My 2025 predictions on how AI will disrupt the economy felt exaggerated when I made them… now, everything I said seems obvious. Even timid!
If you had asked me what I thought about AI five years ago, I would have said something like, “I’m curious.” Asked the same question in ‘22 and ‘23, I would have something like, “It’s surprising. It’s developing faster than I thought it would.”
I began writing about AI in early 2024, and by then I was jumping on board with the likes of Elon Musk, who were talking about Moore’s Law and telling us that, whether we knew it or not, the AI Revolution was moving full speed ahead.
Meanwhile, I wrote at least a dozen emails to the various businesses I feel responsible for, urging them to give their full attention to how AI is changing the world by infiltrating itself into virtually every sector of the global economy.
In my most recent blog posts about AI, I said that I believed we were already locked into a massively transformational technological revolution – one that was likely to be at least as disruptive as the Industrial Revolution.
I’ve predicted that within the next five or so years, AI was going to radically transform the foundation of how commerce works in the world, which will have a massively deflationary effect on the value of human labor, leaving as much as 80% of the world’s population unemployed (or, in the best case, underemployed).
I’ve said this a dozen times in conversations with people I know. And whenever I say it, someone – usually someone with better credentials than mine – reminds me that although previous technological revolutions eliminated thousands and even tens of thousands of jobs, those jobs were almost immediately replaced with more and higher paid jobs in the fledgling industries that had been spawned.
And there is no doubt about that. The Industrial Revolution resulted in a massive expansion in national and global GDPs. Railroads created new factories. Factories created new cities. Synthetic drugs and advanced surgeries created the largest industrial complex the world had ever seen.
But I don’t see that happening as a result of the AI Revolution. I don’t see how AI is going to create new industries. I can very clearly see how it will reduce the cost of virtually every product and service in the marketplace – not just make them less expensive but also make them more efficient. But I don’t see that resulting in a massive global depression triggered by hyperinflation. There will certainly be some of that at first. And that is exactly what is going on now. But by 2027, and to a greater extent in the years that follow, the core economic impact of AI will be deflationary, bringing down not only the cost of goods and services, but – more importantly – the value of human labor.
I believe what we will see, starting next year and then continuing for who knows how long, is a major decrease in what workers – from truck drivers to surgeons – can expect to get paid for the work that they do. And that will happen because of a phenomenon that I’ve not heard anyone talk about with respect to AI: the supply and demand ratio for human labor.
Briefly put, what AI is going to do – what it is already doing – is allow unskilled people to perform skilled (even highly skilled) jobs that until now were done by people whose market values were in the highest deciles of annual compensation.
I recently returned home from a two-week business retreat in Nicaragua at Rancho Santana. It was a working retreat for AP’s publishers and marketing directors from the US and abroad. It began with a discussion of how our individual franchises have performed since the last time we met in 2024. (Mostly good news, I’m happy to report.) After that, it was about how we were going to compete successfully in our market over the next several years – and most of that part of the discussion was about artificial intelligence.
