For convenience,
I have divided business functions into management, manufactunng,
selling, planning, training, and professional support. For technology I
have defined three major facets: computer hardware and software;
programmable automation, which includes robotics; and telecommun-
ications. And in the third dimension, the impacts fall on three elements
of business: people, those who define and execute the intent of business;
154
OCR for page 155
COMPUTERS AND BUSINESS
155
structure, the organization of the business ente~pnse; and self-concept,
the view of what business is about and is capable of attaining.
This structure leads to a set of interesting questions. For example,
How will future developments affect people in management? For this
discussion I have selected only a few of these intersections, on the
basis of their significance, the number of people affected, and the
likelihood of the developments in the next 10 to 15 years. This is
certainly not a complete set, and it relies heavily on judgments about
what is possible and about the complex processes of acceptance and
response to new technologies. The changes we have seen to date are
staggenugly significant. What is coming, however, not only extends
the trends of the past but includes massive changes that, in the
aggregate, will define the very nature of business and the relationships
between those who serve and are served by it.
My approach win be to set the stage with a discussion of some
characteristics of emerging technologies and then to describe some of
the changes that seem likely at four intersections in our three-
dimensional (business function/technology/impact) space. The inter-
sections and their respective changes are as follows:
· At the intersection of training, computers, and people, the discussion
centers on simulation as an aid to training;
· At the intersection of manufacturing, automation, and people, on factory
automation and robotics;
· At the intersection of selling, telecommunications, and structure, on retail
electronic funds transfer (EFT); and
· At the intersection of management, computer, and self-concept, on
modeling in management decision making.
SOME CHARACTERISTICS OF EMERGING TECHNOLOGIES
First, the stage setting. There are three principal hardware trends
that characterize electronic hardware today: reduction in cost, im-
provements in reliability, and increases in packing density (the number
of components that can be packed into a given volume). Each of these
characteristics of the technology—cost, reliability, and density has
been changing by approximately a factor of 100 each decade since
1960. Studies by The Futures Group indicate that these trends can
continue for another two decades or so. As limits are reached during
this period, new technologies will offer potential for further break-
throughs. For example, photolithography (the technology required for
printing microcircuits on silicon) is limited at present by the distance
between lines that can be drawn optically. This, in turn, is fixed by
the wavelength of light. Once this limit is reached, conventional
OCR for page 156
156
THEODORE; ]. GORDON
photolithography impedes further progress toward miniaturization.
However, just behind this conventional technology lies the possibility
of using shorter-wavelength energy in these processes; for example,
electron beam or X-ray imaging.
In addition to these more or less continuous trends of improved
reliability, reduced cost, and increased packing density, it is worth
noting two other developments of significance; these are discontinuities
that can significantly affect the application of electronics in the future.
First, the same techniques that are being used to produce very large
scale integrated circuits are also being applied to the manufacture of
small mechanical devices. For example, a mass spectrometer, a device
for determining the constituent elements of gases and other fluids, has
been "printed" on a chip. This is more than simply printing the
electronics on a chip, as is commonplace in very large scale integrated
circuitry. Rather, the whole machine—valves and all is part of the
printed apparatus.' An example of the future use of Microsystems in
industry is the potential for process instrumentation that floats with a
stream of chemicals and telemeters process control data (rather than
being point-fixed on the well of a pipe). Another industrial example is
temperature and pressure instrumentation built into a grinding wheel
or cutting tool to control a feedback system that optimizes metal
removal rates, improves precision of manufacture, and extends tool
life. In the office these m~cromechanical devices can be useful in
constructing extremely small microphones for dictation, telephones,
or security systems (also, micro eavesdropping bugs), or feedback
instruments for chairs, printers, and personal, local air conditioning.
With this technology, buildings can be instrumented to detect incipient
mechanical failures, and quiescent manufactured products can tele-
meter their state of functioning or readiness in response to an external
radio trigger signal. In short, micromechanics not only will permit
replication of macromachines on a tiny scale but will stimulate the
innovation of entirely new applications that benefit from small size,
low pnce, dispersion, and decentralization.
