@ Karnage

Yesterday Marc Andreessen wrote up a lengthy tweet addressing concerns of AI taking our jobs. I will take a few minutes to analyze his tweet and break it out into chunks with my own assessment and responses.

The fear of job loss due variously to mechanization, automation, computerization, or AI has been a recurring panic for hundreds of years, since the original onset of machinery such as the mechanical loom.

True.

Even though every new major technology has led to more jobs at higher wages throughout history, each wave of this panic is accompanied by claims that “this time is different” – this is the time it will finally happen, this is the technology that will finally deliver the hammer blow to human labor. And yet, it never happens.

We can't rely on details of the past to predict the future. Every new development should be evaluated independently. "And yet, it never happens" is an insufficient assessment of whether something could happen just because it hasn't happened in the past. The sun hasn't exploded, but it could. Will it? Probably not. But it could. We don't know what we don't know.

We’ve been through two such technology-driven unemployment panic cycles in our recent past – the outsourcing panic of the 2000’s, and the automation panic of the 2010’s.

No we haven't. We've been through technology-driven unemployment panic cycles - yes, but not "such". Such assumes they are the same and as I stated earlier, everything should be evaluated independently.

Notwithstanding many talking heads, pundits, and even tech industry executives pounding the table throughout both decades that mass unemployment was near, by late 2019 – right before the onset of COVID – the world had more jobs at higher wages than ever in history.

While this is true, real unemployment has been the lowest in history at onset of COVID, what Marc fails to account for is the higher cost of living. It's no secret that rents and prices were all on the rise from 2022 forward and that wages are not able to keep up with inflation.

US Bureau of Labor Statistics reported the highest CPI ever going into COVID. Shelter, being a major expense for people is at the highest level ever according to FRED (https://fred.stlouisfed.org/series/CUSR0000SAH1)

While even an increase in CPI may not paint the full picture as it measures percentage change, in real terms (the dollars people are actually spending on rent) it's clear that the cost of living is rising. You can feel it every day.

• When was the last time your rent DECREASED?
• What was the last time food become cheaper at the store?
• What was the last time your college education all of a sudden became more affordable?
• What was the last time you got a raise?

People living in the real world can clearly tell that things are not going in the right direction. But, if you are Marc Andreeesen, it's not likely you live in the real world, so you wouldn't know. It is dishonest to say "wages are higher" and ignore the other half of the picture - the rise in the cost of living and lagging salaries.

Nevertheless this mistaken idea will not die. And sure enough, it's back.

Is it mistaken? We'll see...

This time, we finally have the technology that’s going to take all the jobs and render human workers superfluous – real AI. Surely this time history won’t repeat, and AI will cause mass unemployment – and not rapid economic, job, and wage growth – right? No, that’s not going to happen – and in fact AI, if allowed to develop and proliferate throughout the economy, may cause the most dramatic and sustained economic boom of all time, with correspondingly record job and wage growth – the exact opposite of the fear. And here’s why.

Marc seems to completely forget about the widening wealth gap. It's as if we can look at the growing wealth gap and pretend like it doesn't exist.

According to Pew research, the middle class is shrinking while the top earners are growing. The average American family is no wealthier today than it was two decades ago. The share of US aggregate income held by the middle class fell from 62% to 43% from 1970 to 2018.

You really don't need to look at any charts or be a wizard to know that the middle class is shrinking while the rich get richer. You can feel it in your neighborhood (unless you are rich), your supermarket, your community, the number of homeless on the streets.

Of course, if you are Marc, perhaps you don't see any of these things because you live in your own little bubble 🤷‍♂️

The core mistake the automation-kills-jobs doomers keep making is called the Lump Of Labor Fallacy. This fallacy is the incorrect notion that there is a fixed amount of labor to be done in the economy at any given time, and either machines do it or people do it – and if machines do it, there will be no work for people to do.

Classical straw-man argument. Marc, do you really think people are concerned that ALL jobs will be gone and humans will have nothing to do? Or perhaps maybe you've given some thought to whether people are concerned for their incomes to support their families? It's not that people are afraid all jobs will be gone. People are afraid that they won't be able to provide for themselves and their families as their jobs are all of a sudden done by AI.

The QUALITY of employment is what's at stake. Sure, you'll be employed - doing some odd thing you probably don't want to be doing because your critical analysis skills are no longer required or can be done with fewer people.

Do you really feel that your employer is going to say "oh hey, Marc, you are doing less and less around here these days, here's a raise!" Exactly. Not going to happen. It is in the businesses' best interest to automate away as many positions as possible. Less labor = higher profits. All business incentives point to automating away labor to bring down the costs to as close to zero as possible.

