This paper from Alex Rampell, GP at venture capital firm Andreessen Horowitz, makes an interesting case for how AI may soon usher in a new era of very disruptive (but profitable) economic alchemy—by converting capital into labor.
The logic goes like this: the era of cloud computing services began in the late 1990s, when firms such as Peoplesoft and Workday, for instance, digitized HR records, storing the information in databases which licensed users could then access through an online interface. The old-fashioned HR filing cabinet disappeared, or at least became smaller. The same thing happened in many other departments, from accounting to sales. The idea was to make human employees more efficient. But there still were humans in those roles. What will happen as AI enables the same companies providing the cloud services—or new companies, for that matter—to provide the actual functions of an HR associate, or that of other white-collar workers whose records have already been largely digitized into the cloud? At that point, firms will have not just substituted one form of capital (i.e. a filing cabinet) for another (i.e. computers and code), but will have converted capital into labor.
Reassuringly, Rampell does not see this as a threat to white-collar labor overall. He believes “AI jobs” will grow concurrently, as will opportunities for efficiency and corporate profits. And the pricing models currently built around user licenses may evolve as well, since the users themselves may be AI.
“But what is most exciting about the AI revolution is that the enterprise software market — which looks big at $300B/year in spend — is infinitesimal compared to the white-collar labor market, at many, many trillions of dollars a year.”