Pink Slips, Purpose Crisis, and the Looming Economic Shift in the Age of AI

In the corridors of corporate giants, recent upheavals and the relentless march of artificial intelligence have birthed a unique confluence of challenges.

Pink Slips and Fixed Incomes

Citigroup just pink-slipped 20,000 people. Why? Ostensibly, they had a bad quarter, and need to "turn the company around". They are taking a one billion dollar write off charge for severance packages, and expect to make $2.5B in profit from that. Yes, $1.5B is not a small number, but for a bank the size of Citigroup, that's chump change.

They have a brand new CEO. The old one "retired", no doubt with enough money to keep him in sports cars for life. The disruption of cutting 20,000 people is HUGE, and it will no doubt end up costing the corporation several billions more in lost sales, terminated projects, and more. This makes me suspect the real reason that she was hired was to eliminate 20,000 jobs.

Let's connect the dots. I've mentioned this often enough of late: Baby Boomers hit peak retirement age in 2020. Four years have passed since then, meaning the average Boomer is now 69 (meaning that more than half HAVE retired). Yes, Boomers are going to work until they're 75, no doubt, but the reality is that we are now in a regime when one of the largest generations in history is now on a fixed income. People on fixed income do not invest. They withdraw. Banks make no money when people withdraw their money. This means that for the banks, they have less money to speculate with, less money for interest.

This trend is JUST starting. The average life expectancy for the people most likely to have the money to invest is probably somewhere around 85. This means that banks are looking at another sixteen years during which they will have net negative balance sheets. This is a calculus that is weighing heavily on bank managers right now, because they should know that the banks are not going to turn around, not likely within their working lifetime.

Virtualization is hitting the banking space hard. Banks are closing branch offices in favour of phone apps. Banks are saying that Generative AI is also a factor, although most organizations are in fact not looking at GenAI initiatives. Instead, this has become shorthand for: "We're going to fire everyone, then if we really can't get by with the survivors learning AI to cover those who we've let go, we'll reluctantly bring someone in for only as long as it takes." This is the real meaning of depending upon AI.

Oh, and by the way, the same day that Citigroup announced the job losses, JP Morgan Chase reported their best annual profits ever (even as they too have announced significant job cuts). Similar cuts look to be happening elsewhere in the industry.

It's AI, folks. Really.

15 Year Old Girls, Jobs, and Purpose in the AI Era

This one broke my heart, and I have seen it in my own young adult children. When asked about Generative AI and art, one young woman tremulously asked,

“I tried ChatGPT and it can do a lot of things much better than I can - even if I learn hard. If the systems become even smarter, and can do anything I can do better... Then what am I here for?”

Forget for the whole moment about whether machines think or don't think, whether they hallucinate, whether they contemplate their own existence. That's largely immaterial to this discussion. It all comes down to the nature of work.

Before the 17th century, most work was done primarily in exchange for room, board, payment for tools, and protection from raiders. If you were a tenant farmer, you produced for the manor, and you could then eat or trade the excess. If you were in service, your room and board was provided, and you usually also received some form of stipend. It was not ideal, as it meant that you had comparatively little mobility, but at the same time, you worked when the work was needed, and your time when you didn't was your own. This, in a nutshell, is serfdom.

The 17th century saw the re-emergence of urbanization for more and more of the population, and with it came a different social contract (indeed several such). Factory work was frequently arduous, dull, and repetitive, but it had the advantage that you were paid a predictable wage, which could then be traded for the goods others produced. Reliability was prized over loyalty. Urbanization also saw the rise of of the merchant, buying and selling goods. Land ownership (feudalism) gave way to wealth ownership (mercantilism).

This also saw the increasing hold of philosophies such as Calvinism, in which one's wealth became a perceived proxy for moral goodness. This consequently implied that one's job defined one's purpose in life and that not having a job was, therefore, seen as a sin. This particular doctrine is VERY strong in the United States, and it has mutated into something truly corrosive.

Here's the problem. Once you automate something that was originally done manually, eventually, the job becomes supervisory before disappearing entirely. If you've ever seen a soda bottling plant, it becomes obvious that no human could fill even ten bottles in a minute, let alone tens or hundreds of thousands of bottles, as is typical at most plants. At one point, you needed to have supervisors to ensure that bottles didn't break or machinery didn't jam, but that need (and hence that job) faded over time as processes improved. Today, only a small percentage of factory work still requires active human participation, and in some places, human beings would be killed accidentally if they tried to manually involve themselves.

Now those same machines are reaching a point where they can reconfigure themselves via software to do more and more kinds of tasks, pushing human beings out of manufacturing and leaving only management, service, and knowledge/creative work. Yet, with the advent of the computer and networking revolution starting in the 1950s, even these jobs are becoming endangered.

