This is a solid 15-20 mins read, but I promise you it will be worth it. I’m going to explore how AI is changing how the world will be looking at labour and money and the potential effects of this on society.
Note: due to the length of this post, it’s recommended you read this on tanvirtalks.substack.com for the best reading experience.
If you’ve been following the news, you’ll be aware of the mass layoffs happening in various industries - attention is on big tech companies specifically, but other industries such as finance, manufacturing and others are in the same boat. The global economy is basically teetering on a recession at the time of writing due to pandemic inflation, wars and other local political challenges. I will be focussing on the tech side of the layoffs as well as the UK and US economy.
So what are these layoffs about? The main reason being stated is that the growth during the pandemic isn’t here to stay - people aren’t using their services as much as people did during the pandemic (note, Apple did not grow as aggressively during the pandemic and has not announced any layoffs). Is it purely to do with the recession and nothing else? Did these supposed very intelligent people who run these companies really think after the pandemic we won’t go out again?
The state of capitalism is evolving with AI
I am not saying that the downturn in the economy isn’t playing a role here - I’m sure it is a factor. Everything is significantly more expensive than it was a few years ago. But these tech companies are rich, so when they make layoffs it is a harder pill to swallow.
All the big tech layoff letters (Twitter being an anomaly here) to their employees are very similar: apologising, saying how great they are and then making a comment about AI. Microsoft said “the next major wave of computing is being born with advances in AI…we will continue to invest in strategic areas for our future” in a letter from Satya Nadella (Microsoft CEO) to their employees. Also, amongst the layoffs, Microsoft invested $10 billion into Open AI, the guys who made the AI bot, ChatGPT (I’ve discussed what ChatGPT is in a previous post).
To me this is a repeat of history and an indication that AI will change the way businesses look at labour and money. They will push to make more money at the expense of the general good of society.
But so what? What does this shift mean? For that we need to take a slight tangent and a brief look at history.
The effects of mass production
In my grandparents' generation, the family you were born into ultimately determined your status and wealth in society. For sure, some people broke out of that, but generally, if you were a poor farmer, it was likely you would stay within farming, albeit hopefully a little richer than your previous generation(s). When mass consumption was introduced to the world at the end of the industrial revolution (approx. 1920s), things that were otherwise too expensive to access, became cheaper. There was a consumer need/want for luxuries that weren’t gate kept by the wealthy. Mass production opened opportunities for average people that otherwise would not have been possible, due to the affordability of things. Moving between wealth ladders and social classes became a little more feasible.
Mass production meant that the family you were born into did not necessarily determine your fate. Anyone could be wealthy and live comfortably if they worked hard. People now had access to things that were reserved for the extreme elite, like education, travel, disposable income (due to things being cheaper), communication, etc. You were an individual with potential, not a homogeneous being labelled into a group (for example, a farmer, factory worker, etc.). The possibilities were endless.
The wild 1970s
In the mid-1940s, the economist Karl Polanyi argued that capitalism had to have social protection in place. There were regulations and policies in place to ensure that labour was not exploited.
By the 1970s there was high inflation and a recession in the US, leading to low growth and high unemployment. To tackle this, the US unhooked the valuation of the dollar against gold (it was a little more complicated but this is the general gist). This lovely website that I visit every now and then called ‘wtfhappenedin1971’ shows some US centric economic graphs of when the government decided not to back the dollar with gold anymore. The graph I want to focus on is the graph showing the productivity of workers vs compensation.
In the 1970s the US also aligned closer to neoliberalism (and shortly the UK followed suit), or in other words, the free market. The belief was that the market price for labour and goods should be determined by supply and demand with minimal intervention from the state (or the market should get deregulated). This eroded the idea that businesses should be for public good. Shareholder capitalism, the idea that businesses should solely work in the interests of the shareholders of the business no matter what (or in other words, for the richest), took off.
The combination of these ideas of the economy meant that companies were incentivised to reduce their size and be as lean as possible. Investors were impatient. Middle managers who didn’t produce anything and purely managed people were seen as negative to the company and pushed out. The graph above shows the effects of this mindset - wages stagnated while people were working harder.
This obsession to increase value as cheaply as possible as quickly as possible meant that businesses started to explore other forms of financial speculation (or other ways to make money) beyond production of goods. This made it harder for traditional or smaller businesses to survive and larger businesses started buying them out. By the 1990s and early 2000s, consolidation of businesses, or smaller businesses being bought out by larger businesses, was common. In the UK, the number of public companies (companies trading in the stock market) went down between 2000 to 2020 by over 45%.
All of this increased the divide between the rich and the poor. Now that businesses were working exclusively for investors and investors were the wealthiest of society, everything was designed to make the rich richer. This rapidly increased the income inequality between the rich and the poor. The graph below shows the increase in inequality in the UK from 1977 to 2016.
