Industrial Revolution 2.0: Artificial intelligence can be a boon for mid-sized companies

Artificial intelligence (AI) will not put millions of people out of work, but instead offers a unique opportunity, says David Autor of the Massachusetts Institute of Technology. In an essay, the economics professor puts forward the statement: “AI could help rebuild medium-sized companies.” Blogger and economist Noah Smith puts it succinctly: The computer has harmed the average person, and now AI is bringing the “average person’s revenge.”

With AI, what happened with the Industrial Revolution will be repeated, explains David Autor. This revolution, although late, was a boon for moderately educated people.

At the time, they were able to replace highly educated professionals. Because their complex work was broken down into many small, often quite simple steps for mass production. What was previously only done by an elite of craftsmen could suddenly be done by the average person.

This division of labor allowed industry to produce increasingly cheaply. What was once a luxury for a few became normal for many: kitchens full of appliances, closets full of clothes and apartments full of furniture.

Over time, mass production changed and tools, processes and products became more complex. New skills were needed, for example in assembly, welding or calibrating precision instruments. Outside the factory floor, in offices and administration areas, telephone operators, typists and accountants were in high demand.

This created a wide range of jobs for people with a normal education. Together they formed a new class of professionals: experts in mass production.

It was a curse for the artisans. They did not necessarily become unemployed and also benefited from the new, unprecedented prosperity. But the specialist knowledge they had built up over the years was devalued and their social status weakened.

In the past, they made everything individually: tailors made clothes and shoemakers made shoes, watchmakers made watches and blacksmiths made firearms. Now this was all made in factories, by casual workers.

Craftsmen were the losers, workers the winners. Then came the computer age.

In mass production, people with mediocre training often had little discretion in their work: essentially, they had to complete a series of commands, quickly and reliably. This routine work was vulnerable to automation: it could be turned into programs by software engineers and performed by computers more cheaply than ever before.

Millions of jobs were automated and skilled workers with mediocre qualifications were driven out of offices or industry. They moved into service industries, such as catering, security, cleaning or personal care. The new work was generally lower paid and the training requirements were minimal.

In the service sector itself, the simpler tasks cannot be done by computers as they require skills, communication and common sense. But the supply of labor increased and already low wages came under further pressure.

In the United States, 60 percent of adults without a bachelor’s degree had to resort to low-skilled, low-paying service jobs. Economic sociologist Daniel Oesch of the University of Lausanne writes about Switzerland: The big losers of recent decades have been working-class and lower-middle-class people who made their money as office assistants or industrial workers. Their tasks are most automated or outsourced.

The computer is therefore a curse for people with an average or low education. But as David Autor writes, it is almost a “divine gift” for a narrow layer of highly educated experts in law and medicine, or technology and natural sciences.

They could obtain and process information more quickly, leaving more time for actual analysis and final judgment. This made this judgment more accurate, thorough – and ultimately more valuable. For example, when determining the treatment plan for a cancer patient, writing a legal briefing or developing software.

The computer has led to a concentration of decision-making power that has never existed before, writes David Autor. As a result, the salaries of such experts have increased much more than those of people with average education. It set in motion a four-decade trend of increasingly unequal incomes.

In the computer age, the average people are the losers and the experts are the winners. With AI, it could change things again.

Because AI can be trained, learn from experience and then make judgments that previously only human experts could. This ability is still in its infancy, but it is AI’s “superpower.” Your main task will therefore be to advise, coach and support the application of professional knowledge.

Today, AI already helps with decision-making in peripheral areas of daily life. The email program makes suggestions on how to complete a sentence. The smartwatch asks if you have fallen. The car gives the steering wheel a push to get back on track.

And this superpower increases the performance of all people, but that of the average person more than that of the intellectual high flyer. David Autor states: “AI narrows the productivity gap between low- and high-skilled workers.” This result came as a surprise to researchers when they conducted scientific experiments with AI, but it has been demonstrated time and time again.

For example, when AI was used in call centers: the skills of less qualified or poorly qualified workers improved dramatically, while those of better qualified workers barely improved. The same applied to writing lyrics. And so it remained, no matter who was tested, whether it was a student or a consultant, an advertiser or a manager.

“AI offers the unique opportunity to reverse the trends that computers have initiated,” the author writes. AI will reopen the work of highly qualified experts to the masses. Job quality for workers without a university degree will improve again and income inequality will decrease slightly.

And just as mass production made consumer goods cheaper back then, AI could help solve today’s challenge: high and rapidly rising prices for important services such as healthcare, law or higher education. Nowadays, according to the author, these are monopolized by guilds of highly qualified experts. AI could ensure that their expertise becomes less scarce than now and costs decrease.

All this is just a possible and not inevitable consequence of AI. Like all technologies, AI is just a tool that society must use correctly. It is not a predetermined fate that will inevitably befall humanity. David Autor quotes the French philosopher Simone de Beauvoir: “Fate triumphs as soon as we believe in it.”