Posted on 05/23/2023 9:05:39 PM PDT by SeekAndFind
Two months ago, Goldman sparked uproar across Wall Street when the bank forecast that the AI revolution could lead to as many as 300 million highly skilled (or at least not menial labor) layoffs across the US and Europe and predicted that some 18% of global work could be automated with AI...
... with the biggest impact falling on legal and admin jobs, with social science and architects and engineers also in danger of being made obsolete (much more in the full Goldman note available here to pro subs).
Goldman's back of the envelope calculation inspired none other than hedge fund legend Steve "expert networks" Cohen to predict that the market is going up as a result of the margin boost that AI-driven layoffs will unleash.
As Bloomberg reported, the billionaire added that he’s worried about the “types of jobs that will be displaced,” but more broadly, he expects profit margins to improve, which would reduce pressure on the Federal Reserve to curb inflation with additional interest rate hikes. This would, in turn, boost markets, he said. Of course, "boosting profit margins" is a polite way of saying mass layoffs are coming.
Cohen joined other hedge fund managers who have expressed enthusiasm for AI. Stan Druckenmiller and Lee Ainslie both took positions in chipmaker Nvidia a beneficiary of the AI boom, during the first quarter, in anticipation of even more AI-driven upside .
“AI is very, very real and could be every bit as impactful as the internet,” Druckenmiller said last week at the 2023 Sohn Investment Conference.
But what if this growing consensus is wrong, and what if AI ends up creating more jobs than it destroys?
That's the argument made by Deutsche Bank head of global research Jim Reid, who has written a lengthy report explaining why "History suggests AI will ultimately create not destroy jobs” (and available to pro subs ).
As Reid reminds us, there is a long history of resistance to technology. As far back as 1589, Queen Elizabeth I of England refused to grant the inventor of a mechanical knitting machine a patent lest it put manual knitters out of work. Such concerns were accelerated by the arrival of the Industrial Revolution. In 1772, Thomas Mortimer wrote how machines would “exclude the labor of thousands of the human race, who are usefully employed”. Famously, in the early 19th century a group of English textile workers known as the Luddites destroyed machinery, in part because of fears it would take their jobs away (they were right). Similar narratives have subsequently resurfaced on the eve of every major technological breakthrough.
However, Reid argues that history tells us that technology does not create unemployment, at least not in the long term. He illustrates this by looking at long-term unemployment data, using the median of the G7 countries. It shows that unemployment has oscillated based on economic cycles, rather than any technological waves. In fact, today's median G7 unemployment rate of 3.8% is beneath the 5% UK rate at the start of the series in 1755.
"So even though virtually all of the jobs of 1755 no longer exist, the automation of different tasks did not lead to an ever-increasing spiral of unemployment" Reid argues and concludes that "technology has always created the wealth and time to free up labor for alternative more productive employment and created industries and jobs we never knew we needed at the time."
While this is correct, what Reid's analysis ignores is the social upheaval and short-term spikes in unemployment after any major new technological shift. Indeed, what his charts omits is the countless wars since 1755: maybe his unemployment rate is so low because it counts all the mass mobilization and army units as employed workers (it wouldn't be too much of a stretch: after all the Biden admin counts a record number of multiple jobholders as individual workers, allowing the admin to benefit from a record low unemployment rate). That said, there is a tongue-in-cheek admission that not all may be as rosy as represented when Reid says that "it is no coincidence that unemployment is associated with various negative health outcomes." Like war?
We are curious to see just how far the current social safety net - whether in the US or China - will stretch when there is a sudden spike in unemployment, and how many of the democrat-controlled coastal cities will burn down when millions of people suddenly find themselves without a job (even if eventually AI will result in potentially better jobs for most, albeit with a lot of retraining).
Could this time be different? Reid concedes that "there are obvious arguments why it might be given the speed of possible adoption of AI and the type of jobs it could put at risk" which are critical caveats: after all, if it takes 5 years to retrain someone to find gainful employment in an AI world, it's the same as an unemployment shock; and in this economy in which virtually nobody has any idea how to deal with a lengthy stretch of unemployment, we doubt the ending would be happy.
Still, Reid is optimistic and concludes that "even if there are short-term disruptions to labor markets, we desperately need the productivity-boosting potential that AI brings. In turn this will soon likely create more opportunity, jobs and wealth for society."
We are confident that the Steve Cohens and CEOs of the world agree, even if those 300 million workers who are about to be made obsolete may have second thoughts.
Much more in DB's full note available here to pro subs.
When I started in the oilfield nearly 50 years ago now there was no automation on the drilling rig. A big accommodation module on an offshore rig was 100 to 120 or so. That was on a really big rig.
The rig floor was a dangerous place with the crew right at well center over the rotary table when moving pipe. People got hurt but they learned to watch out for themselves and others. Safety culture with good people was real and they took a lot of responsibility for all going home safe.
