AI might lead to Capitalism's downfall

For much of recent history, capitalism has been a powerful engine for human progress and value creation. I'm not here to argue anything different. What I'm here to argue is that asset holders should care as much, if not more, about AI job loss. I'll argue why I think capitalism currently is a net-positive stable system, and how AI job loss might be its downfall.

Capitalism's social contract: stability through work

Capitalism, at its most functional, operates on a kind of social contract. It channels the human drive for betterment and reward (often simplified as self-interest) into productive work, which in turn provides workers with a sense of value, stability, and income. The 'trickle down' effect.

This value chain has a circular effect creating a flywheel of value creation. This is why we keep getting better healthcare, infrastructure and technology.

The critical element here is that the stability of this system hinges on profits being meaningfully circulated back to the population, traditionally by rewarding them for their labor. When this circulation falters, so does the foundation of broad-based contentment.

Where the cracks may appear

What does capitalism's value chain look like if AI significantly reduces the demand for human labor without readily available alternatives?

Concentration of productivity

In the current job-to-AI replacement efforts. Who is losing and who is gaining?

Waymo's explosive growth has increased the value of Waymo and its parent holding company, Alphabet (GOOG). Who's losing their job? Thousands of individuals who were already making low wages.

VEO3 has shown real use cases, where traditional ad agencies now can generate approved ads without having to pay any shooting companies. That's revenue away from actors and writers into the hands of, again, Alphabet.

The worry I have most is that the AI race seems to be one where the success, and therefore value capture, will be concentrated at an even smaller group of winners, leaving a massive group of unhappy citizens. If a large segment of the population finds itself without a viable path to contribute and earn, what societal responses can we anticipate?

The policy conversation needs to start

Best case scenario; we create more jobs than we lose, like with many past technological disruptions.

If this time is different; my hope remains that capitalistic societies will prove adaptable to manage this shift. Perhaps through mechanisms like UBI or other profit-sharing models that extend beyond traditional labor. I'm not looking for draconian communistic efforts. I'm looking for win-win policies that keep capitalism's value creation flywheel in effect in a stable political setting.

My point: asset owners should care about this. If leading indicators of job loss tick up, we need to be ready to act.

If business owners will be able to maximize profits by 1:1 replacing their workers with AI they will. Some already tried. That's capitalism. If that happens at scale without alternatives, I'm afraid the population will fight back by voting on more extreme ends of the political spectrum. Whether that's right or left.