The Return of Mass Unemployment – Intelligent AI Bots, Expensive Capital, and Recession

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Alien technology (=LLMs) promises an insane amount of efficiency and cost-effectiveness but brings a daunting shadow – the displacement of millions of jobs:

AI’s ability to automate complex tasks, ranging from programming to design, significantly reduces the need for human labor in “legacy” job domains.

This shift is not just limited to manual or routine jobs; even roles requiring analytical and creative skills are at risk.

As AI systems become more sophisticated and accessible through affordable subscription models (e.g., ChatGPT’s $20 per month) businesses will likely favor these solutions over traditional human labor (e.g., $2,000 per month).

Not many businesses can or will give up a 100x cost advantage, for instance!

Saving costs is vital, especially when capital is becoming increasingly expensive, as seen during the 2022-2023 interest-hike period.

US Fed Funds Interest Rate (source)

This constrains businesses’ ability to raise funds for expansion and hiring. Especially as the economic uncertainty is significant, inverted yield curves predict a global recession on the horizon.

Easy access to cheap capital once fueled growth and job creation, but this new economic reality could significantly slow down employment opportunities:

  • ⚑ Interest Rates: The high cost of capital reduces the ability or willingness of businesses to hire employees.
  • ⚑ LLMs: Artificial intelligence replaces more and more jobs due to 100x cost advantages.
  • ⚑ Recession: The yield curve is inverted, predicting a looming recession.

This triple challenge of technological and economic shifts suggests a transition period, potentially lasting a decade or more, where the labor force may struggle to find its place in the new market landscape.

What DALLE-3 believes mass unemployment will look like in the 21st century

πŸ‘¨β€πŸŒΎ Historic Transitions of Labor πŸ§‘β€πŸ’»

The transition from agrarian to industrial societies, and then from industrial to informational ones, marks significant shifts in the global workforce and economy.

Initially, during the agrarian era, the vast majority of the population was engaged in farming and related activities.

As the Industrial Revolution unfolded in the late 18th and early 19th centuries, a massive shift occurred, with people moving from rural areas to cities to work in factories. This shift was not seamless; many faced unemployment and had to acquire new skills to adapt to industrial jobs.

Similarly, the transition to an information-based society in the late 20th century, fueled by advancements in computing and the internet, saw a decline in traditional industrial jobs. This shift again resulted in periods of unemployment and a pressing need for retraining, as workers had to adapt to roles in technology, services, and information management.

Each transition fundamentally reshaped the workforce, demanding flexibility and a willingness to learn new skills to navigate the changing economic landscapes.

There will still be work in the future – but the character of work will have changed!

Today, the unemployment rate is very low, so nobody has it on their radar:

US Unemployment Rate (source)

In recent years, the consistently low unemployment rates have fostered a sense of security, often leading to the issue of joblessness being overlooked or underestimated in public discourse and personal planning.

Historically, however, periods of high unemployment, while relatively brief, have been intense and disruptive:

US Unemployment Rate (source)

These sudden shifts have served as rude awakenings, particularly for those who either did not prepare during times of low unemployment or opted out of the workforce for lifestyle choices.

The speed and severity of these transitions often caught many off guard, leaving them facing significant hardships. We need to be prepared, even in times of apparent economic stability, as the landscape can change rapidly, leaving little time for adjustment.

If we enter a new period of high unemployment due to economic recession, alien technology, and expensive capital costs, traditional job roles may decline before new opportunities fully materialize in emerging sectors.

However, it’s important to recognize that this is a transitional phase.

The evolution of technology and markets continually creates new opportunities. There will be enough work, but it will be different, requiring new skills and adaptability.

πŸ§‘β€πŸ’» Recommended: 11 Profitable Ways to Make Money as a Prompt Engineer (2023)

Four Proactive Strategies to Stay Antifragile in Times of Change

Given this scenario, it is crucial for individuals to proactively prepare for the changes. This preparation could involve:

  • Freelancing and Diversification: Building a portfolio of skills and income sources will provide you more stability and robustness than getting all income from a single source or region.
  • Saving and Financial Planning: A stronger financial safety net will give you certainty and predictability and an ability to prioritize long-term opportunities in periods of uncertainty.
  • Lifelong Learning and Skill Development: Continuous learning is essential to stay relevant in an evolving job market. Learn something new every day!
  • Entrepreneurship: Creating businesses can not only provide personal employment but also create jobs for others.

I think all of these four pillars are equally important.

πŸ”— Recommended: If you follow our daily email updates on tech disruptions, you’re already working on the latter two pillars.

You can create a second income stream with freelancing (e.g., working on Saturdays only) and save the additional income in tech stocks or scarce assets that won’t be inflated away (beware of fiat currencies!).

OpenAI experts make between $60 and $300 per consultation Zoom call (source):

πŸ”— Recommended: The Ultimate Guide to Buying and Selling OpenAI API Freelancing Services on Upwork

Be On The Right Side of Change: Disrupt or Get Disrupted!

Fortunately, there’s a silver lining for entrepreneurs: the opportunity to be disruptors rather than the disrupted.

This era presents a unique chance for innovative thinkers to reshape industries and create new paradigms. Or simply to carve out a tiny but profitable niche using AI to scale up your value offering.

πŸ’‘ Entrepreneurs who embrace AI and automation can redefine the market. By automating processes, they can increase efficiency and significantly reduce costs. This reduction allows them to offer products and services at more competitive prices, challenging established players and gaining a foothold in the market.

Some examples of how you can use AI and other emerging technologies to create profitable businesses in the next 1-2 decades:

  • Healthcare AI Consultation: Develop an AI-driven telehealth platform that offers personalized medical consultations, leveraging machine learning to provide accurate, efficient, and cost-effective health advice. A free personal doctor that’s available 24/7 to answer any question a user may have!
  • Automated Financial Advisory Services: Create an AI-based financial advisory firm that uses algorithms to offer personalized investment strategies and financial planning, democratizing access to financial advice for a broader market segment.
  • AI-Enhanced Educational Tools: Launch an education tech company that uses AI to create customized learning experiences, adapting content and teaching methods to each student’s learning style and pace, thereby transforming the educational landscape.

I have listed a number of interesting SaaS business ideas in this blog article: πŸ‘‡

πŸ”‘ The key to successful disruption is understanding how to leverage technology to create value in an efficient and scalable way.

Specifically, think of your own job background or passion. What small ways could you integrate LLMs into the process to make it more efficient? Can you provide a slightly more generalizable solution to create a SaaS company out of it?

Feel free to read the following article that may give you some more ideas how you can leverage technology to stay on the right side of change: πŸ‘‡

πŸ’‘ Recommended: 8 Millionaire Tips to Reach Financial Freedom as a Coder