So many companies cut their workforce as much as 10-15% citing that those jobs can be fully automated by the use of AI but I am still waiting to see any meaningful price cuts of their products from the said companies, etc.
Otherwise this will mean that they are doing this just to increase their profit margins and please their shareholders and don’t care about their customers or workforce.
Nope. Worker productivity has increased many fold over the last 50 years, meaning each person can produce many times more goods.
Wages have been stagnant and cost of living is through the roof, despite all of this increased efficiency, productivity, fewer workers and much cheaper operating costs.
We’re fucked lol
But the number, and wealth, of billionaires is way up!
“For a beautiful moment in history we created a lot of value for shareholders”
Genuine question. Why hasn’t free market forced the prices to drop? If company X makes Y twice as cheaply, it could drop its prices like 20% and having way more customers and way higher profits. Why hasn’t this ever happened?
To some degree barrier of entry. Let’s say I want to create a smartphone. I know it’s possible to do it cheaper, without selling customer data or with special features.
You would need crazy amounts of start captial to even enter the market and the current leaders would make your entry as miserable as they could with huge sales and temporary minor pro consumer moves.
If you could get the captial you would probably fail there or cave and accept some kind of deal where you become rich and your company gets ingested and dissolved by current market leaders.
Are you discovering capitalism now?
Your first mistake was thinking large companies care about customers - you’re just an obstacle to your wallet
Workers are just obstacles to their labour
The most amount of your money possible should spend the least amount of time possible in your bank account. In fact, you’re probably a terrorist if you don’t simply sign over your entire monthly income to BigCorp, you terrorist.
Just like paying decent wages is just seen as a loss of money for them.
My father once tried to tell me that capitalism was fundamentally about making people happy. Because, see, the whole point is bringing to market a product that people want to give you their money for. That’s the whole point, you see. The people wanting things. The money is just a by-product, you probably shouldn’t pay too much attention to it. It’s not like another word for money is “capital” or anything.
What a riot.
Otherwise this will mean that they are doing this just to increase their profit margins and please their shareholders and don’t care about their customers or workforce.
Oh my sweet summer child… that’s exactly what it means. Always has.
So buy ETFs
If you were to follow Adam Smith to the letter, it will Eventually® get cheaper: lower production cost leads to increased supply, and unemployment leads to decreased demand. Both forcing the prices down.
In practice, though, there are at least two problems with this reasoning:
- The hand of the market has Parkinson’s. Sure, it might “eventually” put things in place, but before that the hand will keep shaking things up and down, while people still need to live.
- Smithsonian supply and demand assumes an infinitely competitive free market. There’s none - and specially not in this current situation, where you got oligopolies everywhere, and plenty services+goods have huge natural costs of entry.
In those situations I’d simply ditch Smith and look at Marx instead.
This. The invisible hand doesn’t work if monopolists buy control of all the fingers.
I think Smith would probably prefer playing ball with Marx over whatever this hellscape is
Got any book recommendations on this topic?
Capital. It’s the biggest and best for a reason.
If that’s too daunting, read Wage Labor and Capital as well as Value, Price, and Profit. Both combined are far shorter than 1 volume of Capital.
Cowbee already answered it. But really - I recommend going straight to the sources: The Wealth of Nations and The Capital. Preferably in annotated versions, specially for Marx as it’s a bit harder to digest (sadly I can’t recommend a specific one as I didn’t read either book in English).
Otherwise this will mean that they are doing this just to increase their profit margins and please their shareholders and don’t care about their customers or workforce.
All for profit business moves are always in the direction of lowering the cost to maximise the profit.
There have been instances where shareholders have removed executive officers because they wanted to go down that path but that goes against the priorities of the shareholders.
If I recall correctly, the shareholders also can and will sue you if you make a decision that earns them less money than if you had done something more profitable for them. So the companies have a legal incentive to only serve their shareholders.
The core thing the rich left out when they invented “Trickle Down Economics” was that it’s not money that trickles down onto us.
