In our latest bestseller, “Breakpoint: The Crisis of the Middle Class & The Future of Work” we explain that tech disruption usually impact the labour market in two waves. In the first wave, labour is displaced by new tech eg. the light bulb displacing candle makers in late 19th century America. In the second wave, tech creates new jobs eg. electricity leading to the birth nightlife, the gramophone and Hollywood in the early 20th century America. We lay out our hypothesis in the book regarding how AI’s impact on India is likely to move as per these two waves.
In this article, James Pethokoukis cites recent research from Morgan Stanley (which is apparently backed up by 250 years of data) which makes a similar point. He writes: “The economic stories of transformative technologies often display two important plot beats. First, expect a rough patch at some point. Canal mania collapsed in 1837. Railroad overbuilding fueled the panics of 1873 and 1893. Turn-of-the-century electrification saw speculative excess in utility holding companies. The 1990s dot-com boom went bust.
Yet in each instance, business productivity eventually surged, living standards climbed, and the prophets of permanent technological unemployment turned out to be wrong. Workers got reallocated, not eliminated. And while what those workers did changed shape, work itself didn’t disappear.
In a new analysis, “Lessons from the Five Innovation Waves That Preceded AI.” Morgan Stanley’s economics team highlights this encouraging pattern across 250 years and five broad innovation waves. From the paper: “While technological revolutions invariably bring short-term disruptions and uncertainty, they also deliver significant long-run benefits.””
Mr Pethokoukis then cites a few specific examples from Morgan Stanley’s paper which buttresses their ‘long term positive impact of tech’ hypothesis:
“Electrification and motorization helped double output per hour in a generation and enabled mass production and national consumer markets.
Postwar electronics and aviation coincided with GDP growth above four percent a year, alongside a major expansion of federal R&D.
The internet era roughly doubled productivity growth in the late 1990s, shifting investment from factories and structures toward software and intellectual property.”
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