The second development is the coming of age—probably within the
next decade—of artificial intelligence (AI), the simulation of human
intelligence by computers. Artificial intelligence requires the ability to
sense, operate on sensed information, draw inferences from observa-
tions, and perform adaptively in view of these inferences and changing
circumstances. AI programs have two general attributes: search and
knowledge. Search comes from "defining a space of possibilities large
enough to contain the sought-for solution," and "knowledge is nec-
essary to guide the search through the space."2
OCR for page 157
COMPUTERS AND BUSINESS
157
The initial entries in this field are expert systems that capture
pragmatic if-then rules of analysis followed by human experts in a
given field. Examples of expert systems that are functional or in
development abound. Medical diagnostics, personal financial services,
geological exploration, legal strategy, and software design are some
examples. In these fields and in others yet to come, computers will
produce practical and functional answers to real problems better than
answers that could be produced by a random sample of professionals.
When expert systems can learn from expenence, the decision rules
incorporated in the knowledge portion of the program can be much
more extensive, and a transition will have occurred from programs
that merely emulate the behavior of experts to creative artificial
intelligence routines. These routines will arrive at answers better than
those that might be created by most human experts. This will not
happen tomorrow, but it is reasonable to expect self-learning systems
to be in operation within 15 years.
This image of the growth of electronics and its applications and spin-
offs depends, of course, on the market. Given demand, the capability
of electronics and all of its derivatives grows; without demand, nascent
applications wither. Business fosters demand both by offering new
products to consumers and by becoming a consumer itself. In either
mode business touches and is touched by these technologies and thus
is changed, not only in how it does business, but in what it believes
business to be. Let us turn now to some intersections in the three-
dimensional space discussed earlier.
INTERSECTION: TRAINING, COMPUTERS, PEOPLE
Simulation as an Aid to Training
Take as a starting point high-density TV (in the more distant future,
perhaps holographic TV) driven by rapidly accessed videodisks,
excellent and sensitive computer simulation programs, and much more
effective input-output systems. Put them together and imagine a worker-
training system 10 to 15 years hence. The key here is software—superb
simulation techniques that permit the creation of accurate environments
that stress the student and promote learning. With such software, the
emphasis in education switches from teaching to learning. Pilot training
serves as a current example. In the future, decreasing equipment costs,
better software, and realistic input-output systems mean that appli-
cations will be far less monumental and will certainly be applied in
business for training of production workers, managers, salespeople,
OCR for page 158
158
THEODORE J. GORDON
repairmen, and anyone likely to benefit from the stress of practice.
Simulation in the context used here means that the user determines
the plot of an unfolding story through his or her decisions. This is
computer game playing carried to its logical end. In schools you can
be with Napoleon or serve as a lieutenant to Washington. In leisure
at home, TV becomes active rather than passiv~here you can be
with Cleopatra or J. R. Ewing. In the workplace you can direct field
operations to put out oil well fires, or learn, as a potential manager,
how it feels to deal with labor grievances and the chess game of a
stnke.
Consequences
Personnel training and education will be substantially changed, with
competitive advantage falling to the best corporate simulators. Imagine
the new case study approach in management education: "Have you
played Continental Illinois yet?" Grading of personnel in corporations
may be according to their successes or failures in simulations. Imag-
in~in awed tones "He made Continental survive." Perhaps bore-
dom will become a problem when the game environment makes the
adrenaline flow more easily than reality does.
New products and markets will be built around interactive on-the-
job expenence. When the simulation tools are very good they will also
serve as decision-aiding tools. For the repairman not quite sure about
which wire to connect, a quick run on the simulator will show the
consequences of connecting the wire a working machine or a blown
fuse. The analogous situation for management dilemmas is obvious.
INTERSECTION: MANUFACTURING, AUTOMATION, PEOPLE
Factory Automation and Robotics
When computers were first introduced, there was a great deal of
concern that unemployment would result. In fact this was not the
case—wherever computers were used, more jobs were created. Com-
mon wisdom holds that this situation will always continue, but it might
not be so. Factory automation is likely to advance so far beyond
current capabilities that the net effect of introducing such new tech-
nologies may be to improve total output with less labor required in
both a relative and an absolute sense. I will explore the potential for
such technology-induced unemployment in this section.
