The Burning Building Problem
Fifty years ago, The Towering Inferno earned over $100m at the box office (a huge sum for those days) by playing on the public’s growing fear of the dangers of modern skyscrapers. These days we have a different kind of burning building to worry about: the labor market.
I strongly believe that AI will have a profound impact on the market for human labor. First, it will make some people much more efficient at their jobs, so fewer people will be required to do the same work, leaving the rest looking for other employment. Second, it will outright replace many workers. The end result will be widespread unemployment. But lots of smart people disagree.
Many people—including many labor economists—claim that even if AI destroys some jobs, it’s bound to create new ones. After all, they say, this is how new technology has always worked. (I went back and looked at my labor econ textbook but couldn’t find the part where it says that past performance is any guarantee of future returns, but maybe I just missed it.)
The problem is this: AI gets better. AI can do things today it’s couldn’t do yesterday, and will do things tomorrow that it can’t do today. Some of the smartest people in the world fueled by hundreds of billions of dollars in investment are pushing the frontier forward at a mind-boggling pace. In economics terms, AI is continually gaining absolute advantage over humans at one task after another. And there is no reason to believe that progress will stop any time soon.
So what does this have to do with burning buildings? Simple: if you find yourself in a burning building you can avoid the fire by retreating to higher floors—but that strategy only works for so long. Eventually the fire will catch up.
Imagine the job market as a skyscraper, with the ground floor housing low-skilled jobs, and increasingly higher-skilled jobs on each floor as you go up. If your job is threatened by the fire of AI, you can retreat to a higher floors by reskilling, upskilling, or cross-skilling. (Yes, these are real words, even if the iOS spell checker doesn’t recognize them.)
You may be able to escape the fire for a while. But as AI continues to gain capability across a wide spectrum of domains and the fire spreads higher and higher, the floor to which you’ve retreated will eventually be threatened. (Maybe some jobs will never be done by AI. Maybe some rooms in the building are perfectly fireproof. But I wouldn’t bet my life, whether literal or economic, on it.) So again, up you go.
At some point you’ll reach the highest floor you can attain. Maybe you’ll reach the highest floor in the building. Maybe you’ll simply max out your personal potential. Either way, you can no longer go up. And yet the fire will not stop. Ultimately you’ll need to either put out the fire or find a way out of the building.
In The Towering Inferno, Steve McQueen and Paul Newman use plastic explosives to rupture water tanks on the roof of the burning skyscraper they’re in, extinguishing the fire. But the race dynamic of the AI market makes it unlikely that anyone will voluntarily put out the AI fire.
The fire may be contained to an electrical closet in the basement for now, but eventually we’ll all need to find a way out of the building—or the labor market. (Hint: in the battle of labor vs. capital, be capital. But that will have to wait for another post.) Good luck!