The 2016 presidential election featured the major candidates competing over who had a more compelling job-creation program. That drove me a little crazy. It’s been clear for a long time that the biggest long-term challenge to the U.S. is a labor shortage.
From 1987 through 2007, the U.S. economy as measured by gross domestic product (GDP) grew by an average of 3.1 percent per year.
After Obama was inaugurated in 2009, he ordered the Commerce Department to produce annual ten-year growth forecasts. This was a big deal for two reasons: Previous reports had only covered five years, and we were in the middle of the worst recession since the Great Depression. So this was a potentially important change that allowed for longer term planning.
The first forecast released early that year was a rather large disappointment. The Commerce Department forecasted 1.5 percent growth over the next decade, citing labor shortages as the number one constraint to economic growth.
So seven years later, when Clinton and Trump were coming out with competing proposals for jobs initiatives, I was practically screaming at the TV, “No! It’s not jobs we need. It’s people!” During the next 15 years, the U.S. labor force grew by only 0.6 percent per year.
Economic growth has two major components: population growth and productivity. It turns out that our GDP grew by a faster than expected 2.2 percent annual rate. That’s because productivity grew at an average of 1.5 percent per year.
This brings me to the most important point: productivity.
During the first Trump administration, anti-immigration policies made it clear that we were not going to solve our labor shortages by importing people. That left only one potential solution: automation.
We are only at the beginning of the AI revolution, and already it’s making big changes. I made extensive use of it while writing this article. No, this was not written by AI. I wrote all of it. But AI is an amazing research tool, and what might have taken an hour to dig up now takes under a minute. That’s amazing!
The potential impact of AI is even more dramatic than in the 1990s, when the advent of computers on every desk and access to the internet changed everything.
ChatGPT was first introduced in November of 2022, a little over three years ago. ChatGPT is a Large Language Model, or LLM for short. It’s not intelligent, but the various companies putting out LLMs for public use have given them an interface that makes them seem intelligent.
In the three-plus years since ChatGPT, LLMs have moved from being a curiosity to being everywhere. Personally, I am now using an LLM to search for things that I used to search for on my browser. But this is just scratching the surface. Last week, I listened to a podcast in which a technology reporter constructed an entirely new basic website in roughly two minutes using Anthropic Code. My new fitness watch has a built-in AI agent that answers my fitness questions partly by using personal data taken from sensors. It can then generate tailored plans to help me reach my fitness goals.
The list goes on and on. For free, I can use any number of AI agents, and more and more devices have AI built into them. And it will only get better.
So humans have done what we have always done: adapt. Faced with chronic labor shortages, we are finding ways to continue to grow. We are using LLMs and actual robots to make human workers far more productive than ever before.
As with all productivity revolutions, many workers will be replaced by machines, and those workers will probably never find jobs as good. Humanity will likely be fine, but many individuals will not.
In 1910, one in ten jobs was on a farm. And, really, that was a dramatic improvement over earlier civilizations in which almost everyone worked at providing sufficient food. If most of a civilization’s efforts are aimed at producing food, there’s less time and fewer resources to do much else. As the number of workers needed for food production shrinks, that opens up more possibilities for humanity. The industrial revolution came about be-cause more workers were available for the new factories. And that opened the door for the next revolution: transportation. By the late 20th century, one in seven Americans worked in the automobile industry—an industry that did not exist in 1910. Meanwhile, farm mechanization meant that even fewer workers were needed for food production, and factory automation meant that the stage was set for the next revolution: the information age.
Just like those previous revolutions, the stage is now set for new revolutions. I say revolutions—plural—because AI will open the door for industries we have not yet imagined.
Recently, I listened to an interview with Dario Amodei, the CEO of Anthropic. He certainly knows more than almost anyone else about what we are doing now in AI, but also about what’s coming. He thinks that, in as little as two years, many of today’s jobs will be obsolete. He may be right. And if it happens that fast, the speed might cause difficult societal upheaval.
But I do not envision a dystopia similar to the ones depicted in the Terminator or Matrix movies, where the machines take over and humans are no longer needed. Instead, I foresee another period of rapid advancement where people are freed from their current jobs to go on to higher levels of work. The only question is, can we handle the speed? The transportation revolution took roughly 50 years to unfold. The information revolution, closer to half that. The AI revolution will likely happen even faster.
The machines are not here to take over, unless we want them to. And we do want them to take over some things. We have invented yet another labor-saving device in a long series of such inventions going back to the wheel.
Hold on tight—it might be bumpy, but I fully expect the destination to be nicer than where we are today.T
Hal Masover is a Chartered Retirement Planning Counselor and a registered representative. His firm, Investment Insights, LLC is at 508 N 2nd Street, Suite 203, Fairfield, IA 52556. Securities offered through, Cambridge Investment Research, Inc, a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Investment Insights, Inc & Cambridge are not affiliated. Comments and questions can be sent to hal@getyourinsight.com. These are the opinions of Hal Masover and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results.