Friends,
As of the end of June, about $3.2 trillion in AI deals had been made this year. According to information, this is an increase of 45 percent compared to the previous year Dealogica data provider. It is the highest amount spent on business deals over a six-month period in at least a decade.
Many of these were truly huge deals – 44 were larger than $10 billion, including acquisitions.
Is this a bubble that’s about to burst?
Since I live in the Bay Area, I often meet people who are intensively involved in AI. They rave about it.
But when I ask them who will buy all the wonderful AI products and services — especially after AI destroys millions of jobs and decimates the American middle class — they have no answer.
And AI will destroying millions of jobs and decimating the middle class. Cisco, Block, Coinbase, HP, IBM and Salesforce have already cited AI as a reason for mass layoffs.
Two weeks ago, Anthropic CEO Dario Amodei published one comprehensive political memo Warning that AI will cause greater and longer-lasting disruption to the labor market than any previous technological change.
Earlier this week, short seller Carson Block noted predicted that AI-driven job losses could eliminate 15 percent of knowledge worker positions within three years. He warned that this disruption could rival the worst economic crises in modern history.
Without sufficient demand for AI products and services, AI companies are of little value. But unless people have sufficient income, they cannot afford AI products and services.
Where will the demand for AI come from if AI undermines what is left of the American middle class and much of the working class?
I was told that we just have to reduce the working hours. But this answer does not solve the puzzle, because companies will not reduce their working hours and will continue to pay the same weekly or annual salaries that they previously paid. You will pay fewer.
Eric Yuan from Zoom told The New York Times that “AI can improve all of our lives, why do we have to work five days a week? Every company supports three days, four days a week. I think that ultimately saves everyone time.”
Jamie Dimon, CEO of JPMorgan Chase, says Advancing technology could shorten the workweek to just three and a half days. Microsoft co-founder Bill Gates openly wonders whether a two days Working week could be the future.
Elon Musk drives the idea forward to the extreme (as he does everything else): “In less than 20 years – perhaps as early as 10 or 15 years – advances in AI and robotics will bring us to the point where work is optional.” Even better: “There will be no more poverty in the future and therefore no reason to save.” says Musk. “There will be universal high income.”
All of this is pure garbage. Even if AI brings major productivity gains, it is far from clear that workers will see many, if any, benefits.
When productivity increases, as it is expected to do when the workplace is integrated with AI, each employee will, by definition, create more value. And supposedly we all do better when we have more value.
Not like that. Although labor productivity has been rising for years, median wages have barely increased when adjusted for inflation.
The truth is: the four-day week will most likely come with four days of salary. The three-day week with three days. And so forth.
As AI takes over much of their current work, workers will become poorer or have to take on additional jobs to maintain their current salaries.
So back to my question: Where will the demand for AI come from if most of us can’t afford it?
One would think that Amodei or Sam Altman (CEO of OpenAI) or even Elon Musk would take the lead in finding an answer to this puzzle. But so far nothing. There aren’t any either Conversation about what we should do to help the next generation of young people survive the specter of mass technological unemployment.
The distribution problem cannot be ignored. Unless the broader American public shares in AI’s productivity gains, the profits will accrue to an ever-smaller circle of owners—and the rest of us will have less money to buy what can be produced.
We may see a dazzling array of products and services brought about by AI, but few of us will be able to buy them.
There is no shortage of ideas about how the productivity gains from AI could be redistributed. These profits could be redistributed through property taxes to fund child care, elder care, and health care.
Or they could be redistributed through a sovereign wealth fund that owns half of all AI stocks and pays annual dividends to every citizen.
Or a universal basic income funded by high taxes on the profits of America’s largest corporations.
There are many ways to do this. The real question is where the political will to do this will come from.
Surely Part The answer depends on AI leaders realizing how much they need a consuming public with enough income and wealth to buy all the wonderful things AI can do.
https://robertreich.substack.com/p/whos-gonna-buy-all-the-ai-stuff