Artificial intelligence will allow machines to perform cognitive
OCR for page 159
COMPUTERS AND BUSINESS
TABLE 1 Forecasts of Robot Technology
159
Sate of the Art
Feature 1983 2000
Accuracy of manipulation (Electnc) 0.02 inches 0.001 inches
(Hydraulic) 0.2 inches 0.020 inches
Repeatability of placement (Electnc) 0.005 inches 0.001 inches
(Hydraulic) 0.050 inches 0.010 inches
Mean iune between failures 1,000 hours 5,000 hours
Fault detection and repair Mostly human Mostly self-check
Speed for standard pattern 4 seconds 1 second
Programming External External and self-
taught
Sensing visual Silhouette 3-dimensional
Memory capacity and type Magnetic media Vastly expanded
magnetic and op-
tical media
Infonnaiion processing Sequential archi- Parallel architecture
lecture
SOURCE: The Futures Group.
functions; robotics will move from specialized to general-purpose
applications. Recent studies at The Futures Group have resulted in
projections of robot technology that illustrate the enormous potential
for this field. As Table 1 shows, robotic accuracy, repeatability, mean
tune between failures, time to repair, and speed are expected to
increase significantly—more than an order of magnitude in most cases
in the next 15 years.
Within the next decade or so we also can expect to see very simple
means for programing robots and, with the advent of artificial
intelligence, robots that learn through experience For example, a
robot could be adaptively programmed to change its positioning or
sequence in order to ~nirnTn~e rejection rates.
A distinguishing feature of robots is their versatility their ability
to be used in a multiplicity of applications. In the future, robots will
become more general-purpose, in the sense that their implements can
be utilized in a variety of jobs without much cost penalty. Vision and
sensing will improve to make three~imensional perceptions common-
place.
The number of robots to be employed in the future is not certain by
any means, but large increases seem likely. The number of robots in
manufacturing quadrupled between 1979 and 1981.3 Forces encouraging
growth include
OCR for page 160
160
.
TH~ODO~ J. GORDON
- Improvements in the technology itself, which increase the number of
applications possible with these machines;
Diminishing costs for given robotic capability as a result of learning-curve
improvements;
Increasing cost of human labor; and
Growing sophistication on the part of management, facilitating the switch
to robotics.
On the negative side, factors that limit the speed of diffusion of this
technology include
· The size of the required investment,
Institutional inertia that slows the adoption of automated technologies,
and
Obsolescence of current equipment.
Now the question is: Will progress in robotics and factory automation
in general create jobs or eliminate them? The answer is, of course, it
will do both. At constant levels of output it will eliminate jobs, because
the robots will perform jobs that human workers currently perform,
and automation, properly applied, will improve productivity through
increasing output per man-hour. Some people argue that as automation
progresses more people will be required to produce the machines and
that as people are freed from dull, repetitive, boring, and sometimes
dangerous activities, unemployment will not diminish but, in Parkin-
sonian response, the scope of work and perhaps its quality will increase
to occupy the new capacity for work. While this has generally been
the case in the past, robotics and the new wave of automation have
some new attributes. They promise to be very good, very cheap, and
unt~nng. They can yield manufacturing quality higher than that pro-
duced by their human counterparts. Instructing these machines (pros
gramming) will be efficient and, through AI, they will be adaptive;
mu an V; ~5 one smug programming may be, the machines will
progress and learn to do even better The machines will c-if Air
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learn OI impending internal failures through "introspection," and-
when necessary—self-repair, to a small extent initially and to a major
extent later. More than that, when programmed to do so, they can
self-replicate.
Just how many jobs will be displaced by continuing factory auto-
mation and robotics? The situation is summarized in Table 2. We have
created a scenario with several critical assumptions. The U.S. De-
partment of Labor expects the labor force to grow from its present
level of 110 million to about 134 million by the year 2000.4 We assume
that real productivity grows at about 1.5 percent per year as a result
OCR for page 161
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OCR for page 162
162
THE ODORS; J. GORDON
of automation and that real Gross National Product (GNP) grows at
2.7 percent per year. Furthermore, the number of robots is assumed
to grow from a currently installed base of about 5,000 to 500,000 by
the turn of the century. We suppose, further, that the effectiveness of
each robot also grows; today a robot is equivalent to about two persons,
and we have assumed that by the turn of the century a robot can
replace five workers. With these assumptions, as Table 2 shows, the
contribution of robots is relatively minor. Only about 2 percent of the
labor force expected in the year 2000 will be displaced by robotics.
