David:
Did you guys see this? Today’s sell-off triggered by this article imagining a world in 2028. [Link to The 2028 Global Intelligence Crisis]
Rob:
Yes. The missing piece is that if people lose their jobs to AI and therefore their consumer spending power goes down, the money doesn’t disappear. It becomes higher corporate profits, which gets recycled elsewhere, or lower prices (enabling easier monetary policy).
What this scenario in fact describes is extreme productivity growth—more output per worker. It’s exactly what you want: non-inflationary growth.
Imagine the reverse happened. Firms need to hire more workers to produce the same output, which happens with heavy regulation, for example. You get stagflation.
David:
I don’t see how mass unemployment of white-collar workers is a positive. Prices will come down, productivity goes up, some companies will thrive (semis), but if the consumer economy breaks and all the assumptions underpinning it, that’s a serious problem.
And the point on governments relying on income-tax receipts of high earners is important. Plus Social Security relies on new workers funding retiring ones. That system is going to break anyway without this.
Rob:
They ultimately won’t be unemployed. Wealth will be created. They will work elsewhere. It’s like saying factory automation is horrible for the economy because all those factory workers will lose their jobs.
Corporate profits will either soar and be reinvested in the economy one way or another, or prices will come down and interest rates will go to zero. The first-order effects are easy to see, but the second- and third-order effects are more abstract but no less real.
David:
There is no place for knowledge workers to work if AI is all-knowing.
Rob:
If health care for example gets cheaper because it’s more efficient I can spend less on health insurance and take more vacations.
David:
And I don’t buy that we will just supervise AI.
Rob:
Yes, everyone becomes a retiree to some extent. I think ultimately it’s good for stocks: earnings up, interest rates down. The Fed and the government will take care of aggregate demand.
There will of course be winners and losers as there were with factory automation. All consumers win. A sliver of the population is screwed.
Here the sliver may be larger, but there will be opportunities created by all this wealth. You just can’t argue productivity growth is bad. That’s totally irrational. It implies negative productivity growth is good.
The economy breaks when unemployment is too low. In 2022, it was 3.5%, like an all-time low. The result was stagflation, interest-rate hikes, and a market crash.
A separate concern may be that people are getting way ahead of themselves talking about 5–6% annual real GDP growth. A massive pickup is like 1% above the long-term trend of 2%. A 5% baseline is bonkers.
At the end of the day prosperity is how much stuff your economy can produce. AI means we can produce more stuff.
David:
This is productivity hitting white-collar jobs. Industries that structured themselves to benefit from productivity but never bear the costs because they protected themselves through regulation, complication, brand, and “moats.” This is different.
While stocks may benefit from lower rates and higher margins initially, many of these businesses become commoditized, which dooms profits. Especially when their supply is limitless and demand is finite.
Rob:
You are describing heaven on earth. We simply ask Claude for anything we want and it delivers. No middlemen extracting rents. The key is to figure out which moats survive AI. Physical ones may be most resilient. Railroad tracks, for example.
David:
And populism will come back to bite on this. There won’t be sympathy for the out-of-work lawyers.
Rob:
Affluent boomers make out like bandits. Already retired sitting on 401ks. The challenge will be for younger people to acquire wealth. Although there will be more wealth to acquire.
Honestly, I see massive growth in wealth management broadly writ. What else does society do when machines do everything other than fuss over their wealth?
Trish:
Just catching up on this! Very interesting article here. Jamie Dimon just dismissed fears over how AI will hit JPMorgan, by the way.
So, who is the sliver that is screwed? I would think it’s the middle-class desk worker. They aren’t a sliver though. They’re the underpinning of an entire class.
Rob:
I guess I would argue that people will ultimately work. Roles will change. Some people will be stranded with useless skills that were once valuable. More wealth means more overall demand.
David:
Someone who works in a call center is accustomed to ups and downs and periodic unemployment and hardship. Lawyers and accountants are not. They won’t be able to handle it because they’ve never been forced to. And cannot adapt.
Rob:
Radiology has become a case study for why AI won’t replace human workers. As sophisticated services get cheaper, demand for them will grow. You are counting one side of the ledger—the negatives—and ignoring the positives.
Basically the argument is that a little productivity growth is good but too much is catastrophic.
David:
I bet the positive health benefits from disease detection and prevention are outweighed by mental health destruction of unemployed aimless people.
Rob:
There is no example in economic history of a productivity boom leading to depression.
David:
It’s like Hillary telling coal miners: “Don’t worry, you will be retrained and better off.” My argument is that AI’s impact and speed is unprecedented. So relying on economic precedent may not be reliable.
Trish:
My own great-grandfather went into severe depression during the Depression after losing his job at the mill in Manchester. He couldn’t get out of bed. His daughters dropped out of school and got work waitressing. He died a few years later.
He was what we’d now call clinically depressed. I bet this happens a lot.
It’s why there’s a bad opioid addiction now with middle aged men across America. Much of the fentanyl crisis and increase in mortality rates in the USA is attributable to diseases of despair.
David:
I support and welcome productivity. But the consequences of this AI-driven one are directed squarely on the upper middle class.
Rob:
In 1980, clerical workers and secretaries made up roughly 18% of the U.S. labor force. Since then the number of secretaries has dropped significantly. Office support roles fell from 12.7% of all jobs in 1980 to only 6.8% by 2022 due to technology and automation.
Trish:
I’ll tell you. I could use a secretary. A real one. Like they had in the ‘50s. That’s a lost art!
David:
Estimated active lawyers in the U.S. in 1980 — ~574,000. In 2024/2025 — ~1.32–1.37 million. The number of lawyers in the U.S. has more than doubled since 1980.
Rob:
Despite LexisNexis! More wealth equals more money to fight over. Which means more lawyers. The more a lawyer can do, the more a radiologist can do, the more their services will be sought.
Trish:
This is like the argument people make with Microsoft Excel and bankers. Tech tools make analysts at investment banks far more productive. As tech got deployed, many more analyst jobs were actually created, not fewer.
So it’s a good case study. When workers can get more done, more workers get hired, at least when you look at Wall Street over the past 30 years.
Rob:
Also, growth in financial advisors has happened despite index funds and robo-wealth tools. The number of financial advisors in the U.S. has basically doubled in the last 30 years.
David:
I think the model is flat-screen TV pricing over time. Cheaper. More abundant. Commodity.
Rob:
You are talking about unit pricing falling. Yes. The essence of productivity gains. But unit sales of televisions have tripled since 1980.
David:
Don’t get me wrong. Lawyers and Wall Street will do whatever they can to protect their turf. Seeking laws requiring humans do the work and provide advice. Politicians will likely comply.
Rob:
The wealth—the claim to production—is still there. And has only grown. It gets recycled into new domains. People with certain highly specialized skills are at risk, though.
Trish:
The problem is this could force the income inequality issue big time. Only 62% of the population owns stocks. 38% does not. To the point about political populism.
Rob:
I agree this favors capital over labor. Even before AI we had this problem.
Trish:
We should publish this exchange. With a note at the end summarizing that people should invest. Very entertaining exchange!