This also spearheaded the rise of surveillance capitalism.
The rise of surveillance capitalism
Surveillance capitalism is best defined by Shoshana Zubuff in ‘The Age of Surveillance Capitalism’:
“A new economic order that claims human experience as free raw material for hidden commercial practices of extraction, prediction and sales”.
Essentially, it’s the act of tracking someone in order to sell access to the data and predict how someone is likely to behave. Data mining and tracking is a gold mine and is the economic order that we know today best employed by Big Tech. “If you don’t pay for it, you are the product” is a common saying, however by you being the product, it would imply you are being sold here, but what is actually being sold is your behaviour - how likely are you to buy something, etc. I have written about this at length over various posts in my blog.
In the early 2000s, the internet gave the rise to individualism. Before 2000, mass production forced consumers to consume what they were given - if the music industry said you had to buy a CD to get access to one specific song, then everyone is buying that one specific CD. Businesses were consolidating and the consumer was starting to lose the power of choice. But the internet and technology broke out of this mould.
You now weren’t restricted to buying a movie from the nearby store that was price gouging you, you could now go online and buy from a regular person and it’s much cheaper. You didn’t need to buy CDs for that one song, you could now buy a specific song that you wanted on iTunes. You could mix up the music on your iPod every week and make it unique to you. Services, such as streaming TV shows and movies as and when you want without buying a huge TV package with pointless channels you don’t need, took off. Consumers weren’t shackled to the restrictions large corporations insisted you needed to be tied down to. The power was back in the consumers’ hands. Consumers now expected to be catered to exactly who they were, and surveillance capitalism enabled this.
Discontent amongst the public
In this new form of mass production, capitalism moved to a rawer form - price was purely dependent on supply and demand, with no social guardrails (laws or regulations). There were minimal legal restrictions on data mining and collection and what could be done with that data. No clear consent was obtained on this collection of data and marketing of behavioural analytics.
The market moved aggressively, and the successful tech companies became incredibly wealthy within a few decades; this wealth was used for consolidation. Acronyms such as FAANG - the first letters of Facebook (now Meta), Amazon, Apple, Netflix and Google - came about as many of the digital services were owned by one of those companies. Consolidation from surveillance capitalism is something that the industry is trying to solve today, over 20 years after its initial inception. The power was back to corporations. The wealth divide gap increased. The general consumer and public feels like they are being dictated by these faceless corporations. In 2020 there was a hearing of all the big tech companies for antitrust and monopolistic behaviour.
Around 10 years into this phase of mass production and new financial speculation, there was a continued rising discontent due to the continued rise in inequality in wealth. 2011 saw riots in England (primarily in London, but other cities did experience them) due to the shooting of Mark Duggan. Tensions between the black community and police turned protests to riots in London, which had ‘copy-cat’ riots in other cities. In the study conducted by LSE, ‘Reading the riots’, researchers interviewed rioters and their motivations behind the riots. The primary reason was the shooting of Mark Duggan and the frustration of feeling not being heard. However, in addition, the themes of social exclusion, unemployment and poverty and government cuts to vital services (further excluding individuals from society) were common amongst the rioters.
“All I can tell you is that me, myself and the group I was in, none of us have got jobs, yeah? I been out of work now coming up two years … and it's just like a depression, man, that you sink into … I felt like I needed to be there as well to just say 'Look, this is what's gonna happen if there's no jobs offered to us out there” - man, 22, from ‘Reading the riots’
The riots were not limited to one specific ethnic minority (in Manchester approx. 76% of rioters were white), but there was a common theme of the socioeconomic backgrounds of the rioters. One can argue who is to blame for these riots and whether this was an appropriate response to the frustration, but ultimately this is the peak of the change in economic behaviour spurred in the 1970s and Margaret Thatcher in the 1980s. Capitalism has worked to socially exclude the poorest for the last 50 years or so and we are back where we started with my grandparent’s generation - the wealth you are born into predominantly determines your future. However, this time we have the mentality that we can be anything we want if we work hard for it and that everything should be served to us exactly how we like it.
So what now? What does AI and cuts in jobs in the tech industry have to do with this?
AI is the next form of mass production
2023.
The UK is going through one of its challenging times in recent memory and has one of the worst performances out of the leading economies. The UK is riddled with strikes from train drivers, ambulance drivers, nurses and teachers over the fact living conditions have become so hard, they are not being compensated fairly for the work they are doing. The general feeling in the UK is discontent. Protests of all forms (including strikes) have been common in the last few years to the extent that the government introduced an ‘anti-protest’ bill and an ‘anti-strike’ law (both highly controversial).
Trust with big tech and the government in the UK and US is at an all time low. Social media is under fire for ‘censorship’ and controlling the narrative. There is a constant struggle to get power back to the average consumer and break the gatekeeping of access to society by the wealthy. Governments are finally trying to put in some guardrails for surveillance capitalism, but it’s too late.
