AI and the Coming Productivity Paradox

Artificial Intelligence (AI) has been a topic of debate among experts, policymakers, and the general public alike.

There are two schools of thought on the matter — one believes that AI will replace humans, leading to mass unemployment and social upheaval, while the other argues that AI will make us more productive, freeing us from tedious and repetitive tasks and enabling us to focus on higher-level work.

Let’s explore these two perspectives and analyze the potential impact of AI on the future of work.

Technology has historically made us more productive

Throughout human history, technology has been pivotal in making us more productive. Consider the transition from hunting and gathering to agriculture, which allowed humans to settle in one place and produce surplus food. This surplus led to the development of trade and specialization of labor, resulting in innovation and new industries and the emergence of artisans, craftsmen, and other specialized workers.

Similarly, the industrial revolution led to the mechanization of production, enabling factory workers to produce goods at an unprecedented scale and speed. This led to the mass production of goods, increased efficiency, and reduced costs, benefiting both businesses and consumers like nothing before.

Moving into the digital age, technology has made white-collar knowledge workers out of most of us. This shift has allowed us to leverage our creativity and problem-solving skills, collaborate with people globally, and work remotely. And instead of merely replacing jobs, new jobs emerged due to recent technological shifts such as the internet and mobile that did not exist 25 years ago. Think social media managers, app developers, and data scientists.

The past isn’t always the best predictor of the future

Advocates of AI will use such facts to argue that we have nothing to worry about. They argue that technology has historically made us more productive. They will say, in a very libertarian tone, that it is up to us to adapt and upskill ourselves to take advantage of these new opportunities.

But while disruptive paradigm-shifting technologies have undoubtedly made us more productive over time, they also historically created what economists call a productivity paradox. This refers to a period of time where society reorients around disruptive technologies in a way that can lead to negative economic growth and significant disruptions in the labor market.

For example, the transition from steam power to electricity in the late 19th and early 20th centuries led to a significant shift in the labor market. According to a study by the National Bureau of Economic Research, the introduction of electricity caused a 6% decline in the employment of steam-powered industries between 1899 and 1914.

However, this period was also marked by the emergence of new industries, such as electrical equipment manufacturing, which more than offset the job losses in steam-powered industries. As a result, employment in the electrical equipment manufacturing industry grew by a staggering 265% between 1899 and 1914, creating many new jobs and opportunities.

According to AI, here are just some jobs that AI threatens to displace in the short term.

Will we be replaced, augmented, or changed?

Today the rise of automation and artificial intelligence has led to concerns about job displacement and unemployment.

However, as history has shown us above, while temporary job losses may occur during the transition period, new industries and jobs emerge over time.

According to a study by the World Economic Forum, the adoption of AI is expected to create 133 million new jobs by 2022, primarily in industries such as healthcare, education, and renewable energy. AI is admittedly expected to displace 75 million jobs in the same time period.

But this time could be fundamentally different.

One fundamental difference between AI and previous technological shifts is that AI systems are self-learning mechanisms that operate as closed-loop systems — an argument posted by Chamath Palihapitiya on the popular All-In podcast.

This means they can process vast amounts of data, learn from their own experiences, and continuously improve their performance. This is in contrast to previous technological shifts where machines were programmed to perform specific tasks and could not learn or adapt on their own without human input and interaction.

AI has the potential to mimic and improve human judgment in ways that we cannot fathom. For example, AI can analyze large datasets and identify patterns and insights that most humans aren’t able to.

This ability to process and analyze vast amounts of data and make better decisions gives AI an unprecedented level of insight into human behavior and decision-making.

While there is potential for AI to create new jobs and industries, there is also a real concern that it could replace most of what humans do, and create a vacuum that won’t be filled overnight with new jobs that AI cannot do, leading to a long and unprecedented period of mass unemployment and social upheaval.

For example, a study by McKinsey Global Institute found that up to 375 million workers worldwide may need to switch occupational categories and learn new skills by 2030 due to automation and AI.

A rising tide lifts all boats?

Despite the potential challenges posed by AI, it has the potential to create significant economic opportunities and wealth for humanity in a way this lifts the living standards of all humans.

According to a study by PwC, AI could add up to $15.7 trillion to the global economy by 2030, creating new opportunities for economic growth and prosperity. Such models, it must be said, forecast the future based on what we know of the world today, not on what we know about it tomorrow. For example, a 1985 study on future economic growth would have not accounted for the impact of the internet, cloud, or mobile.

Nonetheless, the increased economic growth and wealth generation that AI promises could be redistributed to lift the economic standards for all humans.

Policies such as progressive taxation and universal basic income can ensure that the benefits of AI are shared more equally across society.

Moreover, this wealth creation could free humanity up to focus on what truly matters in life.

With the potential for increased wealth and productivity, humans may have more time and resources to devote to their passions, relationships, and personal growth.

Rather than being tied to mundane and repetitive tasks, humans could focus on pursuing their dreams, enjoying new experiences and places, and forging meaningful connections with others. This could lead to a more fulfilling and satisfying life, where individuals have the freedom to pursue their passions and live life to the fullest without the concern of financial outcomes.

If you ask someone “what job would you do if money was no issue?”, most people will tell you something other than what they actually do — they might say something like be a musician, a writer, a nurse or work with kids in developing economies. AI might give them the opportunity to do just that, driven purely by the intrinsic benefits derived and not at all by economic outcomes.

Final thoughts

In conclusion, while the impact of AI on society is uncertain, it could free humanity up to focus on what truly matters in life.

By harnessing the potential of AI and working to create a more equitable and prosperous society, we can create a future that benefits all humans, but it is up to us to harness the potential of AI and ensure that its benefits are shared widely across society.

Maybe the real question isn’t “will AI take our jobs?” but “will AI liberate our lives?”.