AI: Fears of AI & Jobs in Economic downturns. RTZ #380

...rising at senior regulatory levels globally

From the beginning of these daily AI write-ups over a year ago, I’ve highlighted how the two biggest societal fears around this AI Tech Wave are AI Job Displacement and Safety. From LLM AI/Generative AI, to Foundation Robotics, and beyond. Regular readers know that I’ve been on the ‘glass half full’ optimism side of these worries, but these concerns are an ongoing reality in these early days of AI.

I continue to believe we’ll be positively surprised by how AI ends up augmenting work at every level over time. Both from white to blue collar worldwide. But currently, the fears of AI impacts on the economy are rising.

The latest set of these concerns comes from senior economic figures governing various global financial regulatory institutions. They’re focused on how AI could make regular economic cycles worse. From Gita Gopinath, the no. 2 official at the IMF, to US Treasury Secretary Janet Yellen no less. As Axios highlights in “How AI could roil the next economic crisis”:

“The next recession may happen amid a new technological landscape: wide adoption of generative AI, a phenomenon untested by an economic shock.

“Why it matters: The potential economic upsides of AI, including how it might fuel productivity growth, are fairly clear. More uncertain are the potential hits to labor and financial markets when the boom time ends.”

“Driving the news: A top International Monetary Fund official warns the technology might shift a garden variety recession into an economic disaster.”

• “Treasury Secretary Janet Yellen is expected to echo the risks of AI-powered financial systems in a speech this week, highlighting the "black box" nature of models that are a mystery even to their designers.”

“What they're saying: "[T]he widespread use of AI could turn an ordinary downturn into a deep and prolonged economic crisis by causing large-scale disruptions in labor markets, in financial markets, and in supply chains," Gita Gopinath, the IMF's No. 2 official, said in a recent speech.”

“State of play: Gopinath says the globe's experience with automation and labor markets in recent decades offers something of a warning.”

• “When the economy is solid, businesses are more willing to invest in new technologies and hold onto workers. When the economy slips, companies shed workers to cut costs and might never return to previous employment levels.”

• "In the next downturn, AI is likely to threaten a wider range of jobs than in past cycles, including higher-skilled cognitive jobs," Gopinath said, stressing she was outlining a risk, not making a prediction.”

• "The result could be unprecedented job losses," with long-term displaced workers who don't have skills fit for an AI-centric economy.”

“The bottom line: "Most international efforts to mitigate AI risk are currently directed toward concerns around security, privacy, ethics, and disinformation," Gopinath said.”

• "But we also need a serious international effort to AI-proof the economy."

US Treasury Secretary Janet Yellen is set to echo similar sentiments on AI later this week:

““The tremendous opportunities and significant risks associated with the use of AI by financial companies has moved this issue toward the top” of financial regulators’ agendas, Yellen plans to say in the prepared remarks to be delivered at the conference, which is being held on Thursday at the US Treasury Department and on Friday at the Brookings Institution. The event, including Yellen’s remarks, are set to be live-streamed.”

Regulators are of course doing their job. Making sure they’re cognizant and ahead of potential risks facing the economy, known and unknown. And big technology changes like AI are of course amongst the biggest ‘Unknown Unknowns’ out there. The Fear here is natural and understandable.

But the data over decades show that technology, especially the digital kind of the last half a century or more, has generally had a net additive impact on US and global economic growth.

Societal Fears of AI need to be synced with Societal AI Opportunities, regardless of ups and downs in market sentiment. Something easier said than done with AI, given the nature of the beast. Stay tuned.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)