There are two sides to an income statement.
Obviously, any mention of accounting will put many to sleep. I understand this is not the most exciting of topics. That said, it is crucial for people to understand.
Failing to grasp some of the basics of accounting causes an assortment of issues for people. It also leads them to believe in some things that can easily be debunked.
When it comes to technology and its impact upon the future, we have to consider this financial statement when analyzing what is taking place.
At the top of the technological discussion is the anticipated pain that could come from the AI apocalypse. Job losses might skyrocket, sending unemployment past the Great Depression range. We are already seeing signs that job growth is dwindling.
It is a situation that probably will accelerate in the future.
Source
How Deflation Will Help To Offset AI Pain
What happens when the jobs go away?
For people who believe in this idea, it is a question of utmost importance. After all, nobody can deny that consumption is a considerable component to the economy. This means that, to consume, people often spend money derived via income generation. For the average household, this is the wages received for work.
If AI disrupts the labor market (eventually being joined by robots), how could people afford anything? This leads to calls for UBI or some other form of distribution.
While not providing a full answer, we can start to ponder the overall impact by looking at the deflationary nature of technology.
Over the last 40 years, communications, images, music, video, and knowledge all saw major deflationary spikes. There was a time when each of these carried a significant cost.
The next decade will see this list expand. What happens when transportation costs are a few dimes per mile?
Technology tends to obliterate that which is not protected. What this means is that government, healthcare, and education are likely not to experience massive job loss. Regulation and projection serves to protect jobs, at least temporarily. It also allows inefficiencies to exist.
Nevertheless, since government is involved, via regulation, change comes slow.
That said, everything else is on the table.
Price Reduction
Part of the deflationary equation is the loss of jobs. That is a deflationary activity. Since payroll is often the largest expense, anything that can be done to cut is often undertaken.
Here is where we see the impact upon prices.
There are a few options when this occurs. First, is to add to the bottom line profit. CEOs love this one and will do it for as long as they can get away with it.
Second, is to roll that into the prices and slash costs to customers. The third is a blending of the two.
Competition often drives the decision. While a CEO wants to place things towards that company bottom line, sometimes others get more aggressive in the market, using the gains to grab market share. Aggressive pricing by competitors forces the hand of the first company.
We saw this with telecommunications. As new technologies emerged, price wars took place. This didn't happen at the start but as saturation occurred, companies looked to pillage others' customers.
If we look at the impact of AI across the entire spectrum, there will be massive deflationary pressure. This will not offset 100% of the job loss. It will, however, likely soften the blow. Companies that eliminate 10,000 employees and replace them with robots are saving a great deal of money. Retail often has great gross profits but miniscule net. Their costs are far beyond just COGS.
Labor is naturally a large portion of this. Robotics is already shifting things around. With the agentic age starting, we will see how this will further impact the numbers.
Posted Using INLEO
competition and profit margins are key
Congratulations @taskmaster4450! You have completed the following achievement on the Hive blockchain And have been rewarded with New badge(s)
You can view your badges on your board and compare yourself to others in the Ranking
If you no longer want to receive notifications, reply to this comment with the word
STOPThere are some excellent considerations in this post. Over the last 40 years, entire sectors such as communications, music, video, and imaging have seen prices plummet to near zero. I also worked in the music industry as a hobby and saw prices actually drop to zero. With the advancement of AI and robotics, this effect could spread to many other areas. I myself have started using artificial intelligence software at work, no longer requiring certain things from suppliers. Ultimately, we hope the following will happen. AI cannot stop at the jobs being lost, but must consider the whole picture: lower wages but also lower prices thanks to technological deflation. Your reasoning is excellent, as always. You've shifted the focus from just wages to the relationship between income and prices. We often forget that well-being also depends on the cost of living, not just how much we earn. Thank you for keeping us updated and for making us think.
Great analysis on tech deflation offsetting AI job losses.
In Cuba we’ve been living the inverse experiment: hyperinflation in fiat, but deflation in crypto purchasing power — 1 HBD still buys the same 6 months of internet today as it did a year ago. It’s a real-world case of how deflationary assets behave in completely closed economies.
Have you considered digging into stablecoin performance as a deflation hedge in markets with capital controls? Data from Cuba, Venezuela, or Argentina could show whether HBD/Hive are accidental proof-of-concept.
Curious to hear your take on that.