To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions. For opt-out preferences & privacy policy, right-click the links below.
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
The technical storage or access that is used exclusively for statistical purposes.
The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Great interview.
Wolf I agree that the revenue model for AI is a huge risk. And AI companies are constantly bragging that their newest releases are more cost effective.
And if the AI products are eliminating a lot of jobs, while not generating a lot of revenue themselves what will be the net effect on the economy?
Just one example. I understand there are about 2 million high school and college teachers, expressed as FTE’s. What if AI tutoring was to eliminate half of those jobs. Those are huge dollars going into salaries that wouldn’t be needed. And currently AI tutors can be bought by school boards for about $100 per year per student.
That’s not a lot of money to compensate for all the lost jobs.
Good for San Francisco maybe, until AI replaces most of its own developers.
Hasn’t this been the case for every technical revolution.
1. People are employed doing a thing.
2. A technology does that thing better and cheaper.
3. People no longer are employed doing that thing
4. People get cheaper to employ doing new, novel other things
5. New novel things flourish with the increased labor availability and we improve as a whole
6. Go back to #1 and repeat.
Yeah it can be painful along that bumpy road but in general humans have a track record of improving their situation from the past
If AI fulfills it’s marketing promise your step #5 breaks because AI can do those jobs more cheaply than humans also.
We are just at a point where AI is physically manifesting in the material world. Maybe next year we will see the first large rollouts in enterprise of actual disruptive innovation using AI.
None of us can really know what the next few years hold. It seems inevitably to be disruptive if for no other reason than the fact that people want some degree of certainty about what they will do and AI is a great certainty destroyer.
Re “If AI fulfills it’s marketing promise your step #5 breaks because AI can do those jobs more cheaply than humans also.”
Disagree. There are tons of jobs that no AI or robot will ever do better than a human. This has been thoroughly explored in various places, including decades of science fiction literature.
I would add that prior labor-saving technologies also enabled:
(a) shortening of the workweek from typical 50-60 hours to just 30-40 hours.
(b) enabling retirement ages to come down and be supported by taxpayers rather than just by personal savings
(c) enabling education. children no longer need to work, and the result is unprecedented opportunity for mass literacy and education, first to age 12 (elementary school for all), then age 18 (high school), and so on.
There is nothing inherently wrong with a world in which more is produced with less human labor. The question that matters is the distribution of that production.
Who reaps the profits of an AI’s or robot’s labor? The vendor, the purchaser, or the taxpayer?
Currently, large corporations want to own all AI technology and reap all the profits. But other than those corporations, no one wants that, so that isn’t going to last.
Government will take a cut – at minimum, to fund social safety nets for anyone who becomes unemployed. Otherwise riots.
More importantly, AI will be democratized. Software will be written that allows AI functions on personal devices – anything with adequate processing capacity and adequate data.
Data storage and processing capacity are fundamentally cheap. Production capacity is already increasing to alleviate current supply bottlenecks.
As AI and computing capability expand, costs will drop and personal AI capabilities will increase. I expect we’ll have a Personal AI revolution (vs. Datacenter AI) just like the 1970s-1980s “PC revolution” vs. prior Mainframe computing.
The only positive I can think about is adoption curves tend to be slow. Yes AI can replace people. Personally I’d rather ride in a Waymo than an Uber, but there will be a large subset of the population that will still prefer the Uber.
Similarly my tech skills are 1000% better than my mother’s.
I remember being 22 and using Microsoft Excel with complex formulas and my coworkers in their mid 30s and up clicking on every cell to add them up…. learning and adoption curves are slow.
The internet eliminated tens of millions of jobs over the years in the US, from bank tellers and loan officers (online banking) on down. But it created tens of millions of other jobs, including my own. So far in history, new technology has always destroyed existing jobs, but created many more new jobs.
What everyone wants to know is if AI falls into this category, or if AI is the first technology that will be a net job destroyer.
For example, BofA just said that it hired 1,000 people to strengthen its website against attacks from AI-run attacks. Other companies are hiring to implement AI…. there is lots of hiring in other industry, such as construction, manufacturing, etc. that are involved in the physical aspects of AI. But then, there have been job cuts due to AI, such as in the video and film-making industry, or a slowdown of entry-level tech workers due to AI, etc. The signs are very mixed.
