Let’s not be afraid: Schumpeter’s “creative destruction” is a source of growth.
Artificial intelligence (AI) has been a topic of debate for several decades, with often exaggerated fears about its impact on the job market and everyday life. For example, in 1968, Stanley Kubrick’s film “2001: A Space Odyssey” imagined a future where computers would control all aspects of human life, even killing them if they got in the way. Yet, more than 55 years later, human beings are still at the heart of our society and economy.
More recently, Elon Musk predicted that by 2019, we would already have autonomous cars on the road. Yet, while significant advances have been made, autonomous cars are still far from being a mainstream reality.
CREATIVE DESTRUCTION
However, it is important to consider Austrian economist Joseph Schumpeter’s theory of “creative destruction” to understand the impact of AI on employment. According to Schumpeter, innovation and economic progress are the result of a process of “creative destruction,” in which new technologies replace old ones, leading to a transformation of the labor market.
A FRUITFUL COLLABORATION
In the context of AI, it is critical to recognize that human-machine collaboration is often more effective than a machine alone. Machines can complement human skills, improving productivity and allowing employees to focus on higher value tasks. Three weeks ago, Microsoft introduced its new software tools under the name “Microsoft 365 COPILOT”, which once again emphasize people-machine collaboration.
Jobs requiring people skills such as creativity, empathy or complex problem solving will remain less affected.
During the COVID-19 crisis, for example, bank customers needed to talk to human advisors rather than rely on robots. Thus, AI did not replace human workers in this case, but rather served as a medium to help employees better serve their customers.
REPLACE REPETITIVE TASKS WITH CREATIVITY
The industries most likely to be affected by AI are those that involve repetitive and predictable tasks. In contrast, jobs requiring human skills such as creativity, empathy, or complex problem solving will remain less affected.
Of course, it is human – the term is ironic in this context – for workers to fear being replaced by automatons with artificial intelligence. Already in the 19th century, when the industrial revolution was disrupting the established order, worried workers destroyed the looms of several spinning mills with sledgehammers. However, these concerns have now been dispelled and no one today thinks of returning to the arduous task of hand weaving.
UNEMPLOYMENT AT ITS LOWEST DESPITE AUTOMATION
It is interesting to note that despite increasing automation, the unemployment rate in countries such as Switzerland, the United States and the United Kingdom is close to its historical low. This partly confirms Schumpeter’s theories that innovation and creative destruction can lead to the creation of new jobs and ultimately stimulate economic growth.
In summary, it is essential to temper our expectations and also our fears about the impact of AI on employment and recognize that human-machine collaboration is often more effective than a machine alone. Despite past exaggerations, Schumpeter’s creative destruction remains relevant to understanding AI-induced labor market transformations. It is likely that AI will destroy some jobs, but it will also create new ones, and human workers will continue to play a critical role in our economy.
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Source: Allnews | 11 Apr 2023 | Angel Sanz, NS Partners.
Angel Sanz – CIO, Head of Asset Management, Member of the Executive Committee
Angel Sanz joined NS Partners in 2012. He is Chief Investment Officer and heads the Asset Management division. He is also a member of the Asset Allocation Committee. Prior to joining the firm, he held three CIO positions at Bankia, BBVA Asset Management and M&B Capital. In the 90s, he worked as a software engineer at AT&T Bell Labs (USA). Angel holds an MBA from Lehigh University (USA) and a Master’s degree in Electrical Engineering from the University of Valladolid (Spain), for which he received a national award for academic excellence.
Founded in 1964, NS Partners (formerly Notz Stucki) is today one of the largest independent asset management groups in Switzerland and Europe. Over the past 55 years, NS Partners has developed a unique expertise in selecting the best fund managers from around the world and combining them to build robust, high-performance portfolios. In parallel, the group has built a diversified range of traditional strategies with a convincing track record.