The Wall Street Journal had an interesting recent article about a change in the way executives talk about workers. What they think of as artificial intelligence has given them the confidence to say that everyone is replaceable.
Wholesale elimination of jobs has been developing for at least the last decade — much longer if you consider the broader development of automation. Will new AI technologies enable even more job destruction? Certainly, but it will come at a cost and likely spread further than prudent and intelligent business strategies would allow. Possibly including their own jobs.
The Myth Of Profit Maximization
Chief executives typically look to improve the fortunes of a company and returns to shareholders. Many take to heart the argument Milton Friedman made in a 1970 New York Times op-ed that the “social responsibility of business is to increase its profits.” That has been further interpreted as meaning the responsibility to maximize return on investment to shareholders.
This is both legally incorrect and strategically troubling and mistaken. Experts in corporate governance have, across many years, tried to find a legal basis for the prescription. It has yet to appear. In the 2014 Supreme Court decision in “Burwell, Secretary of Health and Huma Services, et. al. v. Hobby Lobby Stores,” the Court addressed whether a for-profit corporation could give money to religious causes. “While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so,” Justice Samuel Alito wrote for the Court.”
Corporate law and governance also recognize that a company’s board and executives have duties to the company. They are charged with strategy and operations for the company’s benefit, with the shareholder’s benefit being an offshoot. In basic calculus, math students learn that you cannot maximize for more than one variable at a time.
That doesn’t necessarily mean one factor cannot benefit while another does as well, but maximization mathematically means something has to come first. Everything becomes subject to that desire.
Confusing People And Machines
There is a peculiar attitude among executives, which has been around for a long time, that people are infinitely extensible. The signs come up with every wave of layoffs, and if you’ve ever been one of the people who survived a round of staff cuts, you have likely experienced this.
Those left are expected to pick up and complete the extra work with neither additional pay nor schedule adjustments. Everything is supposed to be compressible. Employees are expected to contort themselves, making operations look as though they were normal. Forbes contributor Bryan Robinson discussed a study last year that noted 88% of layoff survivors experience burnout, and 25% suffer from mental and physical exhaustion.
A developing and increasing trend is the desire to replace people with actual machines. Bring in not only the robots to do everything physical, but software to do everything mental. Chief executives want to make shareholders happy, which drives up share prices and the CEO’s own holdings. Replace people with mechanisms to drive labor costs down and profits up.
Ten years ago, I wrote about how automation was already coming for white collar jobs, including professional ones. A study at the same time said “highly creative” professionals would remain safe. That didn’t last long.
When all work becomes something to be done by mechanisms — robots, artificial intelligence, or people — human needs become unimportant. Ultimately, there is only the need to cut costs, to increase profits.
Three Rising Risks
The decisions may seem obvious to the MBA crowd, but they bring three risks to business. One is the loss of institutional knowledge. It is people who hold the understanding of how processes work, the things a company needs to know about its customers. Again, this has been known for many decades. Lose people and you lose understanding. In theory, a company could use technology to capture and store much of this, but they don’t tend to.
Next is the risk of mediocrity, which is particularly true of large language model software that works on complex statistical algorithms. These products don’t think. Instead, they’re trained on vast examples of how words connect and then respond accordingly. What seems like intelligence is clever repetition, in a way. This brings up average responses. Furthermore, increasingly repeating what others have done undercuts creativity and innovation.
The third and biggest risk is the undermining of the jobs and incomes of a growing portion of the populace. What happens when fewer and fewer people can make a good living? Who’s going to buy all the products and services that companies need to sell to make their growing profits?