AI-driven job loss risks socialism

When corporations prioritize efficiency at all costs, the people suffer

Welcome to Cautious Optimism, a newsletter on tech, business and power.

• 📈 Trending Up: Jared Isaacman … startup M&A? … natural selection … the European technology industry … industry talking points … Bullish …

  • Read this: Speaking of the European technology industry, TechCrunch’s Anna Heim has a great rundown on Atomico’s annual report, which includes a quote from European Commission President Ursula von der Leyen. The fact that the EC’s chief is dropping quotes for venture reports points to a change in the wind, I think.

• 📉 Trending Down: The American consumer … the American consumer … the American consumer … Larry Summers … Larry Summers … hidden AI, crouching slop

Things That Matter

Talk about paving the way: On Monday, it felt like the AI industry needed a win. Concerns about infrastructure spending overflowed, and many argued that investors had pushed AI-related valuations to unsustainable levels.

Then xAI dropped Grok 4.1, an update to its current flagship LLM, that took it to the top of the LMArena leaderboard. Google then stomped on xAI’s parade by dropping Gemini 3, which supplanted Grok 4.1 atop industry leaderboards.

Thanks to xAI and Google, Nvidia will report earnings not amidst an atmosphere of concern, but on the coattails of two major AI wins.

• No, LLMs have not reached a point that will preclude improvement. What’s more, we’re seeing AI models improve despite strong competition. That’s how you keep getting progress.

• Progress means better AI models. Better AI models mean smarter agents, lower AI prices, and fewer restrictions on using lots of thinking tokens.

It’s been a winner of a week for companies building with third-party AI technology, and everyone in that game leans on what Nvidia is selling. Let’s see how CEO Jensen Huang discusses the current climate and next year’s growth plans. Trillions of dollars of wealth is holding its breath.

An authoritarian disgrace: Yesterday in the Oval Office, POTUS hosted MbS, the Crown Prince of Saudi Arabia. A few things happened, apart from a president welcoming an autocrat to the White House as if they were on the brink of saving global democracy:

• Trump defended the murder of former Washington Post columnist and Saudi dissident Jamal Khashoggi, who the American government concluded was killed at the behest of MbS:

“You’re mentioning somebody that was extremely controversial. A lot of people didn’t like that gentleman that you’re talking about. Whether you like him or didn’t like him, things happen, but he knew nothing about it. And would you leave it at that? You don’t have to embarrass our guest by asking a question.”

• Journalists and columnists naturally forfeit their right to live the moment they criticize power centers. Everyone knows that.

• The fact that the question was considered “embarrassing,” and not MbS and his government’s actions, speaks volumes about our President’s mindset.

During that same gaggle, after he was asked about the Epstein files by an ABC reporter, POTUS threatened to revoke her organization’s broadcast license:

“I think the license should be taken away from ABC, because your news is so fake and it’s so wrong. And we have a great commissioner, the chairman, who should look at that, because I think, when you come in, and when you’re 97 percent negative to Trump, and then Trump wins the election in a landslide, that means, obviously, your news is not credible.”

• The party of free speech, everyone.

We’d better have a plan

Yesterday on the podcast, Jason and I riffed on the potential for AI to drive job losses. Jason played a clip from a recent 60 Minutes interview with Anthropic’s Dario Amodei, in which the technology executive said that a huge fraction of white-collar jobs could become automated in the coming years.

• This viewpoint is not controversial if you are an AI bull; if you are an AI bear, you are probably less worried. I think that the potential to save costs by using AI to replace humans will be enough incentive to impact the labor market. The level of that impact, however, will depend on how much AI agents improve.

Jason is an AI bull, and he argues that what Amodei is saying is not far-fetched or doomerism:

Jason: If you were to look at an entry level PR person, or an HR person, or an entry level researcher, entry level apprenticeship level accounting person or legal person, a lot of what they do is a drag on the senior people, and the senior people are now able to do that young person’s grunt work with AI.