I think it will fall into this category but, like the internet, we won’t see how until we get into the Slope of Enlightenment phase. All the malinvestment in companies that have based their tech on the Transformer Model — which requires enormous compute capacity — needs to be shaken out. Then, all the teams and companies that will be — and, in some cases, already are — advancing the tech with exponentially more efficient algorithms will have a bunch of existing infrastructure (i.e., data centers) upon which to build sustainable business models. That’s when we will really start seeing the productive uses of LLM-based AI.
It seems like the leadership of the major players realize this, hence their recent scare stories of how dangerous their tech is. Probably hoping to get some type of regulation, “golden shares” or other state intervention to protect their place.
Kroger @ 3,000 job over the next 3 years due primarily to their expected leveraging of AI.
The next 2-3 years will either make or break the job market with regards to AI. In other words, does Congress step in and put some levels of control around AI-based job displacement?
We either find a way to slow it down, or the tipping point arrives a lot sooner than most expects.
Anyone who says AI can replace teachers fundamentally misunderstands teaching. Like MOOCS before them (and the printing press before then), relatively smart people who are good at independent learning can easily use AI in place of a teacher: they want to learn, they know how to do it, and they just need a source of knowledge. But this only describes a tiny subset of learners.
For students who have little to no interest in learning, the rule of a teacher is to do all the behavioral things to trick them into learning. So they are babysitters/daycare providers plus someone who can force them to listen/read and offer some negative consequences if they don’t. AI doesn’t do any of that.
We are over 5 centuries into the free knowledge era. We are over 30 years into the era in which knowledge is instantly available to anyone who wants it. The fact that no teachers have been replaced yet should be a big sign.
Teachers are in classrooms to do way more than just spit out information. This above post is on the mark.
Cool perspective!
The COVID-19 experience demonstrated the daycare value of schools. I don’t mean that in a derogatory way. Dual wage earner homes had challenges associated with the loss of this daycare feature provided byour schools.
I’m a HS Math Teacher and we’re within 3-5 years of students thinking about going off to college seeing the writing on the wall that college for a lot of them no longer makes sense.
Entry level jobs that require a college degree are drying up like crazy and this will only get worse. In 2-3 more years, we will be reading all sorts of stories about college grad hiring rates getting worse and worse. Once that happens, HS aged kids thinking about college are going to have to adapt their career planning, meaning a lot of them are going to be forced into realizing college isn’t an option.
And that doesn’t include the squeeze that will continue in the middle layers of knowledge workers who are going to continue to get displaced due to AI.
Withing two years, Congress will be forced to require employers to explicitly account for which workers are being let go due to AI adoption within their company.
We’re still in the honeymoon period where workers who learn how to leverage AI will get better at their jobs and probably get bigger raises. But this honeymoon period isn’t going to last 10+ years.
AGI will be here by the end of 2027 at the very latest. The hysteria and hype will quickly fade into a realization that either Congress acts and slows things down or it gets worse a lot faster than most people expect, and this includes teachers withing 5-7 years.
Can you publish the text to that video?
It’s not my video. It’s Adam’s video.
How to Get a Transcript on Desktop or Mobile
1. Go to the YouTube video.
2. Click “more” in the video description box to expand it.
3. Scroll down and click Show transcript.
4. The transcript panel will open (on the right side on desktop, or at the bottom/popup on mobile). You can copy and paste the text into a document.
Wolf it’s unfair that you’re not only handsome but also knowledgeable about the bond market.
“handsome” 🤣❤️❤️❤️🎇🍻
Made my day!
I have thoroughly enjoyed Wolf’s written perspectives for a number of months; but this is the first time I have heard him or seen him.
Has anyone ever seen Wolf and William Defoe in the same place?
And somehow there’s a hint of Christopher Walken here…
Dang… sure hope we don’t lose him to Hollywood.
The accent, German? Whatever the country…
If it’s his second language, his command of the English language is impressive.
(Apologies for all of the gushing :))
I’ve always thought that Wolf looks like G.E. Smith (the guitarist).
A I building out is to this society as is peanut butter to jelly. Get out of the way or get back into a Time Machine and go back 50. Hey don’t shoot the messenger. George Orwell saw it long ago.
Great to put a face to the newsletter and name…keep up the fantastic unbiased analysis ..much appreciated.
