AI Will Not Kill the American Worker

There’s a lot of tech news that has come out in the last week or two… such as yesterday’s update that Microsoft (MSFT) will be letting around 9,000 employees go, mostly from its Xbox (video game) division.

That’s on top of the 6,000 layoffs it already conducted earlier this year.

To be clear, this has nothing to do with budget concerns as far as I can see. Microsoft reported third-quarter results only two months ago, with significantly better-than-expected earnings per share of $3.46 versus $3.22.

Revenue, meanwhile, was $70.07 billion instead of the predicted $68.42 billion. Plus, it rose 13% year over year. And net income rose 17% to $25.8 billion.

Oh, and the company has just over $28 billion of cash on the books.

In short, Microsoft isn’t hurting for money.

Instead, it says it’s trying to streamline the process between contributors and executives. As Phil Spencer, CEO of Microsoft’s gaming division, explained:

To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness.

Translation 1: You’re fired.

Translation 2: Artificial intelligence (“AI”) is allowing them to cut out middlemen left and right.

I recently mentioned another example of this in Klarna, a Swedish financial tech company that’s slashing its workforce. Thanks to AI, it has reduced its employee count from 5,000 to 3,000.

Bill Gates told Jimmy Fallon in March that AI would make human engagement obsolete “for most things.” It’s a scary thought, but I don’t think it’s an accurate one.

AI is certainly a game changer – even a disruptor. But I expect the U.S., at least, is on the right path to handle it well.

This Time, It’s (Somewhat) Different

Seth Godin, best-selling author of books like This Is Strategy: Make Better Plans and This Is Marketing: You Can’t Be Seen Until You Learn to See, blogged yesterday about how:

Plato was sure that the invention of handwriting would destroy memory, and I’m confident there were scribes who thought that the Gutenberg press was the end of civilization. Yet, all around us, there are writers who use spell check, guitarists who use electronic pitch tuners, and photographers who use digital cameras.

Productivity wins out.

He also mentions the invention of laser printers, which ended the typesetter profession… streets that are paved with machines instead of by hand… and cars that allow us to drive from place to place instead of walking or riding a horse.

In each case, he points out, some people did lose their jobs. Others bewailed the theoretical end of the world.

And yet humanity lived on anyway. They adapted and advanced with and because of the changes.

Therefore, it’s reasonable to conclude that humanity will do the exact same thing now. It’s not any different this time around, Godin argues.

It’s a compelling argument, but I do think it has two flaws to it:

1. In all the cases he cites, one industry was targeted at a time. So society had much more room to rearrange itself.

2. Previous historical disruptions have actually created jobs, with expertise created across entirely new industries. AI’s ultimate potential involves eliminating human expertise completely.

Those two factors make a difference.

Where do out-of-work accountants turn to if most other financial positions have also been wiped out? And “learning how to code” (i.e., studying for a whole new trade) won’t really be an option since so many other sectors will be AI-dominated as well.

With that said – and call me an optimistic fool if you’d like – I still think I’ll be proven correct… I still believe society will survive this latest change.

In fact, I think it’s going to thrive because of it.

AI Versus Humanity (Humanity Wins)

I know that, from an investor perspective, it’s hard to see anything but dollar signs in artificial intelligence. But, as I’ve mentioned in previous articles, that’s not necessarily how others see it.

Don’t forget about the Hollywood writers and actors strikes of 2023…

The United Auto Workers strike the same year…

And the dockworkers strike last year and into 2025.

Each one involved industry employees fighting back against what AI would do to their livelihoods. And every single one managed to set boundaries for how it was used.

In Hollywood’s case, Brookings explained:

The [final] contract explicitly spells out that AI is not itself a writer competing with humans, but rather a tool for writers’ beneficial use. To the extent that AI is used, the regulations specify that AI should complement the work of writers instead of replacing them. The contract permits studios and writers to use generative AI under specific circumstances, but with guardrails that protect writers’ employment, credit, and creative control, while also protecting the studios’ copyright.

There were similar concessions in the dockworkers strike. And while that wasn’t the case with the autoworkers exactly, they did get the right to strike over plant closures – which was largely happening because of shifts toward electric vehicle manufacturing and the AI-empowered automation behind it.

It proves that when American workers stand up for themselves, positive progress really can come from AI. It can turn artificial intelligence into a true tool for human beings instead of a replacement.

I expect we haven’t seen the end of protests on this issue. And that’s a good thing. AI still has plenty of bugs to figure out, and the more voices involved in solving those problems, the better.

I know that Trump lost his bid for federal control over AI this week as the Senate cut that aspect from the One Big Beautiful Bill. And that is disappointing. As I said in the past, centralizing legislation for AI at the federal level would mean AI companies wouldn’t have to deal with a patchwork system of regulations at the state level. All else equal, that’s good for innovation and growth.

But it also gives Americans more room to speak up and turn AI into the asset it’s meant to be. As they do, I know the Trump administration will be behind them just like it was involved in resolving the dockworkers dispute.

As he stated last December, the short-term money companies save from automation isn’t worth the long-term effects of destroying American workers. I know he hasn’t changed that stance; his goal is to Make America Great Again by empowering its citizens.

AI is just supposed to be one of many means toward that goal.

Regards,

Brad Thomas
Editor, Wide Moat Daily