So then you have to ask yourself: If you’re a senior level person, do you want to mentor, you know, these two or three annoying kids who are just learning how to, like, show up at work on and they can’t even get in on time or they’re goofy and they fool around or they do some stupid stuff at work? Like, everybody’s had this experience. Like, mentoring people is hard. It takes time out of your day.

Some people find it rewarding. Most people find it annoying. Sorry. It’s just the reality of it. And then, you know, you could just have run a query with your LLM or use your copilot from a legal provider, a tax provider, a coding provider.

Jason went on to argue that some folks don’t want business leaders to discuss AI-driven job loss, because it’s bad PR. That’s fair, and I think that Amodei deserves credit for saying what he thinks out loud.

Going to happen and should happen just like that are different concepts, however. I argued that simply because companies will be able to hire fewer junior staffers doesn’t mean that they should:

Alex: I think we’re gonna have to make a civilizational decision here, because everything you’re saying, Jason, is right. Often, mentoring people slows you down. It burns time, and it makes the senior person who’s more expensive less productive because they have to go back and do a lot of busy work. But if we want people to have kids, they’re going to need employment, and stable employment is better.

Jason: Yeah, so you’re thinking on a societal basis, but that’s not how people work. That’s not how business leaders work day to day.

Alex: But maybe, that’s what I’m saying, we need to change our mindset. Because if we do automate these jobs away and we take a lot of careers that should start right after college and begin to accrete value and income and therefore wealth and therefore the ability to buy a house and have children, if we short-circuit that process at the beginning, we’re going to have a lot of people that are just 45 with two roommates and a shared dog.

If that’s a bad outcome, then why are companies so hellbent on reducing their human workforce?

Jason: Because businesses are just gonna do what businesses do, which is lower costs and be more efficient. They’re gonna adopt the technology. They are adopting the technology. And so they are not going to think about this overall society issues.

My view is that maybe companies should think about the society that enables them to function, given the populace’s current sentiment about capitalism. You don’t wind up with socialism-friendly mayors in Seattle and New York City if your citizens are incredibly stoked about how their economy works:

Alex: But what what about making conscious decisions, like putting together a consortium of leaders of businesses and say, ‘Hey, we are not gonna stop hiring young people. We are going to keep investing in the future generations because we would like to not only have a society in 50 years, we’d like to have senior people in 50 years.’ Like this is a thing that businesses could get together and choose to do if they wanted to.

We struggled to find a historical analog to my pitch, leading to Jason saying that AI-predicated job loss is probably an issue that no one will sort out:

Jason: I think nobody’s solving these problems. I think it’s gonna be tragedy of the commons kind of situation. Nobody is, you know, gonna be looking out for the interns and the apprentices. They’re just gonna adopt the technology, go faster, lower their costs. […]

Alex: Then you better get accustomed to Mamdani winning in New York City, because what you’re saying here is that there’s no way for businesses to look out for their own interests. And that’s surprising to me. Because you’re saying essentially it has to be such short-term thinking; they can’t think long term. And that’s an indictment of the capital formation process.

Jason: They can’t think collectively. They can think mid-term, long-term. But it’s not like Amazon’s going to go, ‘You know what? We need to keep adding staff to do this instead of robots so that our staff can buy stuff on Amazon or can go to Starbucks on their way to work.’ They just that’s just not how businesses think.

They’re just gonna be radically pursuing efficiency. Now the question is: do people wanna create more companies and products and services using these new tools? If you know these tools, you’re gonna be infinitely employable.

I’ve long thought that the argument in favor of AI actually replacing humans is not because AI is 100% as good as the humans it may supplant. Instead, I think AI will absorb human jobs because AI can get to 80% of the same quality for 10% of the price.

Precisely how the economy will function under such a setup — See: Trending Down today — isn’t clear. If we want to preserve capitalism in the face of rising discontent with how the economy functions, we’d better actually try and do something other than handing out pink slips and boosting buyback pledges.