Big fan of Adam and Thoughtful Money. I have been putting bring on Wolf Richter in the comments every time I listen. Glad he finally got you on.
Wolf. Your assessment that the bottom of the K is also rising doesn’t factor in inflation. When wages don’t go up as quickly as inflation the quality of life declines. That’s the bottom of the K. Yes it’s click bait, but your assessment that the bottom is also going up is wrong.
BS. It factors in inflation. Including during the high-inflation years in 2021-2022 when the biggest percentage wage increases (in the double digits) were at the lowest levels of the income spectrum, such as workers in the hotel and restaurant sectors and other basic services with low pay. You people just ignored all the data because it contradicted your BS narrative.
I’m really sick of the clueless emotional clickbait BS being bandied about in the media because it tends to go viral, and then everyone keeps regurgitating it as if it were some divine truth.
Wolf. We’ve had over two years of real wage decline. I’m happy to be wrong but show me numbers. Don’t just say “BS” and rant about your readers being stupid. Im listening.
https://www.statista.com/chart/27610/inflation-and-wage-growth-in-the-united-states/
BS. You cannot even read the chart you posted. “Real wage” growth (after inflation) was strongly positive per your own chart from early 2023 through February 2026. It’s only during the inflation spike in March and April 2026 (= “two months” and not “two years”) that inflation briefly rose faster than wages.
This is the issue: people are clueless, and they stick to their narrative, and even when they dig up the proof that contradicts their narrative, they don’t look at their own proof that they have in their own hands, and just stick to their own narrative.
I stand corrected. I read the chart in reverse. I apologize. Thank you.
Crazy swimmer huh. My Finn dad would always swim like 3 miles out during our beach vacations, would scare me as a kid that he would get eaten out there in the Atlantic ocean. I was a swimmer too, but the competitive kind in a pool, not fond of swimming in scary deep waters.
The macro outlook scares me for the political outlook for this country. Trump was elected by appealing to angry rural citizens feeling left behind. I had a friend in town last weekend to from a depressed rural area. Nothing has changed there except things cost more. Wages haven’t followed suit because the residents are largely captive to a poor job market, so they’re getting priced out of the larger US economy further by inflation. Helping out the little guy has largely been a lie for votes with no substance, any manufacturing coming back is centralized in large pop areas with little impact for depressed rural america.
At some point, something has to change for these people, or that anger will continue to fester and come to a boil. It’s sad going to these rural areas, I hope someone figures out a breakthrough to bring them into the larger economy rather than a local depressed bubble.
Technology has always replaced workers. This can be said of much of the agricultural sector, manufacturing blue color jobs and so on. Now AI looks to replace a lot of intellectual white color “jobs” and suddenly those people are upset. I thought the South Park episode parodied this with software developers and accountants being outside Home Depot looking for jobs while those will physical skills were flying around on jets.
This can’t be labeled as good or bad but the goal would be to use technology and innovation to allow people to live more as creative human being rather than wage slaves. Unfortunately our current political, societal and economic models do not align with this. I would love to see, for example, where society along with technology creates groundbreaking medical cures and instead of it being intellectual property it benefits humanity as a whole.
““When AI Spending Starts Slowing, Start Worrying”
Just judging from the 10 yr over the past couple of days, some people are already worrying….
At least for the stock market, it’s actually not the “slowing of spending” that matters, but the “slowing of the rate of growth of spending” that matters.
Stocks are priced off of earnings models based on projected growth rates. (Some models are less formal than others, but this is also how human optimism is wired.)
So even if spending continues to go up, if the expected growth rate of that spending slows, that will reprice stocks downwards.
MW: Investors are dumping AI stocks as ‘tech wreck’ worsens. Here’s where they’re turning now.
Nasdaq already bouncing back; S&P already in the green. The selloff is already over.
There are several ways to play the AI transition:
1. Hyperscalers (Google, Microsoft, Amazon, etc)
2. Semiconductors (SEMI)
3. Energy (GRID)
My analysis is that most of the money spent by the hyperscalers will continue to flow to semiconductors and energy, which are the actual picks and shovels in this gold rush.
The K shaped economy is descriptive of what’s been happening with relative wealth. A person’s wage may have gone up 20% the past five years, but housing prices rose 50% to 200% in many places, and stock prices took off, leaving asset light folks behind.