This struggle manifests in multiple ways, recently through Bitcoin and NFTs. The whole concept behind cryptocurrency was the fact that it wasn’t controlled by a central government. For capitalism to work there needs to be some form of guardrails - this was demonstrated with the failure of cryptocurrency in its current form. Without the guardrails in place, this new financial vehicle struggled to take off and is now associated with scams.
Some companies tried to get ahead of the new paradigm shift in capitalism and create new forms of financial speculation - Facebook did a rebrand to Meta and wanted to create the metaverse. Despite the ad campaign behind it, it is struggling to take off due to its immaturity. For there to be a new shift in capitalism, the new order or vehicle of mass production needs to be sustainable and with crypto and metaverse antics, they are too immature.
Not AI though.
The concept of AI has been kicking about since 1955. The technology has become affordable enough to perform complex calculations at scale and available for consumers. AI also enables a new form of mass production - the mass production of image generation, text generation, content curation, and more.
We are in a similar situation as in the 1970s. There is high inflation, low wage growth and the cost of living is spiralling. Social services are struggling and people are striking to make themselves heard. In some organisations middle managers are not looked at in a positive light. Mark Zuckerberg recently stressed on ‘efficiency’ as the new focus of Meta, implying further cuts coming.
What we are experiencing is a shedding of mass that these organisations don’t want anymore. Mass production in the form of AI is here and will be used to automate as many things as possible. With tools like ChatGPT being released into the wild, society will fundamentally have to change to adapt. Schools will need to start teaching differently - setting an essay assignment will be outdated. Jobs will be lost, there will be further consolidation, more wealth will be made for the wealthier and the divide between the poor and the rich will grow.
Social guardrails need to be put in place
This new age of capitalism and AI does not need to be destructive. It can be for the social good. But for it to succeed for the social good, social guardrails need to be in place in the form of regulation. Big tech is pouncing on AI before any rules and regulations are implemented to limit how much money can be extracted from it.
AI has had ample time to mature and has proven itself to be an immediate use to society and all industries, and people are taking note. AI textbots are being used to write speeches for congress, shining light to lawmakers of its power. It is also already being used to abuse.
At the time of writing, the streamer Atrioc caused controversy as he was watching deep fake porn (where AI is used to replace the faces of porn stars with another person, commonly without their consent). This caused an outcry from the victims of this deep fake website as none of the women had given consent to being depicted in such a manner. No doubt the website that hosted this content has made a significant amount of revenue from website traffic. AI imagery and video can be deeply harmful if abused, and unless real laws are put in place, in addition to the economic changes, AI will cause significant social harm and drive deeper the feelings of anger and discontent.
Big tech are not being subtle about this change
In addition to Microsoft dumping billions into AI, Google has announced they will provide infrastructure for the next gen AI startups.
Kevin Systrom and Mike Krieger, the co-founders of Instagram, have recently launched a new product, Artefact. It is a news app that uses AI and machine learning to show you news that you will be interested in. When asked why make something now (as from selling Instagram they are set for life), Kevin listed a couple of things, with the main thing being “a big new wave in consumer technology that he and Krieger could attempt to catch”, which is AI. Kevin Systrom admired the Tiktok recommendation algorithm for content:
‘“I saw that shift and I was like, oh, that's the future of social,” Systrom said. “These unconnected graphs; these graphs that are learned rather than explicitly created. And what was funny to me is as I looked around, I was like, man, why isn't this happening everywhere in social? Why is Twitter still primarily follow-based? Why is Facebook?”’
The CEO of OpenAI, who created ChatGPT and DALL E (AI image generator) has stated that he expects his tech to break capitalism:
“I think capitalism is awesome. I love capitalism. Of all of the bad systems the world has, it's the best one — or the least bad one we found so far. I hope we find a way better one. And I think that if AGI [Artificial General Intelligence] really truly fully happens, I can imagine all these ways that it breaks capitalism.”
ChatGPT was released into the wild early as they were worried someone would beat them to it - they wanted to be first, to capitalise on its value first. Originally they wanted to release a more locked down and refined version of the model. Capitalism literally drove the decision to release an immature product. As a result, AI is in the standard consumer’s hands, without any rules or regulations of its use in place. Society is beta testing AI in real time and the consequences have not been discussed or thought about. If we carry on the way we are, by around 2060, the world will likely have significantly more inequality, more consolidation and the wealthy will be significantly wealthier.
The new age of capitalism is here and the best time to put the guardrails in was yesterday.
The next best time to do it is today.
If you have a better idea than I do, if I’ve missed out anything or you think I am talking absolute rubbish, feel free to reach out either by commenting on the post, or by emailing me on tanvirtalks@substack.com