The Paradox of Productivity, Part II - The Player Piano Society

AI and the Future of Professional Employment
In my last post we learned that from 1980 to 2025, technology improved the productivity of employees, but reduced the number of good jobs and workers’ earning power.  Now, in 2026, people who are knowledgeable about the state of artificial intelligence are warning that worker replacement is about to happen on an unprecedented scale.  

This image of a robot playing a piano was generated by AI.  I'm aware of the irony here.

Writing in Fortune, Matt Shumer wrote of his own experience as an AI developer. 

“For years, AI had been improving steadily. Then in 2025, new techniques for building these models unlocked a much faster pace of progress. This year, something clicked. Not like a light switch… more like the moment you realize the water has been rising around you and is now at your chest.I am no longer needed for the actual technical work of my job….
The experience that tech workers have had over the past year, of watching AI go from “helpful tool” to “does my job better than I do”, is the experience everyone else is about to have. Law, finance, medicine, accounting, consulting, writing, design, analysis, customer service. Not in 10 years. The people building these systems say one to five years. Some say less.”  

A friend on social media wrote a very similar post within a day or two of the article above.  

"I piloted the expensive version of Anthropic's Claude this weekend and we're really screwed. Anyone pretending this can't replace the majority of mid-range paid work is living in a dangerous fantasy right now.
Careers on life support:
- Product Owner
- QA/test Engineer 
- Paralegal
- Data/BI Analyst 
- Copywriter  
- Content Editor
- Any role in IT Support
- Marketing whatever 
We're not mature enough a society to have this many people out of work"

Global spending on artificial intelligence in 2025 was about $1.5 trillion, increasing at a rate of about 50% per year.  These investments are largely justified on expected cost savings for businesses by replacing employees.  But at some point, I wonder what will happen to consumer spending when many good-paying jobs have disappeared.  

The economy is already showing signs of stress for lower-income Americans.  In 2025, overall consumer spending increased by 2.7%, a slight slowdown from the previous year, and declining in the fourth quarter. Lower-income consumers faced tighter budgets and rising debt.  Credit-card debt increased faster than inflation, at 5.5%.  Delinquencies on most categories of debt rose through 2025, and the personal savings rate has declined from 6% to 4% over the past two years. 

Impact on the Economy
As I explored in an earlier post about the book “Abundance”, many workers have been left behind in the economic development of the past fifty years.  Moody’s Analytics recently reported that households with the highest 10% of income account for 50% of consumer spending.  It is the logical response of the economy to wealth inequality.  Extreme wealth inequality has existed before; e.g., in the 19th century Gilded Age, or the pre-revolutionary French economy.  I do not know how our current disproportionate economic production compares to those early ages.  But if AI greatly increases the rate of destruction of white-collar jobs, there will be even stronger division between the haves and have-nots in America.

In recent months, the expectation of what AI can do has had a major impact on the job market and in stock valuations.  The job market for software developers rapidly surged immediately post-pandemic, and equally quickly collapsed, as the capabilities of AI became better known.  Stock valuations for traditional software makers, certain internet services, and employment agencies fell abruptly.  Yesterday, the leading AI company Anthropic made an announcement about coding abilities of its Claude AI, and the IBM immediately lost $32 billion in market capitalization.

 

In my economics classes, the professors confidently predicted that new technologies would always produce new jobs.  But that is simply an empirical observation about previous economic change.  It doesn’t necessarily hold for the future.  AI has the potential for faster disruption and more complete disruption than earlier technical revolutions.  And the people put out of work by AI will not necessarily have the skills to take new jobs, if they appear.  

I’m not a Luddite.  I see no point of continuing jobs after they have been rendered obsolete.  The history of railroad employment is an example.  In 1920, there were about 2 million railway workers in the U.S.  By 1959, the number had declined to 780,000, and today, only 153,000 workers are needed to run our trains.  Around 1960, labor contracts forced railroads to continue employing workers that were unneeded due to more modern train technology, such as coal shovelers on diesel trains.  The unnecessary workers cost the railroad industry about $500 million per year, or about 5% of total profits.  

It seems to me that AI is necessarily derivative from training sets of human-generated content.  As such, AI is simply not capable of genuine creativity and innovation.  AI does have the ability to synthesize, and make connections between bits of information that a human would miss.  But, although I am no expert about AI, it seems that AI will probably not recognize new phenomena, or invent new processes for businesses.  And without creativity, technology may stagnate.  Or, perhaps AI, acting as an assistant, may give more scope to  human inventors.  Time will tell.

