The Land of Milk and Honey
Picture this. It’s 2035. You wake from a lovely sleep to a notification from your front door. Your Tesco shop has arrived, delivered by a robot. You don’t get out of bed, obviously. You press a button and the shopping is carried into your house, unpacked, sorted, and put away by your in-house robot, which then makes you a cup of tea.
Downstairs, breakfast is already being prepared by your Airfryer 3000. Frank Sinatra’s latest song, a cover of Eminem’s Stan is playing on the radio. You pause for a moment and wonder what to do with your day, do you lie outside and read some books? Carry on with the painting you are working on? Maybe attend the new android-led yoga class at the local gym, which everyone says is very calming. You opt for yoga then lunch with friends. You check your bank balance and see that your weekly AI dividend has landed, it always does.
A self-driving Tesla takes you to the restaurant. An AI butler greets you at the door and shows you to your table. With a flick of your eyes, you order your food, which arrives moments later, carried by a robot that looks uncannily similar to the one that brought your shopping earlier. After lunch you head home to find the house spotless. You lie on your bed and put on the Terminator 7 featuring a 25-year-old Arnold Schwarzenegger. You drift off into a peaceful sleep.
Now, a small question.
How did we get here?
The promise of AI is one of abundance and huge leaps in productivity, human labour will become largely unnecessary, enormous wealth will be created, society will adapt and the whole human race will benefit enormously.
Already we can see the huge amounts of wealth creation. The combined market capitalisation (combined value of equity) of the Magnificent Seven is $21 trillion, with NVIDIA, the chip maker over $5 trillion on its own. That means we already have around $2600 of wealth for every man, woman and child on the planet today - not cash in hand, but an illustration of the scale of wealth being created - and that’s just 7 companies.
The growth of AI is increasing at a massive rate, you can spin up an app just by talking to AI, it can help with personal finance, booking holidays and an ever expanding list of tasks.
The productivity gains don’t stop at home, the companies are making them too, according to Morgan Stanley research, the UK has recorded an 8% net job loss linked to AI over the past year (twice the global average). Job ads for software developers are down 37% since ChatGPT launched in 2022 and youth unemployment hit a five-year-high of 15.9%. These are worrying figures and this is happening now.
The Missing Piece
By what mechanism does AI productivity turn into shared prosperity? Well, there are a few ways
1) Redistribution of profits
After every billion of profits (clear, realised profit after all expenses) that goes into the Global Wealth Fund and gets distributed out to the population – either at national or global level.
2) Ownership broadened
Every citizen becomes a shareholder, dividends and equity are the backbone of our wealth.
3) Labour has compensating power
As productivity gains accelerate, workers are compensated as a share of the gains, this would need a strong trade union movement or social norms that enforce this.
4) The state needs to tax and transfer
90% tax on all profits over x$ and redistribute this via public spending or direct payments (think UBI)
None of these are happening. Global wealth funds require international cooperation that doesn’t exist and is unlikely to given regional tensions. Broadening ownership means diluting existing shareholders, which boards are legally obligated to resist (see next section). Labour’s compensating power has been declining for decades, with union membership at historic lows. And wealth taxes? As we’ve seen, the slightest mention of a wealth tax and companies start threatening to move their capital elsewhere (this could be solved by a global agreement, but see above)
How Companies Work
So, what does a company do? What is it for?
Firstly, a company is a legal and economic entity, it is not a moral agent. What do I mean by that? Well, a company exists for the good of the company, not of you or I or wider society, any benefit it has is a secondary consequence of the company’s activities, that’s not to say that companies don’t have remarkable benefit to society, but that is not their duty.
Their primary duty is to generate returns for its owners, as long as it is acting inside the law, then it can do that in any way it chooses. The directors of companies have fiduciary duties, these are legal obligations to ‘act in the best interests of the company’ which is generally taken to mean protecting profitability, preserving competitiveness and enhancing value. This can take many forms, but most usually increasing productivity and reducing costs.
There is no incentive or imperative for a company to share productivity gains, preserve jobs they no longer need, or distribute their profits outside of the company.
This is not evil, it has no morality at all, it’s the way the system works, in law and in practice, this is efficiency, this is a description of capitalism.
The Disconnect
Presently it is not clear how the age of AI abundance will come about. Although there is much talk about this wonderful utopia, no one has given any hint as to how this may be achieved. It’s possible that the disconnect is just one of communication, the tech CEOs assume the governments will come and sort it out and the governments are waiting for the CEOs, or it could be that the current situation suits them both.
Tech companies can talk about the future abundance while keeping all the present wealth. Governments are happy not only to keep taking what taxes there are, but are wary of trying to regulate something they barely understand which is led by billionaires who fund campaigns.
So Who Lives There?
If incentives don’t change, not you and not me. The same process that happens now, with wealth concentrated in few hands, and now it will be vast sums. That’s not to say that there won’t be some indirect benefits in technology, but everyone being able to quit work will not come about here.
We can already see what happens when productivity increases with AI: humans are let go; there are adverts asking ‘are you still hiring humans’. The likely outcome without intervention and agreement is more of the same, huge wealth, concentrated in few hands, everyone else hoping some of the milk and honey trickles down before it turns sour.