Yes, new jobs will open up, but they will increasingly require higher levels of knowledge and experience. In other words, the top earners today will step into those positions as they will be in the best spot for this transition.

The Lump Of Labor Fallacy flows naturally from naive intuition, but naive intuition here is wrong. When technology is applied to production, we get productivity growth – an increase in output generated by a reduction in inputs. The result is lower prices for goods and services.

This would be true under the bitcoin standard, but we live in a different reality. Productivity growth goes to the top earners and executives while workers are laid off. Ask yourself, what was the last time your prices dropped? I'll wait...

Food more affordable? Housing cheaper? Your vehicle cost less now than it did a decade ago? Gasoline? Education? iPhone?

It is true that technology lowers the marginal cost of production and in theory should make everything cheaper. But, in reality, costs rise as the fiat money inflates everything with it and any savings to be had are passed onto top brass. When you are doing great at automating away tasks, your first thought is not "oh now we can hire more people with all this extra cash", your first thought is "great, how can we automate away even more?"

As prices for goods and services fall, we pay less for them, meaning that we now have extra spending power with which to buy other things.

False. We are paying more. This is reflected in reported CPI and real CPI, inflation, lagging wage growth, and growth in inequality.

This increases demand in the economy, which drives the creation of new production – including new products and new industries – which then creates new jobs for the people who were replaced by machines in prior jobs.

It is true that consumer spending has been growing recently and that in theory all of that spending should create more jobs. However, we have never had a technology with no upper limit in terms of what it could do. While new jobs can indeed come online, the numbers of new jobs may not be sufficient to replace the jobs they displaced. Technology improves efficiency and you need fewer people to the jobs of many. Marc's assumption is that the AI developments would create so many new industries that the jobs required to make them work would outpace all of the displaced labor. However, he seems to willfully ignore that AI is not a "twice better" technology. It has no theoretical limit to the level of efficiency achievable.

At the core of it all, everything we are and everything we do is math and algorithms. Machines need not be 100% better than humans to take our jobs. Eighty percent is a good enough threshold that the other 20% can be ignored. As long as AI is sufficiently able to perform a task, human need not apply.

The result is a larger economy with higher material prosperity, more industries, more products, and more jobs.

Yes, an economy for the top earners.

But the good news doesn’t stop there. We also get higher wages. This is because, at the level of the individual worker, the marketplace sets compensation as a function of the marginal productivity of the worker.

Money printer would like a word. Higher wages are just one side of the equation. What you really want is more purchasing power and we know that purchasing power is shrinking dramatically. Simply look at the appreciation of Bitcoin's fiat value to understand what is happening to the dollar. Hint: it ain't good.

A worker in a technology-infused business will be more productive than a worker in a traditional business. The employer will either pay that worker more money as he is now more productive, or another employer will, purely out of self interest.

LOL. Seriously? Hey, Jim, you're looking productive today! Here's a raise! C'mon... are you kidding me? What world does this person live in? Like I said, even if our hypothetical employer is super happy with Jim and pays him more, uncle Sam will ensure you're always in line. Money printer go brrrrr!

The result is that technology introduced into an industry generally not only increases the number of jobs in the industry but also raises wages.

Let me rewrite. "The result is that technology introduced into an industry generally reduces labor as fewer people are needed to perform a task now done by few. It also raises wages for the top earners while the average person earns no more than they did two decades ago."

To summarize, technology empowers people to be more productive. This causes the prices for existing goods and services to fall, and for wages to rise.

Yes, more productive. No, goods and services rarely fall in price, in fact, quite the opposite. Wages rise for top earners, not really at all for middle class, and just barely for lower class.

This in turn causes economic growth and job growth, while motivating the creation of new jobs and new industries.

In the past, yes. But with ever-improving AI that growth won't outpace displacement. Yes, more advanced categories of jobs for highly skilled (top earners) people. If you are not highly skilled, super intelligent, good luck! New industries actually displace more workers from previous industries.

Higher productivity doesn't mean higher employment. I can be very productive at home with ChatGPT, coding away, designing fun stuff, but that doesn't automatically translate to more employment. If a startup founder can create his/her own website and no longer needs my services, that's that.

If a market economy is allowed to function normally and if technology is allowed to be introduced freely, this is a perpetual upward cycle that never ends.

That is a BIG IF. We know the powers that be LOVE manipulation. The dream Marc aspires to can only exist on the Bitcoin standard.

For, as Milton Friedman observed, “Human wants and needs are endless” – we always want more than we have. A technology-infused market economy is the way we get closer to delivering everything everyone could conceivably want, but never all the way there. And that is why technology doesn’t destroy jobs and never will.

