Here’s How To Think About Artificial Intelligence, Jobs And The Economy
It’s hard to believe that ChatGPT launched in November 2022, just two and a half years ago. In that short span, AI has become deeply embedded in our personal and professional lives, often serving as a constant companion: answering questions, offering feedback, and sometimes even pointing us in new directions.
So it shouldn’t be surprising that many are asking what it all means for the future. Are we heading toward a utopia of super-productive machines and widespread abundance? Or are we hurtling inevitably toward a Matrix-like dystopian nightmare in which we are subjugated by machines and the oligarchs who control them?
History is long and varied, so there are plenty of examples to support both the utopian and dystopian view. The future is unknowable. Yet by this point, we know a lot about innovation so we have some good models to make judgements. When it comes to technology, jobs and the economy, we need to look at three effects: displacement, productivity and reinstatement.
The Displacement Effect
Since the beginning of the Industrial Revolution technology has displaced labor. The Luddite movement in the early 19th century smashed automated mills to protect the jobs of skilled weavers. In 1900, 30 million people in the United States worked on farms, but by 1990 that number had fallen to under 3 million even as the population more than tripled.
It’s clear that AI will have similar effects. A 2023 report by the World Economic Forum, analyzing 673 million jobs, predicted structural job growth of 69 million jobs and a decline of 83 million jobs, a decrease of 14 million jobs. An IMF analysis found that 40% of global employment is exposed. In an interview with Axios, Anthropic CEO Dario Amodei, said AI could wipe out half of all entry-level white-collar jobs in the next one to five years.
The pace of automation also appears to be increasing. A 2024 CFO survey by Duke’s Fuqua School of Business and the Atlanta Federal Reserve Bank, found that while 37% of firms planned to automate tasks previously done by employees over the previous 12 months, 53% expected to do so in the next 12 months.
The report also shows a stark contrast between large and small firms. While 55% of large companies have implemented AI for automation, only 29% of smaller businesses have done so. This disparity could lead to a widening gap in productivity and competitiveness across sectors, perhaps accelerating the long-term trend of increasing industry concentration.
None of this should be surprising to anyone who has even casually used an AI service. Even the free versions can be incredibly helpful for a wide variety of tasks. The larger question is whether these changes will provide lasting gains. A 2025 survey by Orgvue, a company that produces organizational design software, found that 55% of the companies that laid off employees because of AI now regret the decision.
The Productivity Effect
Technology has long had a transformative effect on productivity. During the late 19th and early 20th century agriculture was transformed from being driven by a combination of animal power and back-breaking human labor to a heavily mechanized industry. It’s been estimated that in 1940 alone, tractors saved 1.7 billion hours of human labor.
Tech giants clearly believe that we are on the brink of something similar. CNBC reports that they plan to invest over $300 billion in 2025 alone, with Amazon itself accounting for $100 billion of that. Consider that IBM developed its game-changing System 360 mainframe computer in 1964 at a cost of $5 billion (or about than $40 billion in today’s dollars), and you start to get some sense of the unprecedented scale of the bets these firms are making on AI.
The rhetoric is, if anything, even more confident about the power of AI. In the Axios interview, Anthropic’s Amodei suggested that it could cure cancer and push economic growth to 10%. On venture capital giant Andreessen Horowitz’s website, tech investor Anish Acharya predicted that the technology will usher in an age of abundance.
Yet more grounded economic analyses suggest a much more modest impact. A study by the St. Louis Fed suggests a 1.1% increase in aggregate worker productivity, with much of that increase concentrated in the tech sector. A paper by Nobel laureate Daron Acemoglu, which looks at total factor productivity (TFP), a measure which takes use of capital into account, sees a 0.66% increase over 10 years, translating to a 0.064% increase in annual TFP growth.
One reason for the disparity is that most of the tasks that are being automated now are the ones that AI is best fit to replace and, because many of those tasks, such as coding, are in the tech sector, leaders in that industry are more sanguine. How those gains translate to other tasks, such as leadership, negotiations and medical diagnosis, remains to be seen.
The Reinstatement Effect
A third factor that figures into the overall jobs picture is the reinstatement effect, which is the extent to which new technologies create completely new jobs and, crucially, the quality of those jobs. For example, if productivity gains are substantial but the bulk of the economic benefits are captured by a small group of oligarchs, and the new jobs created are low-skill and poorly paid, the reinstatement effect will be minimal.
MIT’s David Autor, a leading authority on automation and labor markets, has long noted that automation tends to favor non-routine jobs, such as financial strategists and wedding planners, over routine jobs like office clerks and assembly line workers. This pattern has shaped much of the job landscape over the past century.
For the most part, this has been a happy story. Many descendants of the people who held those 27 million back-breaking farm jobs that were displaced now hold lucrative jobs in software development, graphic design and the like. In fact, Autor has found that 60% of employment in 2018 was found in job titles that did not exist in 1940.
A recent McKinsey report takes an optimistic view. While noting that many routine office and production jobs are likely to disappear, those that leverage technical, social and emotional skills are likely to flourish, just as Autor has predicted. However, there is reason to suspect that optimists may be merely extrapolating from historical trends that may no longer apply.
There’s no guarantee that the future will look past. An analysis in Harvard Business Review suggested that AI could disrupt the non-routine creative work that, to this point, has been hard to automate. Meanwhile, research in Science has found that, although AI may enhance individual creative work, it diminishes the diversity of novel output, potentially stifling the very innovation it aims to support.
What Does The Future Hold?
Henry Ford provides a good model for understanding how displacement, productivity, and reinstatement shape how technology affects jobs and the economy: Automation on his family farm displaced his labor there, which led to him going to work for Thomas Edison. His increased productivity afforded him the luxury of leisure time, which he used to tinker, experiment and imagine new things.
It was the third effect—reinstatement—that proved transformative. Ford became prosperous enough to start his own company and pioneer an industry that created many more jobs. Millions left their family farms, where their labor was no longer needed, to work in factories. Their increased productivity allowed them to earn more and educate their children to work in the high-tech industries of today.
What’s crucial to understand is that it is ecosystems, not inventions, that determine the future. You can’t understand the impact of the automobile just by riding in one. It’s the second and third-order effects—how improved transportation and logistics transformed industries such as retail and manufacturing—that truly mattered. Electricity did the same for communication, information processing, entertainment and other things.
For a decade, I’ve argued that we need to prepare for a new era of innovation. In fact, I considered this idea so important that I chose it as the title of the final chapter of my book Mapping Innovation, with which I concluded, “It is no longer enough to disrupt and disintermediate industrial era institutions; we must forge a new path with a renewed commitment to fundamental innovations.”
What will determine our future is not any particular technology, but the ecosystems we build and what they are designed to serve. How can we focus our energies on tasks that AI can’t so easily automate? Do we intend to feed the hungry, cure the sick and protect dignity for every human life? Or do we want to preserve those things for only those that market and technological forces feel are deserving?
Only we can shift our focus toward creating completely new industries that can serve us better. No machine, no matter how smart, can automate those decisions for us. Some things, we just have to do ourselves.
Greg Satell is Co-Founder of ChangeOS, a transformation & change advisory, an international keynote speaker, host of the Changemaker Mindset podcast, bestselling author of Cascades: How to Create a Movement that Drives Transformational Change and Mapping Innovation, as well as over 50 articles in Harvard Business Review. You can learn more about Greg on his website, GregSatell.com, follow him on Twitter @DigitalTonto, his YouTube Channel and connect on LinkedIn.
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