“For the first time since his creation man will be faced with his real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well. […] We shall endeavour to spread the bread thin on the butter—to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us!”
I am quoting from a 1930 essay entitled “Economic Possibilities for our Grandchildren” by John Maynard Keynes. Keynes really was a visionary, and I think this utopian ideal needs to be explored a bit. It is Sunday afternoon, and I am feeling a bit philosophical. We shouldn’t lose sight of the fact that the economic greats were more philosophers and moralists than people who formularised demand and supply equations. Adam Smith was not an economist in today’s form. His main work before An Inquiry into the Nature and Causes of the Wealth of Nations was The Theory of Moral Sentiments.
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It is very clear that the current narrative driving markets is the A.I. revolution. It is not like we haven’t experienced innovation in the past century that has dramatically improved productivity. However, the reason why I think this feels a little bit different is because we are witnessing a computer “think” for the first time. I know I am entering dangerous territory when I say that this time may be different.
To set the scene, let us take a look at Nividia’s price chart.
Nividia is the world’s third-largest company, with a market cap (value) of more than $2.2 trillion and is the poster child of the A.I. age. I am not sure how many households have even heard of this company. Such is the demand for the computer chips produced by this company that power the majority of the computers providing A.I. services that its share price and value have literally taken off like a rocket.
I am not going to bore you with boring facts about valuation metrics. I would rather speak conceptually. It is obvious from the growth in value of companies associated with A.I. that we as a society are expecting great prosperity from this advancement in productivity.
In my previous companies, I have always had a data science team assist me with my work. I have built Signal 2 Noise (S2N) entirely on my own (I can hear some smart Alec’s saying, “I can see that”). I have been able to achieve this with the help of ChatGPT at a cost of $20 a month. That is great for me as a business owner, but what does this mean for the job market and the economy as a whole?
The optimistic way of looking at things is that increased productivity will drive down the costs of producing things, which in turn will mean companies will make more profits. With increased profits, business owners will have more money to spend on other goods, which will lead to the birth of new industries and increased wealth.
Another positive way of looking at improved productivity is that it will help make our planet more sustainable. Instead of depleting the earth’s irreplaceable resources, we will discover more viable ways of using the earth’s natural resources to improve sustainability.
Before answering the question I posed about whether our overall economic growth will be enhanced by the AI revolution, I have to bring the conversation back to Keynes’s utopian vision in 1930.
Keynes saw a world where we worked only 3 hours a day and enjoyed much more leisure time as the fruits of our productivity. The extra time was to spend with our families and further our own personal growth. Keynes saw this extra time for things personal as wealth creation. Pretty cool ideals, but was Keynes dreaming?
I am not sure about you, but the invention of email and smart phones has made me more engaged with work than during earlier times of my life. In fact, the more we have innovated, the more I find myself having less time to enjoy leisure time. Why is this?
One of the reasons is that we are still very much driven by a consumer-led economic model. The more money we make, the more we need to spend it on more streaming services, more entertainment in the form of eating out and having fun, more clothes to keep up with the ever-changing fashions, and more technology so we can keep up with the status quo, as well as all our friends and family we see living their “best lives” on social media. I would argue that our current societal pressures do not allow us to enjoy more leisure, but the opposite. One may be mistaken into believing that the work-from-home culture has increased one’s leisure. Here, I speak from experience. I am one of those WFH who frequents coffee shops with my laptop during the day. Don’t mistake the informal dress code and flexibility of the location for leisure.
So where do I see the latest innovations and growth in productivity taking our economy?
As a student of economic history, I believe we are experiencing yet another cycle in our economic evolution. Nobody knows what will happen with any degree of certainty but we can figure out the overall picture. I feel we are going to reach a little too far into the anticipated wellspring of prosperity, and there is going to come a period of reckoning where we will see some of the benefits of technology being used for things that are not so good for us. It won’t be the endless blue sky we imagine. There will be darkness with technology used for war. There will be darkness from technology, with fewer people needed to do jobs they have done in the past. There will be darkness in a society split between the haves and the have-nots.
I feel A.I. is the final phase in the information superhighway revolution that has been driving the world since the early 1990’s. I am not suggesting that, over time, we will become worse off through technological innovation. I am, however, suggesting that we will probably experience a painful period where we come to terms with this new productivity, and we will need to try and find a healthy balance between work life and leisure time.
One of the most underrated secrets to a life well lived is moderation. Keynes thought 3 hours of work a day would be enough. I simply long for the days of my youth, when working an average 8-hour day provided most people with enough to live a reasonable economic life where savings drove growth, not consumption. Where people lived a life of physical interaction. Where people were able to switch-off.
If A.I. can lead us to a 3 hour work day, then long live A.I.