We took refuge in the belief that computers and software could never be creative and couldn't think. We clung desperately to that belief, even as bright young engineers and scientists showed that it didn't matter - they could do something that looked enough like creativity that "business" could use it as a product with minimal human intervention. Once you move away from the notion that creativity is some divinely inspired ability and take a purely mechanistic view instead, then thinking, even awareness, isn't really all that important to the mercantilist viewpoint.

Expertise can now be fabricated and canned, and even if it's not truly insightful, this canned insight is good enough for most people. Once such knowledge or creativity is extracted, the need for the expert goes away. In the last few years, this concept became increasingly obvious, but it exploded into public consciousness this last year. Yes, you could put a pay wall on that knowledge, but when millions upon millions of people are doing the same thing, what you can get for that knowledge becomes a race to the bottom.

OpenAI is correct in one thing. Their business model collapses overnight if they have to charge for content what that content is worth to sustain what was paid in the market in the past. Everyone is now fighting to become THE deliverer of knowledge and creativity, but it will prove very, very difficult to differentiate these streams without creating a neo-feudalistic system where your "land lord" could arbitrarily establish what your value is worth.

Atoms, Bits, and Post-Capitalism Collapse

Everyone wants to be a millionaire (fill in the appropriate big number here). This is easily achieved in the US. Print out 360 million checks for one million dollars and then send each person a check. It would take a while for a new equilibrium to be reached, of course, and those who had physical things (atoms) to sell would likely make a killing, but ironically this has been done repeatedly in the past when the velocity of money had all but stopped, and it usually served to spur economic activity (most recently with the Pandemic).

This was also done in a much bigger fashion with the tax cuts on businesses in 2017 with far less real impact other than to create a great deal of speculative malinvestment (NFTs, anyone?). The very rich became very much richer, but for most people, the small sop that was sent out did almost nothing for them personally or for the economy generally.

The reason for this comes with the second aspect of Calvinist doctrine (a doctrine that is VERY pervasive in evangelical circles today, by the way). This doctrine can be stated as follows:

One can only be a member of the elect if that elect is an exclusive club.

This is seldom explicitly stated, but it is a subtext in contemporary Monetarist economic theory. For most people, being a millionaire simply means that their immediate monetary needs can be met, and they can allocate some money to longer-term investments to protect when the inevitable emergency occurs. For some people, however, their specialness is tied to their net worth and social position, their literally God-given (or increasingly inherited) privilege.

Now, wouldn't giving a million dollars to everyone (or even a guarantee of $10,000 a month) be inflationary? This has always been the counter-argument to any kind of Basic Living Stipend, and almost immediately, the argument goes to the Weimar Republic, which is the classic case of printing money, driving the value of that money down. I realize this is a bit of a rabbit-hole journey, but bear with me.

The Weimar Republic collapse occurred because Germany tried to get out of the demands placed upon it by the Versailles Treaty after World War I by printing money (a denominator of value) that wasn't backed by something else (in effect by abandoning the gold standard). Since the country was also heavily dependent upon foreign goods, the deliberate devaluing of the currency just served to make those goods (such as grain and meat) correspondingly more expensive. (It also pissed off the French in particular, who didn't take kindly to the attempt.

It was a hack, and it backfired, badly.

In general, governments make a key assumption - that the economy will grow in the future, and that when you do print money, you are in essence borrowing from the future growth of that economy, beyond a small percentage that represents population growth (that semi-mythical 2% inflation target, which should actually be about 0.42% given a peak likely to be at just around 400 million people in the US by 2050). There's another assumption which I believe is straight out wrong: that software automation will create economic growth in the first place. If anything, AI (which I use in a VERY general sense here of being the encapsulation of both autonomous and human algorithms) is deflationary.

If anything, we do not have much of an economic model for virtualized systems, but given that Milton Friedman's economic theories were developed when atoms were the only game in town,, I suspect that any economic system based upon Monetarism today is going to be VERY suspect.

So what does this do for the young woman concerned about her purpose in life? My personal belief is that for the first time in history, she has a chance of making her footprint in profound ways, but only if she can keep people from stealing that value before she has time to develop it by stealing the collective efforts of an entire civilization to feed a data model.

No company has a right to make a profit by stealing the intellectual work of others - not OpenAI, not Microsoft, not Google, not Facebook, no company. Those resources are a business cost, and paying for those resources would go a long way toward offsetting the caustic effects of the techno-Calvinists.

We also need to protect our future by investing in our future. The world is not going to become any easier moving forward, and we need people who are adaptable enough to handle it, which won't happen with an AI that can't even tell when a critical piece is missing from a door on an airplane, causing it to blow out at 30,000 feet. But to do that, we need to build accounting systems that value knowledge, expertise and creative property in the same way as monetary assets, rather than simply privatizing their profit while socializing their costs. Make education free and freely available, provide a means for people to survive while getting that education and to survive until they can establish themselves thereafter. You know, fund people, not corporations.

Otherwise, the system will collapse, probably within the next decade. We're teetering on the edge as it stands. And I'm really tired of paying for some overprivileged tech bro's second yacht, thank you very much. I suspect I'm not alone.