AI may ease labor shortages more than it displaces workers

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 22:18

   all this concern that young people, jobs are not going to be there for them, AI is replacing them. On the flip side, there's what you're describing here. It feels like people coming into learning today are going to move so fast and learn so much more? Where do you sit on this divide of young people are in big trouble or they're actually going to be the ones winning in the end? Yeah. So the job substitution job loss thing is just, it's very reductive. I think it's an overly simplistic model. And again, it goes back to what I said at the very beginning, which is we've actually been in a regime for 50 years of very slow technological change in the economy.

2. 22:49

   And so, and again, like I said, it's like at a half the rate of the previous era and then a third the rate of like 100 years ago. And so we're coming out of this kind of phase where we've had like almost no technological progress in the economy. We've had remarkably little job churn as a result of that relative to any historical period. And so even if AI like ticks up, even if AI triples productivity growth in the economy, which would like be a massively big deal, it would take us back to the same level of job churn that was happening between 1870 and 1930. And if you go back and you read accounts of 1870 and 1930, people just thought the world was awash with opportunity, right? At that rate of technological transformation, information, kids were able to develop new careers into new areas of the economy, building

3. 23:29

   new kinds of products and services. I mean, a huge part of everything in our modern world today was kind of invented and proliferated kind of during that period. And so even if AI triples the pace of economic change in the economy, it's going to just translate to a much higher rate of economic growth. It's going to translate to a much higher rate of job growth. And there'll be some level of task level and job level substitution that will take place, But that will be swamped by the macro effects of economic growth and innovation that will happen.

4. 23:57

   And corresponding to that, there will be hiring booms, I quite honestly think, all over the place. And then again, go back to the other thing, which is like this is all happening in the face of declining population growth and increasingly population shrinkage. And so human workers in many, many, many countries over the next 10, 20, 30 years are going to be at more and more of a premium, literally because you're going to have shrinking population levels. We don't really want to get into politics particularly, but it does feel like the world broadly is going to reverse course on the rates of immigration that we've had for the last 50 years.

5. 24:30

   It seems to be kind of a broad-based kind of thing happening with rise of nationalism, concerns about the rate of immigration. Immigration historically in countries like the U.S., it's kind of ebbed and flowed over time based on kind of how the national mood shifts. And so if you sort of combine in a country like the U.S. or any country in Europe, if you combine declining population with less immigration, the remaining human workers are going to be at a premium, not at a discount. And so I think that combination of kind of faster productivity growth, faster economic growth, and then slower population growth and less immigration actually means there's going to be much less of this kind of dystopian, you know, no jobs thing.

6. 25:08

   I just think it's probably totally off pace. That is extremely interesting. So what I'm hearing is you're not super worried about job loss. Is the key here that the timing kind of just works out, Does population decrease? All these kind of have to line up for there not to be this massive job loss with AI. Yeah. Well, look, if we didn't have AI, we'd be in a panic right now about what's going to happen to the economy, right? Because what we would be staring at is a future of depopulation. And depopulation without new technology would just mean that the economy shrinks, right? So it would mean that the economy kind of itself kind of shrinks over time. The opportunity diminishes. There are no new jobs. There are no new fields. There's no new source of consumer demand for spending on things.

7. 25:49

   And so you would be very worried about going into a period of severe decline of stagnation. And essentially, you'd be looking at these very dystopian scenarios of an economy kind of self-euthanizing itself over time. And so you'd be very worried about the opposite of what everybody thinks that they're worried about. The only reason we're not worried about that is because we now know that we have the technology that can substitute for the lack of population growth, and then also for the lack of immigration that's likely.

8. 26:16

   And so, you know, I would say the timing has worked out miraculously well in the sense that we're going to have AI and robots precisely when we actually need them to keep the economy from actually shrinking. And I just think like that, that's just like a fundamentally good news story. To get to the mass job loss thing that people are worried about on the other side of things, you know, you'd have to look at like far, far, far higher rates of productivity growth.

9. 26:40

   You'd have to look at rates of productivity growth that are 10, 20, 30, 50 percent a year, something like that, which are orders of magnitude higher than we've ever had in any economy in the history of the planet. It's possible that we get that. I mean, look, I have my utopian kind of temptation along with everybody else. If AI radically transforms everything overnight, then maybe let's play out the kind of utopian scenario. You get to a much higher level of productivity growth. You get to a much higher level of technological change. Corresponding to that you'll have a massive economic boom.

10. 27:13

    You'll have a massive growth in the economy. And then corresponding with that, you'll have a collapse in prices. And so the price of goods and services that are sort of what are we going to call it, affected by or commoditized by AI, the prices of those goods and services will collapse. It will be price deflation. And then as a consequence of price deflation, everything that people are buying today gets a lot cheaper.

11. 27:33

    And that's the equivalent of a gigantic increase in wealth across the society. Take it this way. This is actually worth talking about because people, I think, get kind of sideways on this issue. So if AI is going to transform the economy as much as the, you know, whatever, utopians or dystopians or whatever kind of think that it will, the necessary economic calculation of what happens is massive productivity growth.

12. 27:57

    The consequence of massive productivity growth, what that literally means mechanically, is more output requiring less input, right? So you get more economic output for less input, right? So you're substituting in AI for human workers or whatever. And as a consequence, you get like this massive boom in output with much lower input costs. The result of that is you get gluts of goods and services in all those effective sectors.

13. 28:18

    The result of those gluts is you get collapsing prices, right? The collapsing prices mean that the thing today that costs you $100 now costs you $10 and now costs you $1. That's the equivalent of giving everybody a giant raise, right? Because now they have all this additional spending power. That additional spending power then translates to economic growth, right? The development of new fields. everybody's like materially like much better off very quickly. And then by the way, if you, to the extent that you do have unemployment coming out the other side of that, it's now much cheaper to provide the kind of social safety net to prevent people from being immiserated, right? Because the prices of all the goods and services that like a welfare program has to pay from, they're all collapsing, right? And so the price of healthcare collapses, the price of housing

14. 28:57

    collapses, the price of education collapses, the price of everything else collapses because this this incredible impact that AI is having. And so in this kind of utopian dystopian scenario that people have, there's no scenario in which everybody's just poor. In fact, it's quite the opposite, which is everybody gets a lot richer because prices collapse. And then it's actually much easier to pay for the social safety net for the people who, for some reason, can't find a job.

15. 29:22

    Maybe we end up in that scenario. I mean, the kind of optimistic part of me says, yeah, maybe AI is that powerful and maybe the rest of the economy can actually change to accommodate that, and maybe that'll happen. But the result of that is going to be a much better news story than people think it's going to be. And again, everything I've just described, by the way, is just a very straightforward extrapolation of very basic economics. I'm not making any bold predictions of what I just said. This is just a straightforward mechanical process that plays itself out if you have higher rates of productivity growth, which are necessarily the results of higher rates of technological growth. And so I think we're looking at, and to be clear, I think we're looking at a world that's not radically transformed the way that maybe the utopians think that it will be,

16. 29:58

    or the dystopias think it will be. I think it'll be more incremental for races we can discuss. But I think that incremental, overwhelmingly, I think that process is going to be a good news process. And then even if it's much faster, it's also going to be a good news process. It'll just be a good news process in the other way that I was described.