Schrödinger’s Apocalypse

0:00Today on the AI Daily Brief, the week the global AI conversation hit a whole new level. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI.

0:18All right, friends, quick announcements before we dive in. First of all, thank you to today's sponsors, Assembly, Robots & Pencils, AIUC, and Blitzy. To get an ad-free version of the show, go to patreon.com slash aidailybrief, or you can subscribe on Apple Podcasts. To learn about sponsoring the show, send us a note at sponsors at aidailybrief.ai. While you're on aidailybrief.ai, you can subscribe to our newsletter, which is newly restarted, and which is going to have all of the links to all of the articles and posts that I reference in the show. And you can also learn about all our various other ecosystem initiatives like Claw Camp or Enterprise Claw, registration for which is open until the end of next week.

0:53The last couple of months have seen a steady growing acknowledgement of just how significant the disruption of AI is. This shift came first to those who are actually in the industry. Just last week, OpenAI founder Andre Karpathy wrote, It's hard to communicate how much programming has changed due to AI in the last two months. Not gradually and over time in the progress-as-usual way, but specifically this last December. There are a number of asterisks, but in my opinion, coding agents basically didn't work before December and basically worked since. The models have significantly higher quality, long-term coherence and tenacity, and they can power through large and long tasks.

1:28Well past enough that it is extremely disruptive to the default programming workflow. As a result, programming is becoming unrecognizable. You're not typing computer code into an editor like the way things were since computers were invented. That era is over. You're spinning up AI agents, giving them tasks in English, and managing and reviewing their work in parallel. The biggest prize is in figuring out how you can keep ascending the layers of abstraction to set up long-running orchestrator clause with all of the right tools, memory, and instructions that productively manage multiple parallel code instances for you.

1:55The leverage achievable via top-tier agentic engineering feels very high right now. In my opinion, this is nowhere near business-as-usual time in software. Now, of course, this is not limited to software. On the earnings call where he explained the 40 % reduction in the Block team, Jack Dorsey specifically noted the leap that AI had made around the same December timeline. And indeed, Wall Street is one of the main places where the recognition of the phase shift in AI is fully coming home to roost. Michael Gayad of the League Lag Report wrote this week, I once tweeted AI is BS, have been playing around with perplexity computer to automate workflows.

2:30It's not BS. It's going to fundamentally alter the world. I believe it now. By the end of the year, I believe we will see huge layoffs. Block is a sign of what's to come. This humble shift, a throwing up of the hands and saying I was wrong to doubt this, maybe got its best expression this week in a memo from legendary oak tree investor Howard Marks. The memo is called AI Hurdles Ahead. In it, Marx writes,

3:21even comprehend. The second important thing that's happened has been an incredible leap ahead in AI's capabilities. Level 1 is chat AI. Level 2 is tool using AI. Level 3 is autonomous agent. At this level, the user doesn't tell AI what to do. The user gives it a goal as well as the parameters of the desired output. The agent does the work, checks it, and submits a finished product. This is labor replacement at the task level, not assistance, replacement. Marx continues, The most significant thing that distinguishes AI is something we've never dealt with in connection with prior technological developments, AI's ability to act autonomously.

3:53The bottom line, Marx concludes, is that AI is very real, capable of doing a lot of work that heretofore has been done by knowledge workers, and growing extremely rapidly in terms of applications. What we see today is only the beginning. As I mentioned above, if I had to guess, I'd say its potential is more likely underestimated today than overestimated. He does point out that it's not clear that the market is pricing that disruption the right way, but that the change is undeniable. And yet still, when we look back at the history of this particular week in time, this will be the Citrini Report Week.

4:25The piece by Citrini's Alep Shah is called The 2028 Global Intelligence Crisis, and walks through a doomsday scenario where effectively AI is so good that it's actually bearish, creating a doom spiral where AI does everything allowing companies to cut human workers, which reduces spending, which reduces available capital from consumers, which forces companies to lay off more, and so on and so forth. The note, while admittedly an artifact of speculative exploration, hit with the force of a neutron bomb in a Wall Street environment that finds itself extremely destabilized and unclear what to make of AI change.