Same goes for efficiency or productivity improvements. Those haven’t done to the US workers since Nixon, and definitely not since Regan.
Trickle down wasn’t invented in the 1980s. It was a rebranding of what was previously pilloried as horse and sparrow economics in that if you let horses gorge on oats, some undigested oat will pass through their systems and be deposited in the fields for the sparrows to eat.
Gee, I wonder why they rebranded.
Far more accurate lol. Nothing’s trickling down except some half-digested oats covered in horseshit
You’re correct. I’d forgotten about Horse and Sparrow.
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Why the hell would they do that when their customers are already willing to pay the current prices?
Suppose you make widgets at a cost of $50 and sell them online for $100 each. Through the use of AI, you were able to fire half of your employees and now the cost of producing a widget is down to $30, a net saving of $20.
Why would you choose to lower the price of the widget from $100 to $80 instead of continuing to sell the widget at $100 and pocketing the $20 for yourself? What incentive have you got to reduce your price?
It may sound cold and cruel, because it is, but this is just how capitalism works. It is not in their economic interest to reduce their prices.
I never heard of any company promising price cuts due to AI and layoffs. Even if they had, I wouldn’t have believed it one bit.
Often companies don’t charge based on productions costs, they charge based on what they can get people to pay. If every competitor in an industry agrees to do the same there’s no incentive to lower selling price. The company doesn’t have to worry about customers leaving for a meaningfully cheaper competitor because everyone is charging as much as consumers will bear. Without that “best/cheapest” outside pressure any efficiency increases can be put into lowering costs like labor and thus increasing profits. It’s why prices don’t drop and suddenly there’s a lot more people within a few missed paychecks of serious trouble (the economy being roughly tuned to keep the most people possible paying as much as they can sustain).
Disclaimer: this is just my two cents, with some research but admittedly not a lot and no formal economics education. Feel free to tell me if I’m wrong.
They are doing this just to increase their profit margins and please their shareholders and don’t care about their customers or workforce
No no, the value proposition is not that it’s cheaper. It’s more consistent. 24/7, same output, no sick days or vacation, no own opinion… It does what you tell it, to the T.
The cost is the same and paid by the companies to the ai suppliers. Same as with the medication that cured hepatitis. The pharmaceutical company calculated the total cost of care for a terminal hepC patiënt, and then set the price of the medication to 80% of that… it’s cheaper so we’re the good guys.
Corporations will charge what the market will bare.
Haha, saying that it does everything to the T shows how little you have used generative AI, as it seems to hallucinate every now and then or return inconsistent results on more complex prompts.
And the worst part is that the AI is still like a black box and it is extremely difficult to compare the quality of different prompts, as it will return all the time different outputs if you ask it the same thing.
Additionally, I truly believe we are currently in the AI honeymoon period where people have extremely high expectations about the capabilities of the AI and we will soon reach a threshold of what the generative AI can achieve which will be like a awakening for the whole industry.
Just look at the self driving cars who were predicted to show up on the streets and we still don’t have a full Level 4 capable car.
It was a hyperbole, but perhaps I should have said “it is good enough for many tasks”.
Sure are a customer service rep it might give a customer the occasional refund, or as an HR rep it might award some extra leave. The bottom line is that it does not need to be perfect, humans are not either.
And the honeymoon period, for sure. A lot of people project their wishes on ai, and the selling people are more than happy not to correct them. And as long as Space Karen can get away with selling stuff that has not panned out and race 0 reprecussions… why wouldn’t others do it.
The examples we (the collective we) get from those at the perceived top of our society, is blatant lies, Grift, theft, more lies… and it pays off! Companies selling AI are no different, there is no downside to over promising and under delivering.
But I stand by the reason why this is not going to bring proces down.
Buy ETFs then
Once the labor force is truly laid off en masses as AI gets better, then competition will force prices lower, dramatically reducing margin for profits. It’s the Tendency for the Rate of Profit to Fall, you just have to wait a few years for the full effects.
10-15% cuts are nothing compared to what may come.
You are so very naive
How so? This is basic Marxist analysis.
