A diagnosis with no way out is just a more sophisticated despair.
| Lough For Ever
FOBO
A new term for our times: FOBO, or ‘fear of becoming obsolete’. This spirit haunts the corridors of the workplace under the specter of AI.
I first encountered the concept in an Economist piece1, in which Bill Winters became the poster child for heartless capitalism in the age of AI job threats.
Bill Winters, the chief executive of Standard Chartered, an emerging-markets bank headquartered in Britain, made waves recently when he talked about a planned 15% reduction in back-office jobs over the next four years. Four words in particular landed him in trouble: a reference to the replacement of “lower-value human capital” by financial capital invested in automation. The kerfuffle provides an instructive case study in a problem now faced by almost every manager: how to talk about the effect of artificial intelligence on jobs.
I doubt he will live down the dubious distinction of saying out loud what corporate boards and the C-suites have been saying — and calculating —behind closed doors.
The Economist continues [emphasis, here and above, is mine]:
Even if the numbers do not point to widespread lay-offs yet, an AI backlash is well under way. It has spawned the acronym “ FOBO ”, for “fear of becoming obsolete”.
A literature review by Magnus Sverke of Stockholm University and his co-authors—published in 2019, before the start of the generative- AI age—found that [job insecurity] is generally associated with worse health outcomes and decreased job satisfaction. But firms suffer, too. In theory, job insecurity might benefit organisations if it spurred greater employee effort. In practice, it seems to lead to impaired performance.
A paper by Wen Wang of the University of Leicester and her co-authors analysed data from a national survey of British employees and employers, covering over 16,000 respondents at 1,100 organisations. The researchers found that objective measures of job insecurity, such as cuts in working hours, were generally associated with lower levels of employee commitment, but that this effect was weaker if workers viewed bosses as being honest, reliable and fair.
In one way, Winters was right: by increasing job insecurity, he decreased productivity and therefore the value of those made more insecure.
The anonymous author of this Economist piece starts by acknowledging the inherent adversarial nature of workers and management, but then slides into defeatism, asserting that governments will have to clean up the mess made by companies dumping the newly ‘obsolete’.
Firms and employees have different incentives—they are not all in this together. And the burden of managing widespread disruption will fall largely on governments.
Alternatively, governments could get ahead of this catastrophe, regulate the wholesale rollout of AI, slow the transition, and give people more time to transition careers where necessary.
Remember the China Shock's impact on blue-collar manufacturing, which rusted out manufacturing industries and from which the Rust Belt still has not recovered, 25 years later. A similar AI Shock may be on the near horizon.
AI Shock
Annie Lowrey, earlier this year2, tried to assess how bad a massive downturn in white-collar work could get, and she starts by saying no one knows:
Businesses really are shrinking payroll and cutting costs as they deploy AI. In recent weeks, Baker McKenzie, a white-shoe law firm, axed 700 employees, Salesforce sacked hundreds of workers, and the auditing firm KPMG negotiated lower fees with its own auditor. Two CNBC reporters with no engineering experience “vibe-coded” a clone of Monday.com’s work-management platform in less than an hour. When they released their story, Monday.com’s stock tanked.
I don’t think anyone knows what will happen, or even what is happening now. AI technology is changing at an exponential pace, and changing the workforce in a thousand hard-to-parse ways. But if AI quickly eliminates white-collar work, the country is going to end up in something much stranger than a downturn, and something much harder to recover from too.
[..]
If white-collar layoffs cause a downturn, Washington might not be able to restore hiring and lift consumer spending as it has done before. Businesses wouldn’t need the skills workers possess. Firms wouldn’t want to hire the legions of accountants, engineers, lawyers, middle managers, human-resources executives, financial analysts, PR types, and customer-service agents they just laid off. (Writers would be fine, I choose to believe.) The United States would have a “structural” unemployment problem, as economists put it, not a “cyclical” demand problem.
She quickly shifts from the macro to the micro view: away from mass economics to people and their lives.
If AI eliminated the need for office work, many people would be unemployed for years; their earnings would potentially fall, their mental health would deteriorate, and their chance of finding a new position would diminish with every month that passed. Plus, the unemployment system isn’t designed to support six-figure earners. Most state payments max out at $500 or $600 a week, a quarter of what many upper-middle-class employees earn. Young workers would face their own challenges: The pool of entry-level white-collar jobs would shrink, as it already is, pushing recent graduates’ income down for years, even decades.’
She makes the obvious comparison with the rise of the Rust Belt:
White-collar workers would go through what blue-collar workers went through beginning in the 1970s. Advances in machine technology improved productivity and depressed employment in Detroit; Pittsburgh; Gary, Indiana; and Worcester, Massachusetts. Rust Belt communities fell apart and never recovered. Then China joined the World Trade Organization, and globalization spurred another round of job losses, causing even more permanent damage. Affected workers ended up poorer, less happy, and less healthy. They died sooner. Their kids were worse off too.
Retraining/upskilling has a terrible record for blue-collar workers, and for jettisoned white-collar workers it might be worse: a 50-year-old accountant might not be open to becoming a plumber, for example, and a 30-year-old middle manager at a software company might not want to become a nurse.
And UBI is no answer; just a band-aid [emphasis mine].
UBI is a dystopian outcome, not a utopian one. For families to thrive in this new post-work paradigm, the government would need to redistribute a lot more than $1,500 per person per month, necessitating confiscatory taxes on corporations—taxes they would fight tooth and nail. The bigger problem would be that Americans would hate a world without work, where the jobless rate floats at 30 percent instead of 4 percent. Many Americans like working.
And what are the societal implications of widespread unemployment?
Long-term unemployment destroys people’s mental and physical health, and generates toxic societal unrest. Politicians love saying that Americans want a hand up, not a handout—and they aren’t wrong.
Lowrey doesn’t explore the unrest angle very deeply, but the unemployed elite is a well-understood powder keg, a source of revolution.
Edgar and Co, in Surplus Elites and Revolution, looked into historical revolutions where ‘elite overproduction’ (to use Peter Turchin’s term3) led to countries being turned upside down:
What happens when elite supply vastly outstrips elite demand? You get a massive pool of highly educated, hyper-ambitious, wealthy “game-losers.” These frustrated individuals become counter-elites. Because they cannot enter the existing structure through traditional means, they have a rational incentive to use the “popular immiseration” (the angry, underpaid working class left behind by the wealth pump) to attack and consequently overturn the system. This oversupply of surplus elites fuels the bitter ideological warfare seen in media and politics. Factions of elites weaponise populist anger to destroy their rivals through the dry, deadwood created by popular immiseration, and the desperate leaders willing to strike the match are produced by elite overproduction.
We’ve seen the glimmerings of populist anger pulling the US and Europe into warring camps, already. Now push millions of well-educated, relatively flush, and now furious ‘elites’ into a growing pool of joblessness.
Lowrey ends ambivalently:
I don’t really think society will come to this. Throughout history, people have used technology to become more productive and prosperous without reducing the demand for human labor overall. Then again, maybe I’m just in denial.
Tell it to those who lost well-paid jobs in the manufacturing centers of the Rust Belt, and who have never rebounded. But they didn’t have a wave of well-educated, ambitious elites to lead them.