Sometime in the late 90s a lot of automation showed up. First it was the iron roughneck then automated pipe handling systems. We had more and worse accidents at first. Sometimes the machines went rouge and if people were in the way then just got crushed. Eventually that got better and became less of a hazard. Zone management, safe areas.
After rig floor automation came rig monitoring systems and smart systems and a huge wave of data acquisition. People had a lot more data but most were overwhelmed and knew less about what was going on than they did before when they had to stay on their toes and do all their own thinking. Some displays, when learned, did help thinking. There also had to be more techs to keep things running well and since the oilfield is a dirty place sensors had trouble sensing correctly requiring lots of attention. It got a whole lot worse when the systems went down. It was a lot like what happens in any number of airplane crashes when the smart systems go down or sensors fail and deliver strange results. When that happens the crew is often caught flat footed trying to make sense out of something they have not been watching because computers were doing that. Not only do they have to become pilots again and immediately in a bad situation but they also have to make sense out of the senseless.
A good operation still had and I believe has a really good, experienced and savvy driller and company man plus support cres. Both were still indispensable no matter how many smart systems there are. i think it is much the same way for airplanes and other stuff. I wouldn’t know about those though since I’m just an old drilling engineer.
Accommodation modules went to handling over 200 people when I retired and often that was not enough beds. A lot of the bed space was for new electronic techs. Jobs were added on the rig, not lost when the oilfield automated. The new jobs required more education and paid a lot more than the old jobs that still didn’t go away and so their wages increased as well for the sake of parity. Everybody talks. Everybody knows what everyone else makes.
With all the added people moving back and forth offshore and much further out than ever before the helicopter flights became a much bigger safety concern. All my really big problems had two feet and legs. More people, more complexity, more mouths to feed and people to keep happy and productive is not an improvement in my eyes without a really really big benefit that I did not see.
Just my thoughts. YMMV.
I’ll add that I don’t believe AI is capable of Gestalt.
I’ll predict that an army of thinking, reasoning, experienced and very hard working people will be needed to repair the flaming screw ups created by AI.
Since you’re working with AI, I’d be curious about your opinion: I think that AI will be fantastic in narrowly-focused practical applications, like autonomous guidance in self-driving cars and autonomous air vehicles, but I can see no way that general AI will ever be trustworthy enough to rely upon it. I just can’t see any way that general AI, given unfettered access to all the world’s information and allowed to create its own associations between all those pieces of data, will be auditable by humans. It will constantly be making errors and even fabricating some of its answers, but the internal processes will be so complex and novel that no human or team of humans would be able to keep up with what it was doing and audit and correct the results. It would become the ultimate “black box.” My biggest concern is not that we will see Skynet come to life, but that ignorant humans will place too much blind faith in the results it spits out, naively believing that it must be infallible. The alternative is to never fully trust it and put a veritable army of humans on the job of checking everything it concludes, both of which would negate the point of general AI in the first place.
I’m just wondering if it won’t concentrate wealth in the hands of few and fewer people and at greater speed. With that will come greater influence and power. What good is a job if you are enslaved or not free?
Finally a bright light appears lol. You are right, let labor costs find its equilibrium and the problem will solve itself. And men will be men again, as a man is known by his work. Is that a frightening thought?
Hmmm, one great post about AI and then this.... Reversion to the mean, I hope not. Just before you someone posted a really good observation about minimum wage. The minimum wage as ben like a wrecking ball to our society. Get rid of it and we will be ok.
“More undertaker jobs?”
Well with the big die off in the next 30 years (due to follow on generational decline) the death industry might see a rise in employment. However, if the big die off is catastrophically overwhelming in numbers then the response would be to automate the process with conveyor belts and cremation stations trucked into various areas with high mortality levels... all achievable with AI and task automation. Might not even need drivers or janitorial services personnel, machines can to the bulk of the grunt work.
Simply put... learning to code might even be automated at that point! I think electrical workers and plumbers might still be needed.
AI is going to spark another industrial revolution on a scale that people simply can’t imagine.
Did AI write this article?
Each technological advance has been accommodated by changing society more and more rapidly and making it more complex.
A faster rate of change requires new roles to cope with change. For example, more computer programmers are needed to create new systems for new products and services being introduced.
Complexity also introduces new roles. For example expanded HR organizations to cope with ever more complex legal and regulatory rules.
I’d expect AI to intensify both of these trends. There will be massive dislocation, but there will not be massive unemployment.
...to dig ditches for their fellow humans to kneel next to....get rid of three or four billion that way should do the trick. And the next pandemic for the rest.
...and automation was not going to impact employment.
Gotta have the labor to put together the Skynet system.
Wonder what would happen if millions of people acquired 3-D printers, and use AI to design/generate products?
Potentially, lots of home-brewed, garage companies making the parts and pieces that China has been building.
Manufacturing as a national, cottage industry.
Using universities and colleges to coordinate plans, help facilitate shipping of resources and finished products.
Yeah. Have to think about it a bit, but might be a very good thing. The Good Lord gave us brains for a reason, didn’t He?
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