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 relies on the place firms are within the innovation cycle. Corporations in new markets are expansive, each by way of buyer acquisition and by way of employment; these in mature markets are steady or in decline. AI could have a special impact relying on the place you might be on this cycle.
As I put it in my submit “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 desperate to shock and delight their customers; the main focus within the early days is all the time on worth creation. Mature and declining firms, in contrast, are inclined to hobble their merchandise as they concentrate on 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 advantage of AI is “effectivity,” they’re telling you that they don’t see alternatives to create new worth or serve new clients. If you’re centered on both of these issues, you may be attempting to turbocharge your development with AI, not attempting to wring out further earnings from a flat or declining market. At O’Reilly, there are such a lot of issues we’ve all the time wished to do for our clients however haven’t had the sources to handle. Sure, AI could assist us be extra environment friendly, however that’s liberating up sources 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 signifies 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 loss of life.…To make certain, this type of decline would occur in excessive gradual movement. A longtime firm would possibly harvest Day 2 for many years, however the last consequence would nonetheless come.”
Cory Doctorow has a vivid identify 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 Prospects (advertisers, sellers, and so on.) will increase as soon as consumer 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 glad, so I went by way of numerous iterations attempting to get the graph extra correct to my sense of Cory’s framework (e.g., consumer worth doesn’t peak firstly 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 adjustments I wasn’t asking for.
So as an alternative 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 business as an entire due to Jim Farley’s feedback. It reveals how far the business 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 business is on its enshittification journey. It has deserted reasonably priced automobiles and is basically specializing in increased costs, vendor markups, and subscription providers. The common worth did decline a bit between 2022 and 2024, and affordability climbed as incomes recovered after the pandemic, however the sample continues to be hanging. (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 bought. I didn’t specify which parameters to make use of, and it stunned me in a great way.)
Then I requested about Ford particularly. Gemini’s narrative confirmed a superb understanding of the corporate’s trajectory:
Whereas a automotive firm like Ford doesn’t function a “two-sided market” in the identical method an Amazon or Fb does (the place customers are the product bought to advertisers), the ideas 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 automotive 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 vital consumer worth (GPS, leisure, security options). Nevertheless, as the main focus shifted to monetizing these options, consumer worth started to plateau or subtly decline….Core functionalities develop into elective 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 providers. Making automobiles more and more tough to restore exterior of approved dealerships, successfully locking clients into pricey service agreements…
You get the thought. Enshittification doesn’t simply apply to tech platforms. (Henry Farrell and Abe Newman have simply made the much more provocative argument that present US overseas 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 gradual. So that they themselves are centered on the “efficiencies” potential with AI. They foolishly go away development to the upstarts. And they’re preaching that stale gospel to extra conventional enterprises as effectively.
AI native firms are nonetheless within the virtuous early stage of development, delighting their customers, hiring like loopy, and exploring new prospects. In response to 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 getting 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 glad, in order that they haven’t began aggressively squeezing them…but. However the free customers and all the ecosystem of on-line content material creators are already feeling the squeeze. The virtuous section of merely serving the end-user with the absolute best product is being changed by the strategic necessity of serving shareholders and managing astronomical prices, following the enshittification curve with exceptional velocity.
I’m a bit extra hopeful than Gemini is concerning the trajectory of the AI business, however I’m involved. AI has not but discovered true product-market match. The patrons paying for the huge buildout of AI should not but the people or shoppers who’re utilizing it however fairly 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 might be fueling their new opponents. A product which you could’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 ebook 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 could get a lot worse earlier than they get higher. However we are able to select as an alternative to elevate one another up, to construct an economic system the place folks matter, not simply revenue. We are able to dream massive goals and remedy massive issues. As an alternative of utilizing know-how to switch folks, we are able to use it to enhance them to allow them to do issues that have been beforehand inconceivable.
So hold this in thoughts whenever you hear speak of the efficiencies from AI. AI can be utilized to cut back the period of time that healthcare staff spend on paperwork to allow them to spend extra time with sufferers, or it may be utilized by the personal fairness firms which have been taking up our healthcare system to wring out increased 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 economize that shall be handed out to shareholders already wealthy with capital. It may be used to offer customer support that not solely improves satisfaction but in addition creates financial savings that could possibly 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 the perfect merchandise and the suitable data, or serving to us join with our distinctive set of family members out of all of the billions of individuals on the planet. 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 accomplished. A lot alternative to unencumber people to innovate, talk, study, 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 could possibly 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.
