After listening to Andy Jassy’s “lean into AI” feedback to CNBC about utilizing AI to ship a greater expertise to prospects, I got here throughout Ford CEO Jim Farley’s feedback on the Aspen Concepts Pageant predicting huge job losses from AI. It occurred to me that whether or not AI creates or destroys jobs is dependent upon the place firms are within the innovation cycle. Corporations in new markets are expansive, each by way of buyer acquisition and by way of employment; these in mature markets are secure or in decline. AI can have a special impact relying on the place you’re on this cycle.
As I put it in my publish “Rising Tide Rents and Robber Baron Rents“:
Disruptive applied sciences begin out by fixing new issues, serving new markets, and creating new alternatives.…They’re desirous to shock and delight their customers; the main focus within the early days is at all times on worth creation. Mature and declining firms, against this, are likely to hobble their merchandise as they concentrate on worth extraction. They lose their beliefs and their edge, ultimately alienating their prospects and their suppliers and opening the door to competitors.
If an organization tells you that the principal advantage of AI is “effectivity,” they’re telling you that they don’t see alternatives to create new worth or serve new prospects. If you’re centered on both of these issues, you’ll be attempting to turbocharge your progress with AI, not attempting to wring out extra income from a flat or declining market. At O’Reilly, there are such a lot of issues we’ve at all times wished to do for our prospects however haven’t had the sources to deal with. Sure, AI might assist us be extra environment friendly, however that’s liberating up sources to do extra. Effectivity is the icing on the cake. For a lot of firms—people who have stopped serving their prospects and are primarily serving themselves—effectivity is the cake.
Jeff Bezos known as the expansive part Day 1: “Being always curious, nimble, and experimental. It means being courageous sufficient to fail if it signifies that by making use of classes learnt, we will higher shock and delight prospects sooner or later.” And in his 2016 shareholder letter, he defined Day 2: “Stasis. Adopted by irrelevance. Adopted by excruciating, painful decline. Adopted by demise.…To make certain, this type of decline would occur in excessive sluggish movement. A longtime firm may harvest Day 2 for many years, however the remaining end result would nonetheless come.”
Cory Doctorow has a vivid identify for Day 2: enshittification.
Right here is how platforms die: First, they’re good to their customers; then they abuse their customers to make issues higher for his or her enterprise prospects; lastly, they abuse these enterprise prospects to claw again all the worth for themselves. Then, they die.
I requested ChatGPT for an illustration of the idea, and it produced a satisfactory first draft:
🟠 Worth to Enterprise Clients (advertisers, sellers, and so on.) will increase as soon as person consideration is locked in, however then additionally drops.
🔴 Worth to the Platform (Shareholders) rises final, because the platform extracts most revenue—in the end degrading the expertise for each customers and enterprise companions.
I wasn’t glad, so I went by means of various iterations attempting to get the graph extra correct to my sense of Cory’s framework (e.g., person worth doesn’t peak at the start and decline instantly however begins with a believable promise and will increase in the course of the first, virtuous part of firm growth; firms that delight their customers are sometimes very worthwhile even throughout their progress part, and naturally the scales of the x– and y-axes don’t make any sense) earlier than ChatGPT gave up the ghost and began making random modifications I wasn’t asking for.
So as a substitute I turned to Gemini, with the inspiration to have it mannequin the graphic on an actual firm. I selected Twitter/X to start out with, however ultimately settled on the auto trade as a complete due to Jim Farley’s feedback. It reveals how far the trade has come from Henry Ford’s revolution. He created a standardized low-cost product to allow a mass market, and together with it, remodeled the twentieth century.
Leaving electrical autos apart, right here’s Gemini’s graph of the place the auto trade is on its enshittification journey. It has deserted reasonably priced autos and is essentially specializing in larger costs, seller markups, and subscription providers. The common worth did decline a bit between 2022 and 2024, and affordability climbed as incomes recovered after the pandemic, however the sample remains to be putting. (It’s additionally intriguing that Gemini selected common worth and affordability as the 2 elements to graph. I’d have thought it could have used used the variety of autos offered. I didn’t specify which parameters to make use of, and it shocked me in a great way.)
