The customer has not read your manifesto

04 / The customer would like a word about civilization

The strongest answer to an indiscriminate anti-AI argument is not a keynote. It is a useful result in a real workflow. Brynjolfsson, Danielle Li, and Lindsey Raymond's November 2023 working-paper version of Generative AI at Work studied 5,179 customer-support agents. It reported a 14 percent average increase in issues resolved per hour, with larger gains among less experienced workers. Those are findings from a particular deployment, not an estimate of what every worker or the entire economy will gain.⁶

Now introduce a second imaginary company, selling the same broad promise into a different setting. Its customers need expert judgment, privacy controls, an audit trail, and a way to catch rare but expensive errors. Producing an answer faster is useful only if the answer survives those requirements. If review absorbs the savings, the customer has acquired a very energetic assistant and an unchanged workload. If review is skipped, the savings may simply be a transfer to next quarter's incident budget.

There is another distinction here: the party that enjoys the productivity gain may not be the party selling the tool. If competition pushes software prices down, customers can capture much of the value. If a new capability makes suppliers easier to replace, profits may be competed away even as use grows. If the benefit is mostly convenience, people may love it without paying enough to support the cost of delivering it. Popularity, utility, revenue, and durable profit are related quantities, not synonyms.

Imagine a machine that makes excellent bread almost free. This would be good news for people who eat bread. It would not automatically be good news for every bakery, every oven manufacturer, every wheat supplier, and everyone who borrowed against last year's bread margins. A genuine abundance technology can make some incumbent claims less valuable. That is not a contradiction in the technology. It is the distributional consequence of it.

05 / The incumbent's difficult second act

A useful invention changes bargaining power. Someone can now do something without asking the old gatekeeper. A supplier loses an advantage. A profession loses control over a task. A customer gets an alternative. It is tempting to tell this as a morality play in which the newcomer is courageous and the incumbent is lazy. Sometimes that works. Often the incumbent is simply responsible for obligations the newcomer has not yet encountered.

A small entrant can promise a clean new system because it does not have a million customers depending on the old one. It can ignore legacy integrations because it has none. It can make individual exceptions because the founder knows every account. These are real advantages. They are not all evidence of superior character. Some are advantages of not yet being large enough to confront the problem.

The interesting transformation happens when the entrant wins. The flexible exception becomes a policy. The neglected edge case becomes a compliance incident. The customer base becomes something that must be protected from abrupt changes. The company hires people whose job is to say no. A person who once mocked procurement now has a procurement department, which is currently delaying the purchase of software from a company very much like the one he used to run.

We should be cautious about diagnosing every restriction as rent-seeking. Some restrictions prevent fraud, protect privacy, preserve reliability, or ensure that someone remains accountable. The right question is not whether the company says the word safety. It is whether the restriction addresses a demonstrable problem proportionately, and whether the company would endorse the same rule if its rival benefited from it.

The winner remains eligible for replacement. This provision attracts less enthusiasm than the part about replacing everybody else, but removing it would leave the incumbent with a fine vocabulary for defending the absence of competition.

06 / The historian is also in the photograph

There is a reason to read Greenspan with both interest and skepticism. He is not simply an external observer of financial history. In October 2008 congressional testimony, he acknowledged a failure in his expectation that financial institutions' self-interest would adequately protect shareholders. The hearing is part of the record against which his later historical arguments should be considered. It is not proof that everything he subsequently wrote is wrong, or that one official explains an entire crisis.⁷

One of the hardest questions in finance is why self-interest sometimes fails to produce self-preservation. Part of the answer is that there is no single self. A trader, an executive, a shareholder, a lender, a depositor, and a future taxpayer do not have identical exposures or horizons. An action can be attractive to the person making it while leaving much of the downside elsewhere. Even where interests align, information and judgment can fail. There need not be a conspiracy for the whole to behave worse than its parts expect.

Consider an invented manager rewarded for expansion, evaluated every year, and reassured that competitors are doing the same thing. Refusing the opportunity produces an immediate, visible cost to his career. Participating creates a possible, distant loss shared with many other institutions. We should not be surprised if he participates. We should be interested in why the organization built a system that makes this decision so easy.

History is useful here not because it predicts the next scene, but because it gives us better questions about the current one. Who has promised what? To whom? On which timetable? What happens if a plausible assumption turns out to be too generous? Which protections are already in place? Which are merely expected to appear?

07 / The invention and the invoice

Follow the invention out of the lab. A business has to deliver it on terms customers accept. Investors and lenders acquire claims on the cash it might produce. If those claims cannot all be honored, officials may be asked to intervene. At each step, a new party arrives with a different claim. By the end, a discussion that began with a product can have become an emergency request on behalf of civilization.

Suppose the invention works. Suppose, further, that it works so well that competition rapidly drives down the price. Customers benefit, usage expands, and the investors who financed expensive early capacity discover that they underwrote a less profitable market than expected. That is one possible disappointment. Now suppose the invention works but adoption is slower, leaving expensive infrastructure underused. That is another. Suppose adoption is fast, revenues are strong, but too much was paid for the asset. A third. None requires the invention to be fake.

In our imagined boardroom, the presentation is going well. Everyone agrees the underlying technology is extraordinary. Everyone agrees the addressable market is enormous. Everyone agrees that history rewards courage. The finance director, who has been unusually quiet, asks whether anyone would like to discuss the liabilities.

There is a brief pause. The coffee is still warm. We have reached the part of the future that has a due date.