During the last three days in Dubai, I had the opportunity to talk with a lot of people, the vast majority of them working to develop new AI tools and businesses. The more I heard about what all of them are busy with, the more I grew concerned for the future of so many people who have no idea about what’s coming and are broadly underestimating the impact of AI in their daily lives, starting from their jobs.
If you wake up in the morning, commute to an office (or just turn on your laptop if you have the luxury of “working from home”), and spend eight hours of your day repeating the same tasks over and over again, I have bad news for you: in a few years, you won’t be needed anymore.
Accountants, customer services, relationship managers, loan officers, account managers, clerks, editors, copywriters, supply chain managers, and even personal assistants will all be replaced by AI bots that can tirelessly work 24/7, 365 days a year. Not only will AI bots take away your jobs forever, but they will do it for a fraction of the cost.
People are “bullish” on AI without realizing the catastrophic social consequences and wealth destruction this will cause. Many of these displaced people will either be too young or not have enough financial resources to retire; all of them will have no choice but to migrate into “blue-collar” jobs. However, there will not be enough demand for them in the job market and they will have no choice but to start competing to the bottom in terms of salaries because of the basic law of demand and supply.
Paradoxically, AI will have a much harder time disrupting blue-collar jobs for a very simple reason: these jobs will remain much cheaper for companies than replacing them with robots for a long time. However, because of lower and lower salaries, savings rates and discretionary consumer spending are going to collapse.
Is this going to solve the inflation problem though? No sir, governments will have no choice but to ramp up “stimmies” distribution to make up for the loss of income of this big chunk of the population and central banks will be forced even more to monetize growing public deficits.
Wealth is then going to migrate from countries with a lower amount of natural resources to those that control them, but rest assured these countries will demand higher and higher prices in fiat currencies since these will be fast depreciating. Ultimately, I won’t be surprised if they even stop accepting payments in fast-depreciating currencies and demand settlement in commodities or precious metals.
It will take a long time for a new geopolitical equilibrium to be reached and societies will ultimately start to look like Dubai today, where a small number of rich “locals” are served by a large number of immigrants coming from poorer foreign countries to “serve” them for rock-bottom salaries, exacerbating wealth inequality.
This type of dynamic has happened many times throughout history until a new equilibrium was found and every time the spark was a new discovery, often technological. For example, think about the industrial revolution or the discovery and industrialization of oil. AI is the spark this time and it cannot be stopped, all you can do is adapt to its consequences.