Are we facing an AI nightmare? Scenario planning should begin

Our best hope is that job losses are minimal and the AI industry doesn't turn oligopolistic but we can't count on this outcome

- RAGHURAM G. RAJAN is a professor of finance at the University of Chicago Booth School of Business, former governor of RBI and co-author of 'Breaking the Mold: India's Untraveled Path to Prosperity'

Are we facing an AI nightmare? Scenario planning should begin

The small equity-research shop Citrini recently sent a panic through financial markets when it outlined a scenario in which AI ends most white-collar employment by 2028, with dire consequences for the broader economy.

But this forecast is surely too pessimistic in some respects. Outside a few sectors, like software, frictions to adoption and sheer inertia will probably slow the pace of change. This has always been the case. For example, although automated telephone exchanges were possible in the 1920s, the last human telephone operator in the US was not replaced until the 1980s.

Moreover, the technology itself is always only one variable. There also must be processes and structures around it to assure customers of reliable service. This is where incumbents have an advantage over challengers, even if they do not use the latest technology. And even if incumbents are displaced, the new opportunities created by AI-induced cost reductions and productivity enhancements need not lead only to more AI. They may also require the work of humans—as with the internet and the rise of influencers.

Still, in some ways, the Citrini post is not pessimistic enough. Even setting aside the possibility that we might all become slaves to some AI overlord, the broader economic outcomes depend on how good AI gets and how fast; the pace of adoption by users; who profits from it; and how society reacts. Given all these variables, some extreme scenarios are indeed conceivable.