Artificial intelligence is necessarily derivative from training sets of human origins.  While AI may be capable of bringing ideas together in synergy, AI itself is likely to lag behind humans in terms of innovation and creativity.  

But I do believe the providing good jobs is part of a social contract between businesses and society.  Business profits should be measured as a function of how many well-paying jobs the business provides and taxed accordingly.  If the business provides well-paying jobs, great; it is fulfilling its social obligation.  If not, government can use the taxes for employment-directed programs for the public good or for job-training.  

I recently saw a conversation thread on the Reddit website.  A fellow working as a Lyft driver argued that new technology always creates new jobs.  It occurred to me that perhaps he could have had a higher-paying job if jobs had not been eliminated by new technology. Further, the job of a Lyft driver might be one of the first jobs eliminated by AI.  It just seemed to me that he hadn’t thought about the problem all the way through.

If the replacement of well-paying jobs is as extensive as expected, what will happen to consumer spending?  As noted above, half of the economy is already serving the top 10% of households by income.  What will companies make and sell when the bulk of consumers cannot afford to buy products?

 A player piano is often used to symbolize the replacement of humans by machines, as seen in the introductory title sequence in Westworld.  Kurt Vonnegut’s first novel, “Player Piano” envisioned a world where machines had replaced nearly all human labor.  Rather than a utopia, it was a dystopia, with 98% unemployment, and only a lucky few able to find meaningful work.  Wealth distribution was greatly unequal, and did not allow most citizens to engage in uneconomic but enjoyable pursuits.  It remains to be seen whether AI will create a society with better employment and more equitable wealth distribution, or whether we will have some version of the Player Piano society.  

References
https://www.bls.gov/emp/tables/employment-by-major-industry-sector.htm
https://www.bls.gov/emp/tables/real-gdp-major-demand-category.htm
https://fortune.com/2026/02/11/something-big-is-happening-ai-february-2020-moment-matt-shumer
https://www.marketplace.org/story/2025/09/17/top-10-of-earners-make-up-half-of-us-retail-spending
Player Piano, Kurt Vonnegut, 1952, 353p.

The Paradox of Worker Productivity, Part I

 In my recent review of the book “Abundance”, I wrote, “…government should help to improve [workers’] productivity and value to employers.”  Implicit in my thinking was that if workers became more productive, companies would hire more workers and pay them more.  A day or two later, I realized that my own career history completely contradicted that idea.

I worked for 26 years for a large corporation.  I spent about 15 years in middle management supervising professional-level employees.  Around 1990, I attended a company-wide managers’ meeting.  At that meeting, the VP of Human Resources gave a presentation laying out his vision of the future company.  At the time, the company employed about 3000 professional employees.  The HR manager said that thanks to productivity improvements, the company could be run with fewer employees and maintain the same level of production.  He said, within the decade, he expected that the company would reduce professional head-count by 2/3, to 1000 professionals.  And he added a stretch goal of reducing head-count to 300.

Employees are expensive.  Employees require salary and office space.  Employees require benefits.  Thanks to union negotiators, my company provided excellent benefits, including a pension plan, matching 401k plus excellent health insurance, which was guaranteed after retirement until age 65.  For the company, employees involve potential liability for injuries and occupational discrimination or sexual harassment lawsuits.  If an employee can be replaced by a widget, there will be potential cost savings, and my company took that as a guiding principle for four decades.  

Throughout my career, technology increased employee productivity.  Rather than creating the opportunity for more value by adding employees, technology simply meant the company could be run with fewer employees.  A manager with a PC no longer needed a secretary.  A geologist with a workstation replaced three geologists using drafting tables.  Information specialists were replaced by computer systems.  Workstations produced presentation-quality documents, so draftsmen and reprographics specialists were no longer needed.  Accountants were replaced by enterprise-wide software.  As people were replaced across the entire industry, they competed for the diminishing jobs and could be paid less.  Or at least, paid no more than before.

The same story was repeated across the whole corporate economy since 1980.  Technology means that businesses can be run with fewer employees, and fewer employees mean lower costs.  

So that is the paradox of productivity.  Technology and capital make employees more productive, but create a surplus of available employees.  Rather than creating more jobs and higher compensation, technology means lower employment and lower pay. 

The preceding paragraphs describe the American economy from 1980 to 2025.  Statistics show that employment increased at a compounded rate of 1.2% per year from 1960 – 2024, while real GDP increased at a compounded rate of 2.5%.  As noted in my blog post on “Abundance”, employee earnings have stagnated over the same period.

