Is Gen Z F@cked?

AI Industrial Revolution Won't Be Fun

Despite the concern that AI will kill up to 300 million jobs (according to Goldman Sachs), there are historical parallels that some argue disprove this.

I have to admit, I’m a bit of a doomsayer when it comes to recent AI developments. But let’s take a break from that and consider the possibility that while AI will be disruptive, it could ultimately transform roles rather than replace them.

The Introduction of the ATM in the 1970s

The invention of the ATM was expected to obliterate bank teller jobs.

Instead, ATMs transformed the bank teller role from simple transactions to more value-added sales and service. Banks now use tellers as a boots-on-the-ground army of sales clerks pushing people to profitable products like mortgages and investments.

Also, ATM adoption by consumers didn’t follow a vertical line. Many bank customers were slow to adopt because they preferred going to an actual human to deposit money - they wanted to deal with a trusted person and craved the personal interaction.

To this day, virtual banks trail those with a bricks and mortar presence.

In the end, the number of bank teller jobs rose in tandem with the proliferation of ATMs.

This might be reassuring, but the ATM was a relatively narrow technology. One shouldn’t extrapolate this example to technologies like the steam engine, Internet or AI that have wide-spread revolutionary implications.

Labor Didn’t Benefit from Industrial Revolution for Decades

Note: I am generalizing the term “Industrial Revolution” to capture the multiple pulses of innovation that occurred during the 18th and 19th centuries.

Looking back, you can see how the inventions related to the Industrial Revolutions of the past lifted humanity from poverty and created a world of comfort and surplus. So it’s only natural to suggest that big technological changes benefit humans.

While this was true over the long-run, history shows that the proliferation of broader-based technological developments is destructive for the average person over the intermediate term (decades). Instead of benefiting labour, early productivity gains derived from technological progress tend to flow to the owners of capital, leaving the average person behind.

According to Robert C. Allen - Global Distinguished Professor of Economic History at New York University, Abu Dhabi, and a Senior Research Fellow of Nuffield College, Oxford - during the Industrial Revolution, it took 40 years for labor to benefit from technological gains.

Writing about “Engels’ Pause” in Explorations in Economic History, Allen explains:

In the first half of the 19th century, the real wage stagnated while output per worker expanded. The profit rate doubled and the share of profits in national income expanded at the expense of labour and land. After the middle of the 19th century, real wages began to grow in line with productivity, and the profit rate and factor shares stabilized.

Allen concludes:

…inequality rose substantially in the first four decades of the 19th century.

To those arguing that the Industrial Revolution ultimately created wealth for all, it was not without major generational turmoil.

Like the Industrial Revolution, the development of AI will create widespread productivity gains for many industries. Unfortunately, the gains will be captured by few, widening wealth inequality. Even if AI is ultimately creates wealth for everyone across society, it could take decades for those benefits to be felt by most.

Generation Z is facing this head-on as they enter the workforce, starting 40 year careers in fields that may soon be obsolete. They will struggle and stagnate while the world economy around them prospers, with gains flowing to the rich and powerful.

The best one can do is to develop diverse skills and learn to use AI to their advantage.