After listening to Andy Jassy’s “lean into AI” feedback to CNBC about utilizing AI to ship a greater expertise to clients, I got here throughout Ford CEO Jim Farley’s feedback on the Aspen Concepts Competition predicting huge job losses from AI. It occurred to me that whether or not AI creates or destroys jobs is determined by the place firms are within the innovation cycle. Corporations in new markets are expansive, each when it comes to buyer acquisition and when it comes to employment; these in mature markets are steady or in decline. AI can have a distinct impact relying on the place you might be on this cycle.
As I put it in my put up “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 inclined to hobble their merchandise as they give attention to worth extraction. They lose their beliefs and their edge, finally alienating their clients and their suppliers and opening the door to competitors.
If an organization tells you that the principal good thing about AI is “effectivity,” they’re telling you that they don’t see alternatives to create new worth or serve new clients. If you’re targeted on both of these issues, you may be attempting to turbocharge your development with AI, not attempting to wring out extra earnings 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 clients however haven’t had the assets to deal with. Sure, AI might assist us be extra environment friendly, however that’s liberating up assets to do extra. Effectivity is the icing on the cake. For a lot of firms—people who have stopped serving their clients and are primarily serving themselves—effectivity is the cake.
Jeff Bezos known as the expansive section Day 1: “Being consistently curious, nimble, and experimental. It means being courageous sufficient to fail if it implies that by making use of classes learnt, we are able to higher shock and delight clients sooner or later.” And in his 2016 shareholder letter, he defined Day 2: “Stasis. Adopted by irrelevance. Adopted by excruciating, painful decline. Adopted by dying.…To make sure, this type of decline would occur in excessive sluggish movement. A longtime firm may harvest Day 2 for many years, however the remaining consequence would nonetheless come.”
Cory Doctorow has a vivid title 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 clients; lastly, they abuse these enterprise clients 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 many others.) 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 happy, so I went by means of quite a few iterations attempting to get the graph extra correct to my sense of Cory’s framework (e.g., person worth doesn’t peak in the beginning and decline straight away however begins with a believable promise and will increase through the first, virtuous section of firm enlargement; firms that delight their customers are sometimes very worthwhile even throughout their development section, 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 begin with, however finally 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 automobiles apart, right here’s Gemini’s graph of the place the auto trade is on its enshittification journey. It has deserted reasonably priced automobiles and is essentially specializing in greater costs, supplier markups, and subscription companies. The typical worth did decline a bit between 2022 and 2024, and affordability climbed as incomes recovered after the pandemic, however the sample remains to be placing. (It’s additionally intriguing that Gemini selected common worth and affordability as the 2 components to graph. I’d have thought it could have used used the variety of automobiles 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 automobile firm like Ford doesn’t function a “two-sided market” in the identical manner an Amazon or Fb does (the place customers are the product offered to advertisers), the rules of extracting extra worth from each direct clients and oblique companions can nonetheless apply. Within the early days, Ford’s focus was on mass manufacturing and making automobiles accessible and dependable. Person worth was excessive (a automobile for the widespread particular person, revolutionary meeting strains)….As know-how superior, Ford, like different automakers, began integrating extra software program and connectivity. Initially, this added important person worth (GPS, leisure, security options). Nonetheless, as the main focus shifted to monetizing these options, person worth started to plateau or subtly decline….Core functionalities develop into optionally available add-ons, and current 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 companies. Making automobiles more and more troublesome to restore exterior of approved dealerships, successfully locking clients 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 shall be utilizing AI for buyer profit) at the moment are additionally within the worth extraction section, managing established companies for revenue in a market whose development, earlier than the disruptive onset of AI, had begun to sluggish. So that they themselves are targeted on the “efficiencies” potential with AI. They foolishly depart development to the upstarts. And they’re preaching that stale gospel to extra conventional enterprises as properly.
AI native firms are nonetheless within the virtuous early stage of development, delighting their customers, hiring like loopy, and exploring new prospects. In accordance 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” section and are firmly coming into the second “seduce companies” section, all whereas exhibiting clear, early indicators of the third “enshittification” section….
They nonetheless want builders and enterprise shoppers to be completely happy, so that they haven’t began aggressively squeezing them…but. However the free customers and your complete ecosystem of on-line content material creators are already feeling the squeeze. The virtuous section 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 outstanding pace.
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 patrons paying for the large buildout of AI are usually not but the people or shoppers who’re utilizing it however relatively traders 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 staff to maintain up with the wild bets of capital markets which are fueling their new opponents. A product you can’t afford to pay for with out preying on others is a recipe for breaking unhealthy.
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 are able to rise to nice challenges. Ethical selection, not intelligence or creativity, is our biggest asset. Issues might get a lot worse earlier than they get higher. However we are able to select as a substitute to raise one another up, to construct an financial system the place folks matter, not simply revenue. We will dream massive goals and remedy massive issues. As a substitute of utilizing know-how to exchange folks, we are able to use it to reinforce them to allow them to do issues that have been beforehand unimaginable.
So preserve this in thoughts while you hear speak of the efficiencies from AI. AI can be utilized to cut back the period of time that healthcare employees spend on paperwork to allow them to spend extra time with sufferers, or it may be utilized by the personal fairness firms which were taking up our healthcare system to wring out greater earnings 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 save cash that shall 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 might be handed on to shoppers or used to retrain staff 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 best data, or serving to us join with our distinctive set of family members out of all of the billions of individuals on the earth. 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 finished. A lot alternative to unlock people to innovate, talk, be taught, take care of, and entertain one another.
Sure, there shall be disruption. However there’s good disruption and unhealthy disruption. Good disruption displaces incumbents with one thing higher. Dangerous disruption replaces one thing that might be made higher with one thing that finally ends up being worse.
Each time you’re instructed that AI will destroy extra jobs than it creates, keep in mind: It’s as much as us.