Then I requested about Ford particularly. Gemini’s narrative confirmed understanding of the corporate’s trajectory:
Whereas a automotive firm like Ford doesn’t function a “two-sided market” in the identical approach an Amazon or Fb does (the place customers are the product offered to advertisers), the rules of extracting extra worth from each direct prospects and oblique companions can nonetheless apply. Within the early days, Ford’s focus was on mass manufacturing and making autos accessible and dependable. Consumer worth was excessive (a automotive for the frequent particular person, revolutionary meeting strains)….As expertise superior, Ford, like different automakers, began integrating extra software program and connectivity. Initially, this added vital person worth (GPS, leisure, security options). Nevertheless, as the main focus shifted to monetizing these options, person worth started to plateau or subtly decline….Core functionalities turn out to be elective add-ons, and present options are moved behind paywalls. Prioritizing cost-cutting (e.g., cheaper inside supplies, much less strong elements) to spice up revenue margins, whereas concurrently pushing high-margin software program providers. Making autos more and more tough to restore exterior of licensed dealerships, successfully locking prospects into expensive service agreements…
You get the concept. Enshittification doesn’t simply apply to tech platforms. (Henry Farrell and Abe Newman have simply made the much more provocative argument that present US international coverage adheres to the enshittification narrative!)
Many main tech firms (together with Amazon, regardless of Andy Jassy’s Day 1 rhetoric extolling how the corporate will probably be utilizing AI for buyer profit) at the moment are additionally within the worth extraction part, managing established companies for revenue in a market whose progress, earlier than the disruptive onset of AI, had begun to sluggish. In order that they themselves are centered on the “efficiencies” doable with AI. They foolishly go away progress to the upstarts. And they’re preaching that stale gospel to extra conventional enterprises as nicely.
AI native firms are nonetheless within the virtuous early stage of progress, delighting their customers, hiring like loopy, and exploring new potentialities. In line with Gemini’s evaluation, although, even the main AI platforms are already on their enshittification journey:
AI firms are largely on the finish of the primary “seduce customers” part and are firmly coming into the second “seduce companies” part, all whereas exhibiting clear, early indicators of the third “enshittification” part….
They nonetheless want builders and enterprise shoppers to be comfortable, so that they haven’t began aggressively squeezing them…but. However the free customers and the whole ecosystem of on-line content material creators are already feeling the squeeze. The virtuous part of merely serving the end-user with the very best product is being changed by the strategic necessity of serving shareholders and managing astronomical prices, following the enshittification curve with exceptional velocity.
I’m a bit extra hopeful than Gemini is concerning the trajectory of the AI trade, however I’m involved. AI has not but discovered true product-market match. The consumers paying for the large buildout of AI are usually not but the people or shoppers who’re utilizing it however fairly buyers flush with money who’re bellying as much as the gaming desk. The prices of the AI competitors are so excessive that even insanely worthwhile firms see the necessity to jettison workers to maintain up with the wild bets of capital markets which might be fueling their new opponents. A product which you can’t afford to pay for with out preying on others is a recipe for breaking dangerous.
So what’s the ultimate end result? Will AI destroy extra jobs than it creates? As I wrote in my 2017 e book WTF?, it’s as much as us:
That is my religion in humanity: that we will rise to nice challenges. Ethical selection, not intelligence or creativity, is our best asset. Issues might get a lot worse earlier than they get higher. However we will select as a substitute to elevate one another up, to construct an economic system the place individuals matter, not simply revenue. We are able to dream large desires and resolve large issues. As an alternative of utilizing expertise to switch individuals, we will use it to reinforce them to allow them to do issues that had been beforehand unimaginable.
So preserve this in thoughts once you hear discuss of the efficiencies from AI. AI can be utilized to scale back the period of time that healthcare staff spend on paperwork to allow them to spend extra time with sufferers, or it may be utilized by the non-public fairness firms which have been taking up our healthcare system to wring out larger income and juice inventory costs. It may be used to seek out breakthrough cures and new supplies, inventing entire new industries within the course of, or it may be used solely to economize that will probably be handed out to shareholders already wealthy with capital. It may be used to supply customer support that not solely improves satisfaction but additionally creates financial savings that could possibly be handed on to shoppers or used to retrain workers for brand spanking new AI-adjacent jobs. It may be used to assist us handle our scarce consideration (as platforms like Amazon, Google, and Fb as soon as did), discovering one of the best merchandise and the precise info, or serving to us join with our distinctive set of family members out of all of the billions of individuals on this planet. Or it may be used to hijack our consideration, creating much more addictive merchandise larded with much more invasive promoting.
Go searching. There are such a lot of unsolved issues! A lot to be completed. A lot alternative to liberate people to innovate, talk, study, take care of, and entertain one another.
Sure, there will probably be disruption. However there’s good disruption and dangerous disruption. Good disruption displaces incumbents with one thing higher. Unhealthy disruption replaces one thing that could possibly be made higher with one thing that finally ends up being worse.
Each time you’re advised that AI will destroy extra jobs than it creates, keep in mind: It’s as much as us.
