The 'Creative Destruction' of Artificial Intelligence

"Having some boom-bust in a sector is normal. Maybe even how it has to be. [But as companies go under it can create wider risks, particularly when failed businesses borrowed big funding]."

"What  you don't want is to infect the credit, and  you definitely don't want to get inside the banking system."

Simon Johnson, MIT, Nobel laureate in economics

 

"The key difference from the 1990s is that the internet only disrupted information distribution."

"AI disrupts cognitive production at large. That's a much bigger economic surface area."

Anton Korinek, AI expert, University of Virginia 

 

"[Management] was like, ‘Okay, this is a nice tool that you can use to make your job easier’."

"It felt like the rug was being pulled out from under me."

Devin Marsh, 36, senior agent handling customer support and sales for telecom giant Rogers through a third-party company, Foundever

 

"Our AI policy in Canada is really being focused primarily on the priority of stimulating the industry in Canada … with almost no attention to the impact on work and preparing workers to navigate the changing nature of work."

"That's a real frustration."

 "It’s very hard to disentangle the incredible disruption that’s going on in the Canadian economy generally from these longer-term technological changes that are also beginning to ripple through the economy more slowly."

Chris Roberts, director, Social & Economic Policy department, Canadian Labour Congress

Photo by Tima Miroshnichenko on Pexels.com

 

It seems not that long ago that ultra-computer-literate ambitious young people entering university chose programs like web development and areas of computer science to distinguish themselves as job applicants whose expertise would be in demand in a job market hungry for good, reliable coding workers as cybersecurity and cloud systems, along with machine learning dominated the field, along with upcoming artificial intelligence. Now, it's suddenly all artificial intelligence and those with secure employment suddenly begin to wonder, for how long?

 

A shadow of uncertainty now looms over companies in the field of internet and computer science  technology as creeping concerns enter their minds at future prospects of ongoing prosperity linked to IT technology. Will they still be in business, will they need their current stable of employees, or will they just harness AI to their programs and manage to cope? The expectation is that artificial intelligence will be the ultimate source of higher productivity. 

 

There was a disruption of the status  quo with the IT revolution that made some industries redundant; classified advertising and newspapers, video rental stores, travel agents, stockbrokers to name a few. There is growing nervousness about what will change in the wake of rising AI development and use, and the potential of disruptions on a much larger scale than what occurred with the IT revolution. 

 

"Is this time bigger? Yes"; perhaps by a factor of ten, mused Anton Korinek, AI expert at University of Virginia. Yes, most certainly AI though still an untested technology, holds the promise to enable more productivity from workers using it. But then, what happens when AI itself, no longer requires a human mind to direct it toward its functional capabilities? Productivity, a measure of worker output using available tools, has surged upward since 2023.

 

While it remains as yet uncertain how much this productivity acceleration owes to AI, analysts believe AI efficiency has had a large part to play in the productivity rise. Since the release of Chat GPT in 2022, capital markets have risen spectacularly; gains driven by surging value of AI companies and their suppliers; Meta Platforms, Nvidia Corp. The concern is the continued rise of productivity to the point where white-collar layoffs and company irrelevance means both will become inevitable.

Jack Dorsey. Photo: Richard Drew/AP

 

Businesses begin to cut payroll costs when technology enables them to produce more with fewer employees resulting in more profit for shareholders. The fintech firm that Jack Dorsey, Twitter founder runs, announced the halving of its staff, while depending on AI productivity, and saw its shares rise over 15 percent. Columbia Business School Daniel Keum studying automation technologies change the balance within companies found employees being referred to as 'costs'. 

 

He concludes that even if jobs and wages are not yet being cut, areas like health care, remote work and freebies are being trimmed. "These side benefits are what the companies go after first, before they go after reducing your paycheque." Businesses fall by the wayside in response to advanced technologies, like Kodak and the Blockbuster chain, left behind by the internet. What the economist Joseph Schumpeter refers to as the "creative destruction" leading to progress.

Illustration by Stephan Dybus

 

"That's been happening for hundreds of years in this country. It's part of the essence of capitalism", stated Federal Reserve Bank of Richmond president Tom Barkin when asked if the Fed should attempt to counter disruption to business and the labour market by AI disruption.  

"Eventually, the disruption will extend to any firm whose competitive advantage lies in human expertise that AI can replicate."

"The transition period may involve stranded assets, debt overhang and the potential for sharp market corrections."

Anton Korinek