While the picture presented in Table 2 is a homogeneous represen-
tation of the labor force as a whole, certain industries will be more
affected by robotics than others. In general, these are industries in
which mechanization of production yields lower cost, higher quality,
diminished production time, improved efficiency, or improved worker
safety. In these industnes, the impact of robotics on job displacement
will be considerable. For example, the production of passenger auto-
mobiles has involved a labor force of about 270,000 over the last seven
years. On average, this labor force produced about 30 automobiles per
employee, while production during this interval varied from 6.2 million
to 9.2 million units per year. Now, assume that the number of individuals
available for passenger automobile production grows at the same rate
as the labor force as a whole. The employees required, however, are
affected by level of production of automobiles and by improvements
in productivity resulting from factory automation and the introduction
of robots. If we assume (1) that production grows at 3 percent a year
(so that by the year 2000 more than 10 million units are manufactured
in the United States), (2) that productivity grows at 1.5 percent per
year (as previously assumed), and (3) that the number of robots used
by the industry grows from 5,000 in 1985 to 25,000 in the year 2000,
less than half of those who might ordinarily have been assumed to be
available for employment in this industry will be required. A major
public policy concern, of course, is that those displaced may be the
least able to find new employment. Whether this is a barrier to the
spread of factory automation depends on many factors, such as the
job security provisions of labor contracts in affected industries and
the state of the economy. My guess, however, is that robotics and
programmable automation will spread rapidly as the return on invest-
ment in such systems grows.
Consequences
There is likely to be a Wowing emphasis on the job security issue
and retraining in industries likely to experience displacement. Also,
OCR for page 163
COMPUTED kD BUSINESS
163
there may be the return to the United States of some jobs previously
located outside the country to take advantage of low-cost automated
production. Product quality will improve and a new class of employ-
ment such as the blue-collar programmer will emerge. Factory
automation and robotics will constitute a new technological frontier
on which the battles for international markets will be fought, since the
products these technologies yield will be of lower price, higher quality,
and more predictable performance.
INTERSECTION: SELLING, TELECOMMUNICATIONS, STRUCTURE
Retail Electronic Funds Transfer (EFT)
There is an unusual and, to some extent, unexpected confluence of
technological and consumer trends that may affect the retailing envi-
ronment in the immediate future. I believe that automated debit
purchasing may come on the scene faster than many people expect.
Here are some of the factors that lead to this position:
· Automatic teller machines (ATMs) have spread (47,000 units in place in
1983) and have become much more widely accepted by consumers.5
· The principal use of ATMs has been to withdraw cash from personal
accounts.
· Many retail establishments are considering or are installing ATMs on their
premise~small bank branches in order to provide a means for their
customers to obtain cash in their stores.
· The communication networks required to support the ATMs and the
software necessary to properly debit accounts exist and are proven.
It takes only a small step of imagination to move the ATM into the
cash register so that at time of purchase consumers can simply insert
the ATM card into the proper slot, punch in their personal identification
number, and be charged for the purchase directly, just as if they had
gone to the ATM and withdrawn cash. In this view, there will be no
such thing as a special debit card. The bank-issued ATM card takes
its place and the era of electronic fund transfers at the retail level will
have come on the scene smoothly, with minimum fanfare, and with
relatively high consumer acceptance. More than just a convenience to
shoppers, this is a crucial and catalytic step to a society that, while
not cashless, certainly functions with much less cash.
An important by-product of this development for business will be
the availability of really exquisite information about who buys what,
where, and when the basis for a potential revolution in marketing
research. Where will this trend surface first? Probably in supermarkets
OCR for page 164
164
THEODORE; J. GORDON
and gas stations. It then spreads in the retail environment wherever
population density and purchase traffic are high enough to warrant the
investment. Then it may spread to vending machines of this new era.