Conclusion
In my economics classes, it was a truism that new technologies always create new jobs as it destroys old ones.  This was the pattern of the industrial revolution and the automobile revolution.  Economist Joseph Schumpeter gave it a name: creative destruction.  But there’s no reason why this should always be so.  It’s simply an empirical observation.  Empiricism is always limited to prior experience and is not necessarily true in future circumstances.  In any event, the new jobs may not appear in a timely fashion, and workers whose jobs are eliminated may be unable to be trained for the new jobs.  

The human cost of technological disruption is real.  As a corporate manager, I survived a dozen rounds of layoffs myself, and was forced to lay off friends and long-time colleagues on more than one occasion.  

New technology enables higher worker productivity.   The paradox of higher worker productivity is that as individual workers become more valuable to the company, corporate profits rise, but workers suffer job losses and lower pay.  

Book Review: The Nazi and the Psychiatrist", by Jack El-Hai

 I have another book recommendation, for those who would take on a dark and serious non-fiction work.  The book is “The Nazi and the Psychiatrist”, and I know the author, Jack El-Hai.  Jack is a fellow Carleton alum and an acquaintance from an adjacent class year.  Jack’s book is a masterpiece of scholarship and taut writing.  From the 2nd paragraph, Jack makes it clear that he is writing a book in the non-fiction horror genre.  By the end, I’d say it was more in the vein of a Greek tragedy. 

The book is the story of psychiatrist Douglas Kelley, who was assigned to appraise the Nazi leaders imprisoned for trial at Nuremberg.  Kelley spent months evaluating and getting to know the war criminals, particularly Hermann Göring, de facto leader of Germany after Hitler’s death.   Kelley added a personal goal to the evaluations – to understand the Nazi mind, with the idea of preventing such people from ever holding power again.  Kelley’s conclusion was that although these particular men all showed neuroses and idiosyncrasies, there was no general “Nazi mind”.  Kelley thought that people like the Nuremberg defendants exist in every walk of life, and he concluded that it could all happen again here, in America.  (The term “psychopath” was not coined until after Nuremberg, but Kelley later used the word to describe the Nuremberg defendants.)  
 

A psychologist, Gustave Gilbert, was also assigned to evaluate the prisoners at Nuremberg.  Gilbert, trained in social psychology, not psychiatry, was fluent in German and Jewish.  Gilbert assisted Kelley by providing translation during examinations, and also conducted personality evaluations independently.  Gilbert disagreed with Kelley’s conclusions about the “Nazi mind”, finding that the defendants shared a narrow personality profile, showing pathological self-interest, lack of regard for external standards of behavior, lack of capacity to  feel guilt or concern for the suffering of others.  The dispute with Gilbert continued throughout their professional lives. Modern psychological reviews have concluded that they were both right.  The Nazi defendants were psychopaths, as Gilbert asserted.  And such psychopaths are found today in every walk of life, as Kelley asserted.

Kelley’s story is a Greek tragedy because his arrogance and hubris were the source of his downfall.  Kelley had a monumental ego, and it shaped every facet of his life, before and after Nuremberg.  The rapport that Kelley found with Göring was perhaps founded on the similarity of that aspect of personality.  This is not to say that the men were alike in any other way – Kelley had a well-developed moral sense, and Göring none at all.  But Kelley had a “big man” self-image, not unlike many men of his era.  Kelley imagined himself tougher than other men, which gave him a penchant for exploits and personal experiments that were unquestionably unwise.  Like other egoists, he thought he could “handle it”.  It’s my notion that Kelley’s personal experimentation with a variety of “truth serums” and his decision to undergo a long-period experiment in oxygen deprivation may have contributed to his issues with mental health later in life.  It’s well-known that people who suffer chronic brain trauma or dementia are prone to the kind of behavioral disorders that Kelley exhibited about a decade after the war.  For whatever reason, in the final chapter of his life and the final chapter of Jack’s book, Kelley’s behavior became erratic and aggressive.   Kelley ultimately took his own life, using the same poison as Göring.

A movie, “Nuremberg” was made from Jack’s book, and released in November of last year.
Jack wrote his book in 2013, well before our current political situation developed.  But it’s impossible to read the book without thinking about comparisons between the figures in the Nuremberg cells and some of our political leaders today.  

By the way, if you look to buy the book, be advised there is a copy-cat book published in 2025 with the title “The Psychologist and the Monster”, also about Kelley and Göring.  Make sure you buy the right book.

The cover art represents a Rorschach ink-blot over the photos of Kelley and Göring.