The share of wealth going to the top 10% is increasing, while the bottom share is decreasing.
You’re changing the topic. You’re talking about DISPARITY.
That’s not what the purveyors of the K-shaped BS say. What they say is the income and spending by the lower leg (the lower 70% or 90% or whatever) are actually DECLINING, while the income and spending of the upper leg are rising.
But that is incorrect. The income and spending of both legs are RISING. But they’re rising at slower pace for the lower leg than for the upper leg, which is what I painstakingly explained in the interview.
HUGE difference.
What you are talking about is another issue: the growing DISPARITY between incomes and spending and wealth. The growing disparity is real and a big issue. But both legs are gaining, just one faster than the other – increasing that disparity. It is pure clickbait idiocy to promote this K-shaped nonsense that income and spending by the lower leg is declining. I’m sick of people promoting this shit.
Wolf, please excuse my clumsiness as I attempt to navigate your comment section. I read through the comment guidelines on your web page (I quit using my real name); but still my comment/question got bounced.
I’ll try again…
My perspective regarding disparity: I enjoy the efficiency I have gained by utilizing Amazon; and I personally don’t care that Jeff Bezos makes several billion times more than I do. And I’ll say the same about his cohorts Musk, Gates, Buffett, Zuckerberg, etc.
I am also aware that some of my fellow Americans are struggling to make ends meet. And now I pause as I type, because I also struggled in my younger years; and I don’t believe that struggling is necessarily a bad thing.
I am simply ignorant as to whether a significant percentage of our citizens are making less money than they did 30 years ago (And I promise I will continue to work on my ignorance!)
Finally now, a question: Are you a proponent of tweaking income taxes to redistribute wealth?
The only guest worth watching on that channel.
65% of households own their home, but they may still feel there’s an affordability problem if they need to sell and there are no buyers due to high prices and an unwillingness amongst sellers to drop the price. This is especially true for families that need more space for their kids because they may have to reduce the selling price, but the seller of the home they want (need?) doesn’t.
As for the K Shape comment, the lower rung may be increasing as mentioned, but as long as it’s increasing a rate lower than inflation, that’s an affordability issue.
They’ve been increasing at a higher rate than inflation. People just make up stuff because it suits their narrative. During the high-inflation years in 2021-2022, the biggest percentage wage increases (in the double digits) were at the lowest levels of the income spectrum, such as workers in the hotel and restaurant sectors and other basic services with low pay. We discussed this hear at the time.
Wolf, you’re ahead of your time and a legend in my mind. Great stuff as always.
👍
I am a software developer, specializing in SQL Server database programming. Claude Code does my job better than I ever could. My role is to copy+paste Jira ticket URLs into a session and perform whatever tasks Claude has me do. I add literally zero value to the process. Eventually my employer is going to figure out they don’t need me. Am frankly surprised it hasn’t happened already.
That’s how it started for translators, copywriters, and artists:
First they were asked to do the work with AI.
Next, they were asked to review the work done by AI.
Finally, they were replaced by AI.
This is going to happen to most knowledge workers in the next 10 years.
If that’s how it’s going to work out, it will include you, the software engineer. What’s your plan B?
If all these people lose their jobs, including you, WHO is going to pay for AI? Companies have to make revenues, but there needs to be an end-user that pays for those revenues. When unemployment is 10%, who is going to pay for corporate revenues? Not other companies because their revenues are down too because the economy is spiraling down, and they’ll be cutting back spending, meaning they’ll cut other companies’ revenues.
That’s the consequence of your scenario.
Wow Craig that does not sound good. Wish you luck. And assume you don’t post your real name. A nasty AI may send your post to the boss.
Hope it never gets that bad
What is unsettling is the disruptive speed at which things could change due to AI, and it’s being combined with so many other technologies. It’s potential use in war or other nefarious activities is especially troubling. The potential of AI to be more creative than people is also troubling. No use dwelling on the negative though I guess. We will benefit from it, but we will also have to live with the monster….Elon Musk mask for Halloween?
According to the World Economic Forum, the knowledge economy is projected to contribute up to 14% of global GDP by 2030, amounting to about $15 trillion.
Ask software engineers in large companies today, and you’ll find out that (close to) 100% of their code is now written with AI.
Not only that, but they are seeing huge gains in productivity as AI can now plan, implement, test and review the change.