These vending machines will be operated by coins as well as by ATM
cards. What better way could be found to reduce store theft? The
image for these vending machines will be upscale, and I would guess
that these machines will typically carry much higher-value items than
do machines of today. One feature of these machines that will make
them unique is their ability to be easily programmed to offer a wide
variety of merchandise (sweaters, socks, small electric appliances,
stationery). In this way the machines can be generic, and the price
can be set for whatever merchandise the retailer wants to sell.
Consequences
The rate of growth in the number of checks written and processed
will be greatly reduced, as will the amount of mail. There will be a
major new role for secure telecommunications networks, and today's
credit cards will be transformed into their debit-credit equivalent. Once
the networks have linked consumers with their accounts at points of
sale, whole markets can go electronic, allowing buyers and sellers to
meet electronically, and bid and auction until deals are made remotely.
It seems to me that this kind of market, based on network connections,
could be very well suited to real estate, tax shelters, and any other
high-value transaction in which "feeling the merchandise" is not
essential.
INTERSECTION: MANAGEMENT, COMPUTER, SELF-CONCEPT
Modeling in Management Decision Making
The goals of a business are, by and large, determined by what
management believes is feasible at acceptable levels of investment and
risk. These perceptions are, in turn, informed by data available to
management about their customers, about competing business, and
about the environment in which they operate. The sensory capacity
of the business to determine what is happening around it has improved
and will continue to improve. Beyond this, the ability to distill nuggets
of pertinent information out of such data enhances not only decision-
making capacity but the goals on which such decisions are based. The
secret here is not knowledge about customers, competitors, and the
environment real knowledge about such matters is restricted to the
OCR for page 165
COMPUTERS AND BUSINESS
165
past but rather the quantification of uncertainty and risk. New analytic
techniques will facilitate the introduction of uncertainty into decision
processes, and from the beginnings that are already in place today,
corporate actions will be weighed not only on the basis of expected
return but on levels of acceptable risk.
Here is an example. Suppose that a forecast of demand for an
existing product has just been made. Using probabilistic tools, the
forecast recognizes irresolvable uncertainties: the potential entry of
competitors, the emergence of a new technology that could overtake
the product, the potential for a fad that could spark unprecedented
demand. Such factors produce two scenarios for the future. Suppose
further that the first scenario requires building a new plant and the
second does not. Has quantification of the level of uncertainty helped
make the decision about the plant? Of course. One could reason as
follows. Case 1: I believe the first scenario and build a plant, but the
second scenario occurs. Case 2: I believe the second scenario and do
not build the plant, but the first scenario occurs. Clearly one situation
is better than the other, and even in this simple example of risk
analysis, quantification of uncertainty helped resolve the issue. For
risk analysis to become very accurate and helpful, models must improve
and be trusted by managers, and data about environmental factors,
competition, and customers must be collected regularly. All of these
developments are happening and will accelerate.
Consequences
The use of corporate intelligence gathering, not as espionage but as
a routine and accepted business function, will increase. Decision
making will become explicitly risk-conscious, and decisions will be
evaluated not in terms of return on investment (ROI) but in terms of
ROI probability distributions. Intuition and the "gut call" will remain,
of course, but in a probabilistic context some high-nsk opportunities
will be seen as worth taking, while some lower-risk options will be
judged not worth it. For better or for worse, probabilistic methods
will make decision making more explicit and management more self-
conscious and more accountable for its performance.
CONCLUSION
This has inevitably been a very rapid tour of some of the more
important intersections in the function technology impact space,
but several more cells deserve some mention.
OCR for page 166
166 THEODORE J. GORDON
· Computer-Aided Design and Computer-Aided Manufacture (CADlCAM).
The design shop and the shop floor are being modified in function and
form to capture the advantages of efficiency, quality, and accuracy afforded
by the new technology. CAD/CAM went from a $1-million industry in
1973 to $1.2 billion in 1983. It is expected to grow by a factor of 10 between
1985 and 1995.
