Imagine there were only two companies A and B in the economy. It’s of no pertinence to our discussion whether they are maximizing profit, revenue or sales. All they are trying to do is to outcompete each other.
Thanks to generative AI technology, both of these companies now have the option to employ AI agents, each of which can replace 10 junior workers and 3 middle level managers. In fact, doing so will improve their workforce productivity and tremendously lower the company’s expenses.
So if company A does this and company B does nothing, the former will reap increased productivity on its own, but more importantly, relative productive advantage over company B.
Of course the situation applies to the symmetrical case.
According to game theory, both companies A and B will eventually deploy AI. Although they will both enjoy increased productivity, there’s no longer relative advantage. What’s more alarming is that there’s a larger subset of the population that are now unemployed.
The matrix I have used to model the global phenomenon is of course way too simplistic. The reality is much more complicated and nuanced. It probably can be modelled with a neural network with many nodes, demonstrating the impact of AI and the resulting mass unemployment.
We are already at the transitioning stage. And not only is the change rapid, the rate of change is increasing at an alarming rate because of AI’s ability to self-iterate over and over again.
The consequences are clear. Each of these pies roughly represents the total share of basic resources that every human requires in order to live a decent life. They include food, shelter and any basic necessities.
I absolutely believe that the overall pie is getting bigger and bigger because of large scale production in agriculture and raw materials.
But because of mass unemployment, rising living costs, decreasing purchasing power, and a whole host of other factors, the average household is increasingly less capable of capturing a piece of the pie.
Our piece of the cake is shrinking, even though the cake itself is more than big enough to feed everyone.
Anyway these are just my 2 cents on a Monday evening.
Please let me know what you think 🙂