Is AI Our Nemesis or Our Saviour
Is AI our nemesis is a question with no straightforward, immediate answer in Australia?
For global economic growth, there is little doubt that it will be a powerful catalyst. The debate is centring on issues of equity and what it will do to the current skewed distribution of wealth.
While in theory, these issues are resolvable inside the tax and transfer systems of a country, this does not help much with wealth generated outside our borders. Look at the decision of Meta to stop paying media outlets for the news they provide.
Though it is slightly tangential to the AI our nemesis dilemma, it is a good representation of dealing with commercial powers in the rest of the world.
A greater impact is occurring because of the confluence of AI our Nemesis with a hardening industrial relations environment.
The Commonwealth Bank has embarked on a series of job cuts as it rolls out AI technology. It has no choice if it is to stay competitive. This is great for the Commonwealth Bank but with relatively few replacement industries rising, it is likely that former employees will count AI our Nemesis.
What is alarming about this is that although theoretically, and certainly historically, labour force that is released because of technological advancement, finds other ways of being utilised, this assumes that new industries come into being to create jobs.
Australia does not appear to be so good at this. Certainly not compared to the front runner in this area, which is the US.
Concentration Of Industry
You only need to look at the share markets of each country to see this in action. Banks (which are busily cutting branches and staff) dominate the largest companies in Australia.
Then come the mining companies tied to the Chinese economy on the brink of a liquidity trap and deflationary spiral.
These captains of industry are almost all over a hundred years old. The translation is that there has been very little genuine creation of new industries and business models here as there has been in the US.
We don’t seem to be any good at it.
The corollary to this is that our productivity is no longer even positive, although that may be changing. Compare this to the US, where productivity growth is at about 5%. AI our Nemesis, is a cry not heard from the US.
Microeconomics not Macroeconomics
The economic debate in Australia has centred on entirely the wrong area. It is based on macroeconomic variables. Macroeconomic variables are the ones that are most easily dealt with by the government. They deal with demand side aggregates, which are traditionally managed using a mix of monetary and fiscal policy.
These policy levers have been exhausted. It’s time to get into the weeds. That’s microeconomics. The difficulty is that is where the greatest conflicts are. For it to be effective, leaders must resist playing to their constituency and focus on the national interest.
So far, the attention to the national interest rather than the sectional interest appears to be lacking.
When the core support for each of the major parties is at levels of the low 30 percent mark, appealing to the national interest may appear to be a dangerous tactic to take. Any slippage of support soon translates into the removal from government and losing power.
The problem is that support continues to slip among the mainstream parties. Maybe a genuine focus on the national interest will bring electoral benefits.
The one thing that can cause our governing class to look to the national interest in a way that allows industry to flourish, productivity to rise, and prosperity to return is a common enemy.
The National Interest
That common enemy is already stalking us. It is the relegation of our great country from a middle power to a might have been.
While we are a sufficiently liberal economy to overcome this common enemy, the longer it takes to turn our direction towards it, the greater and more wrenching will be the required adjustments.
Where does business fit into this picture? I am reminded of the movie Ford vs Ferrari when Henry Ford, the descendent, points to a factory and says that during the war against the Nazis, 3 out of 5 bombers produced by the US rolled off that factory.
There is a lesson in that.
Internal Conflict and External Conflict
Times of conflict cause the greatest boost to production in modern economies.
It is when the greatest change through adaptation occurs. Through this period of adaptation, we are likely to hear complaints that paint AI our Nemesis. It may be the greatest cause of internal conflict for decades. It is a conflict we need to have.
It is when fortunes are made at the same rate as the sad, inevitable losses of all kinds that occur at times of conflict.
Whereas speculative assets do poorly during these periods, productive ones do very well.
If there was a good time to purchase a business, it is at the beginning of a productivity revolution such as the one we are embarking upon with the synthesis of AI into our economies coupled with the imperative to get our productivity in order because everything depends on it.
If there was a good time to sell a business, it is when you have squeezed every drop of benefit out of it. When you have maximised its profitability just before the next revolution when you will be required to find the youthful and exuberant enthusiasm required to implement new technologies.
In a hundred years from now, we will see a cohort of businesses that have the 2020s as the decade that they began. It’s that sort of time. The shake up that is required is for small businesses to overcome the constraints imposed by over regulation and dedicate their focus to building something that will endure.
Many of those in charge of the current crop of big businesses in Australia have allowed their focus to shift off the main game. Similarly, governments do what they do best and that is make rules and regulations.
Small businesses will benefit most from what they do best and that is to innovate like their life depends on it. Because it does.
