Some companies can face total ‘creative destruction’ by AI

Explore how AI could lead to 'creative destruction' for some companies, disrupting industries and impacting jobs. Read more at straitstimes.com.

A new worry is rippling across the stock market lately: entire businesses, not just their employees, may be thrown out of work. While most economists say fears of an AI job apocalypse are overblown, seismic shifts have happened in the past after big tech breakthroughs.

The IT revolution of the 1990s led to a surge in productivity that sped up the US economy for several years. It also rendered companies or even industries largely redundant – from travel agents and stockbrokers to classified advertising and newspapers, or video rental stores.

Economists expect artificial intelligence will deliver higher productivity, which is key to raising growth rates in the long run. But investors are growing nervous about what damage might be done on the way, in capital markets as well as labour markets – especially because AI threatens disruptions on a broader scale than the internet boom.

“Is this time bigger? Yes,” says Professor Anton Korinek, an AI expert at the University of Virginia – perhaps by a factor of 10. “The key difference from the 1990s is that the internet only disrupted information distribution,” he says. “AI disrupts cognitive production at large. That’s a much bigger economic surface area.”

Productivity is essentially a measure of how much output workers can deliver with the available tools, so it tends to surge upwards when someone invents important new ones like the internet or AI.

After big swings in the pandemic period, productivity has grown at an average pace of 2.8 per cent since the start of 2023. That’s more than double the average for the decade through 2019.