Sure, software engineering is just a small part of the knowledge economy — but the upside for AI in this $15T market is huge.
That’s the reason why I’m optimistic about the semiconductor industry.
1. AI used for software development may become a nearly-free service, with lots of competition everywhere, like email, online maps and navigation, and a gazillion other services became free after the Dotcom Bust
2. and what are you and other software engineers going to do as AI expands further into your job? Do you have a plan B?
It’s a good question. Many of my colleagues are asking just that. Jury is still out for me, I’ll see if I can land another tech job, if not I’ll ride the money I made and look for other work, creative or just physical or in person.
What I’ve l heard a lot is this notion of no moat. It used to be that a big company had a moat by sheer size and capital in play. Things that took years and thousands of developers to make can be reverse engineered and output nearly function for function for a few thousand dollars. Why buy any product when you can just make it yourself to suit yourself. Take a look at the guy that put out knockoffs of the whole adobe suite for free…
I’ve built physical projects at my house using AI as a project manager and tutor, things I would’ve hired someone to do previously. Not even mentioning the one off sites I made for tracking tides and fishing at ocean beach, or the games I’ve made solo in days or weeks instead of months or years. Any expert is in play here too, finance included.
This will both cause massive inflation at the pointy end, and bring massive life improvement at the low end, where the ability to have or do something well (for yourself) is improved.
Meaning only the wealthy will get personalized fiduciary service, or finely tuned results from an elite expert, but the rest of us will get a leg up in an arena we never would’ve stood a chance in before, which will erode the middle market of scale that rose up in the last 20 years.
I think we’ll have a wildly diffuse marketplace of relationships and communities run by very small companies or even individuals, even more influencer/entertainer style content curated by single person orgs.
My guess is a whole lot of stagflation. Or maybe more precisely very polar inflation, where some aspects of execution and delivery will be wildly expensive, and assets will skyrocket, but some services and products will see their costs plummet or vanish altogether replaced by personalized tech.
The question is will AI be as effective in the hands of non tech people. How long will the vast majority of people think that AI is slop and wrong answers, data center noise and something for nerds. A decade? How long did Grandma think the Internet was an aol cd?
Can the big money players find a way to build a new moat before they are swallowed by their own creation?
Will any of us survive AI wiping out infrastructure needed for delivery of critical resources like water, power and food, triggered by misguided or intentional actors before government can patch the holes.
If the Internet showed us what the world would look like if every village idiot had a global voice, now we’ll get to see what happens when that same idiot can hack a bank or govt.
Good luck to us all.
I’m also doing 100% of my coding via AI. It still needs to be babysat extensively… for now. It seems it will still be a bit poppy as I don’t need AI toilets, toothbrushes, or q-tips.
As for a backup plan I am fortunately able to retire. Worry for the kiddos though.
LOL. I just got around to watching this. I thought the AI generated donation bugs were you.
Anyhow 20 bucks in anyways.
Mr. Richter,
I have a bit of a problem. I normally wake up at 2am and often have a bit of hard time getting back to sleep. Since I’m awake anyway, I like to watch something educational on youtube until I fall back asleep in an hour or so.
Now for the past few nights at 2am I’ve been attempting to watch your interview with Adam Taggert. But for the life of me, I can’t seem to stay awake. I start the interview, 5 or 10 minutes go by and poof……….I’m back asleep.
So my question for you is, should I be worried? Or grateful?
What’s a fellow to do?
Signed
(usually) Sleepless in Minnesota
Go to bed later and get up earlier, reducing the amount of sleep you get to 5 or 6 hours max, or even less, so you’re really dead tired when you go to bed at midnight, and live with that and get used to it. It might perform miracles.
Just finished, it took 2 treadmill session to complete watching. Thanks for sharing. My comment, prior to CC paying 1.9% cash back we used cash for everything now we want the free CC money, unless the merchant or vendor charges us 3 % for using CC. my point is the 7 trillion is inflated from historical perspective, with a normalize denominator the people paying interest is much higher and more scary.
Thanks for sharing,
Also, I like that you said something like that you would have different opinions or counterpoints than the host, and that’s what made you a good visitor. I am paraphrasing your word, but I heard It’s good to show Grace to people who see reality or express their opinions a little different from you.
Again thanks for posting