Straw-man. Technology has always destroyed jobs and always will. The saving grace was that it created many more jobs in the past. But with AI, the order of efficiency is magnitudes larger than a 2 or even a 10x improvement of the Industrial Revolution. And, there is no theoretical limit to how far it can improve. This is why we cannot look at the past to determine the future. It's lazy thinking at best.

These are such mindblowing ideas for people who have not been exposed to them that it may take you some time to wrap your head around them.

Ah, yes, the all knowing oracle, please bless us with your wisdom.

But, using the principles I described above, think of what it would mean for literally all existing human labor to be replaced by machines.

It would mean a takeoff rate of economic productivity growth that would be absolutely stratospheric, far beyond any historical precedent. Prices of existing goods and services would drop across the board to virtually zero.

Under the bitcoin standard, yes. Hey Marc, why do we need jobs if prices go to zero?

Consumer welfare would skyrocket. Consumer spending power would skyrocket.

Yes, under the bitcoin standard, I agree. But why work if what you make is free. Where is the business making profit here? Why employ a bunch of people, pay them a ton of money and have a service that costs nothing to the consumer? Does that make any sense to you?

New demand in the economy would explode. Entrepreneurs would create dizzying arrays of new industries, products, and services, and employ as many people and AI as they could as fast as possible to meet all the new demand.

Yes there are many new business opportunities, but again, going back to infinite efficiency point - that doesn't translate to many jobs. This is already happening now. There's now an AI tool for so many things that people used to have to do slowly and manually.

Tech is currently going through a wave of layoffs, with as many as 200,000 employees being laid off in 2023 alone. You can track layoffs here: https://layoffs.fyi/

If you don't believe AI is going to result in serious layoffs, consider what ChatGPT has already achieved (and this is a really primitive form of AI): https://www.timesnownews.com/technology-science/48-percent-of-companies-have-replaced-workers-with-chatgpt-survey-article-98635684

• 48% of companies used it to replace workers
• 63% believe it will result in layoffs

Suppose AI once again replaces that labor? The cycle would repeat, driving consumer welfare, economic growth, and job and wage growth even higher. It would be a straight spiral up to a material utopia that neither Adam Smith or Karl Marx ever dared dream of.

As it has in the past /s

In reality, wealth would concentrate even further. The rich would get richer. The top earners would earn more. Yes, the pie will grow, but those who get a bite will be fewer.

Trickle down economics hasn't worked and cannot work under the fiat standard. Wealth and power concentrates while the middle class diminishes and cost of living rises. As long as the base upon which you are building is constantly manipulated, true price discovery cannot take place. The current debt system guarantees forever-rising prices as more debt is required to be created to service previous debt - a never-ending negative cycle.

All of what Marc says IS possible under the bitcoin standard. You can already see it happening if you measure everything from the bitcoin's point of view. As bitcoin goes up in fiat terms, everything else drops in price (as it should). Bitcoin allows for true price discovery because it cannot be manipulated, you can't create more bitcoin. Here, consumer's purchasing power increases while technology enables humans to work less.

Don't you find it ironic that according to Marc, AI is supposed to create plentiful jobs, but cost of goods and services is supposed to come down to zero? What are all those people working for in that scenario? Why would you want more jobs as the cost of everything else drops?

The answer of course is not more high paying jobs, but the efficiencies enabled by AI to be spread more equitably across society. As your technology enables near-free services and goods, you as a person shouldn't have to work as much to acquire the same or greater number of things. This is completely incompatible with a credit-based system where your salary must go up perpetually to accommodate the rise in debt and THE RISE in prices. Not the drop, but the rise in prices. This is exactly what we see today and have seen throughout history. Don't believe me? Go ahead and walk into an Apple store and ask for the newest iPhone model for a lesser price then the previous.

In summary: 1. Everything Marc Andreessen says would be correct under the bitcoin standard. 2. AI cannot be assessed through the lens of previous technological advancement, it's an apple to oranges comparison as we've never had a technology that has the potential to become thousands or hundreds of thousands times more intelligent than humans. 3. Prices cannot fall in a credit-based system because debt must grow to pay off previous debt. 4. Focusing on job numbers is pointless. Instead we should be focusing on purchasing power and standards of living. People don't want more jobs, they want the ability to provide for their family - which could mean working less while taking advantage of technological progress (in this case AI).

Footnotes:

Gig Economy Market [2022-2027] Size, Share, Growth Rate | Recent Development, Demand, Trends, Key Players Profiles, Segmentation, Mergers & Acquisitions, Expansion Plans and Forecast Research | Industry Research Biz

BLS Consumer price index by category: https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm

https://fred.stlouisfed.org/series/CUSR0000SAH1

Pew widening wealth gap: https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/