Creative destruction in the age of AI

Imagine an economy that, for decades, had no growth. Standards of living that never improved. Wealth and money that remained dormant.  

In our modern era, the concept of sustained growth is considered commonplace. But in the annals of human experience, economic progress is unusual. The norm has been a lack of sustained growth or acceleration.  

Last week, the Nobel Prize in Economics was awarded to three laureates for their work on innovation-driven economic growth, including advancement by way of creative destruction.  

Creative destruction is the process of abandoning established protocols, norms, and doctrines, upending legal structures, and sunsetting ideas and businesses in service to innovation. For innovation to flourish, so the Nobel-winning theory goes, companies that foster innovation eventually will supersede companies that don’t. 

The concept of creative destruction has been around for decades, but it has taken on new meaning with recent advances in artificial intelligence. 

Generative AI promises to be one of the most economically transformative technologies in human history. By enabling regenerative applications, it can spur even more technological creation and innovation, continually feeding productivity and new advancements. Offshoots of generative AI, such as computer vision, machine learning, and large language processing will generate their own new technologies and advancements. 

But economic theory holds that AI’s creative potential can’t occur without disruption and destruction. Transformation isn’t about only the “what” of AI; the “how” will make all the difference. 

Society will need to restructure laws, regulation, and norms to make room for an AI transformation. The workplace will be forced to adjust to the demand for new skills and the constant evolution of job tasks and responsibilities. Economies will have to adapt to the enormous energy needs of data-fueled technologies. 

The question is how?   

When it comes to the workplace, the latest issue of Today at Work from ADP Research examines what might be required before AI can put down roots and advance productivity.  

In our cover story, we show that frequent AI usage on the job increases worker engagement and motivation. But those same heavy users of AI also report feeling disconnected and less productive. These findings are consistent with creative destruction theory and its view that new workplace technology requires getting rid of old ways of working. 

For my HR friends, that means it’s time to dust off your change-management handbooks from the pandemic and retool them for the coming AI boom. Once again, you’re on the front lines of change, but worker transitions, skill development, and task restructuring will be your new battle cries. 

My take 

We’re still in the early innings of the AI game. For all its promise and potential, the technology isn’t yet ubiquitous on the job. We still conduct knowledge work using computers, phones, books, and even paper. Autonomous vehicles and robots are making great strides but remain limited by the physical environment. Massive data demands are challenging our energy infrastructure and protocols.  

Still, we have entered an innovation cycle that could be the most consequential in human history. We might focus on AI’s extraordinary new acts of creation, but it is the destruction —of old ways of working, old ways of thinking, and old ways of engaging — that will make the technology truly transformative. 

The week ahead 

Thursday: While the government shutdown continues, we get some meaningful private-sector data today. In August, the pace of existing home sales reported by the National Association of Realtors was mostly flat month over month but up 1.8 percent from a year earlier. Mortgage rates as reported by Freddie Mac have retreated from post-pandemic highs. If lower rates and greater inventory continue, they could lift the fall housing market.  

Friday: The shutdown briefly stopped data collection for the Consumer Price Index from the Bureau of Labor Statistics, but work on this series has resumed, and the report will be published Friday. When we last checked, CPI was up 2.9 percent in August from 12 months earlier. Core CPI, which is stripped of volatile food and energy prices, was up 3.1 percent. Inflation is about where it was last year, with no progress but, so far, no signs of acceleration either. I expect another glass half full, half empty report for September.