· Electronic Mail. Imagine an electronic typewriter that is likely to be on
the market in 5 years or so. It has a matrix printer, memory for several
lines, built-in word processing, built-in spelling correction, and several
other easy-to-accomplish software features. This typewriter is sold not as
an office word processor or computer peripheral, but simply as a consumer-
oriented portable. Its price is less than $100, and it is a standard gift to
high school graduates about to leave for college. It is not difficult to
imagine the sale of several million of these devices, perhaps several scores
of millions, within the next 10 years. With a modem chip these machines
can be plugged into standard telephone jacks. Electronic mail, for better
or worse, will have arrived overnight.
· Group Decision Making. Automated voting machines currently exist (e.g.,
the CONSENSOR) that permit participants in a meeting to provide
judgments in response to questions posed by a monitor. In some of these
machines, an individual's input can be weighted on the basis of expertise
or knowledge. With improved expert systems and artificial intelligence,
group interactions can be computer-augmented. Individual weights can be
set by experience or testing, and the group itself can be integrated with
expert systems and judgments drawn particularly against the profile of
issues being addressed. Also, of course, on-line data can be called up if
necessary to provide background for the group as a whole. These techniques
tend to subdue the normal psychological problems that accompany group
interactions and to promote smoother, more precise, and probably more
accurate decision making. The consequence will be that teams, even teams
composed of individuals located at remote places, become more important,
at the expense of the individual.
The way business does its work is being profoundly and permanently
changed. On the factory floor it is being changed by numerically
controlled machines, analog and digital sensing devices, automated
testing gear, design systems, material-handling systems, inventory
control systems, and automated stockrooms. In the office changes are
being driven by electronic filing, automated scheduling of meetings,
direct access to inflation, word processing, and, soon, idea pro-
cessing. The computer affects almost every job and every worker.
The nature of the jobs, where they are done, the way they are
accomplished, the expectations of job supervision, and the skills
required to perform the tasks are all changing. Additionally, the
OCR for page 167
COMPUTERS AND BUSINESS
167
information available for doing tasks and the precision and timeliness
with which they can be done are changing.
Granted business processes are changing, but is business itself
changing? After all, business takes raw materials, adds value, and sells
products. At this level, is anything likely to be different? Early critics
of computers~omputers using cards that warned against folding,
mutilating, or spindling—were concerned about the way that computers
would regiment and standardize us all, force us into providing rigid
inputs that computers could understand. Now it is clear that computers
provide the ability to manipulate and track information, and a variety
of individual needs can be easily accommodated. Computers do not
standardize; they promote diversity. We are coming closer to the time
when the user can design the product and when, in sensitive and high-
quality work environments, the worker can change his or her environ-
ment and utilize an array of information that makes that person's
contribution unique. Through the computer, business gains diversity.
Business may also gain responsibilities. The prescription to take raw
materials, add value, and sell products may be too simple for a future
age. For all of its elegance, accomplishments, and promise, the
computer can cause human obsolescence, displacement of workers,
and unemployment. The role that business will have in accommodating
these discontinuities is ideological as well as economic, and it is far
from clear how that role will evolve. Somewhere in this chaotic,
complex, and uncertain mix lies business of the future.
NOTES
1. J. B. Angell, S. C. Terry, and P. W. Barth. 1983. Silicon micromechanical devices.
Scientific American, April:44 55.
2. Committee on Science, Engineenog, and Public Policy; National Academy of
Sciences; National Academy of Engineering, and Institute of Medicine. Cognitive
science and artificial intelligence. In Research Briefings 1983. Washington, D.C.:
National Academy Press, p. 25.
3. S. A. Levitan, and C. M. Johnson. 1982. Future of work: does it belong to us or to
the robots. Monthly Labor Review, Vol. 105:1~14.
4. lI. N. Fullerton. 1980. The 1995 labor force: a first look. Monthly Labor Review,
Vol. 103, No. 12:11-21.
5. R. M. Garsson. 1983. Fast growing ATMs are now as ubiquitous as Xerox machines
Georgia finn aims new computer at bank calling of ricers. American Banker, December
21, 1983: 8ff.
Representative terms from entire chapter:
artificial intelligence