4:58Is it an infrastructure bubble? Is it the SaaSpocalypse where AI does everything? Can it be both at the same time? Despite, as Deutsche Bank strategist Jim Reed put it, the report having a high vibes-to-substance ratio, it was extremely resonant. So much so that much of the rest of the week has been responses and rejoinders. Economics opinion writer Noah Smith wrote a response called the Citrini Post is just a scary bedtime story. He summed it up, AI might take your job, but it probably won't crash the economy. And if it does, we know how to deal with it. Noah writes, if you don't like posts about AI, I have some bad news.

5:32For the next few years, there are probably going to be a lot of them. It's not often one gets to live through an industrial revolution in real time, especially one that moves so quickly. There will be very few pieces of the economy, if any, that this revolution doesn't touch. And it will have major implications for other things I write about, like geopolitics, society, etc. AI is not going to be a special, compartmentalized topic for a long time. It's going to be central to a lot of what's going on. If you find that boring, well, all I can say is we don't get to choose the times we live in. Every couple of weeks, someone comes out with a big post about how AI is changing everything.

6:03And that post goes viral and everyone talks about it for a few days. A couple weeks ago, it was Matt Schumer's Something Big is Happening. This week, it's Cetrini Research's The 2028 Global Intelligence Crisis, and yes, the title is in all caps. The post paints a picture of a future in which AI disrupts lots of different kinds of white-collar work and service industry business models in industries like software, finance, business services, and so on, and in which this disruption causes an economic crisis. Noah continues that this is really two theses in one, a microeconomic thesis about which industries and jobs AI will disrupt, and a macroeconomic thesis about what this will do to the economy overall.

6:36all. Now, I'll pause the reading there, but Noah goes on to basically make the point that, among other things, the Citrini Post operates from the implicit idea that there will be no policy response. A fairly confusing view, given the magnitude of the disruption they're articulating. The Kobayesi letter also took on the Citrini Post. Their response essay was called What If AI Doesn't Actually End the World? In it, they write, What's obviously true, AI is not another software feature or efficiency gain. It's a general-purpose capability shock that touches every white-collar workflow simultaneously.

7:07Unlike any revolution in history, AI is getting better at everything simultaneously. But what if the doomsday scenario is false? It assumes demand is fixed, that productivity gains don't expand markets, and that the system cannot adapt faster than the disruption. We believe they continue. There is a second path that is being dramatically underpriced. The same anthropic takedowns that look like early signs of systemic collapse may ultimately be the start of the largest productivity expansion ever. While our analysis is not a certain outcome, it is important to remember that humanity has always prevailed, and the free market always works itself out.

7:42A couple of the key pieces of the argument from the Copayese letter, one is something that I've talked about frequently on this show, that the doom loop or any long-term job loss scenario assumes that demand is fixed. The bearish loop, they write, creates a simplified linear model. AI gets better, businesses reduce headcount in wages, buying drops, businesses invest in AI again to defend their margins, and the downward cycle repeats. This assumes, they write, a completely stagnant economy. History suggests otherwise. When the cost of producing something collapses, demand really stays flat. It expands.

8:11When compute costs fell, we did not consume the same amount of compute more cheaply. We consumed orders of magnitude more of it and built entirely new industries on top. AI decreases costs in every sector. And when service costs go down, purchasing power increases with or without wage growth. The doom loop becomes dominant only if AI replaces labor without materially expanding demand. The optimistic scenario emerges if cheaper compute and productivity yields entirely new categories of consumption and economic activity. The way that I put this in the past is that if the cost to produce code is 1 one-hundredth of what it used to be, we don't get 1 one-hundredth of the coders.

8:44We get 100 times more code. The Kobeisi letter also argues that labor markets don't vanish but restructure. They write, A key concern is that AI disproportionately affects white-collar employment, which drives discretionary consumption and housing demand. This is true and a legitimate concern. particularly as the wealth divide is already so massive. However, AI struggles with physical world dexterity and human identity. Skilled trades, hands-on healthcare, advanced manufacturing, and experience-driven industries retain structural demand. In many cases, AI complements these roles rather than replaces them.

9:15More importantly, AI lowers the barrier to entrepreneurship. When one individual can automate accounting, marketing, support, and coding tasks, small-scale business formation becomes easier. We are bullish on small businesses. In fact, the removal of barriers to entry through AI may be the solution to flatten the wealth divide that we currently face. The internet killed certain job categories but created entirely new ones. AI may follow a similar story, compressing some white-collar functions while expanding self-directed economic participation elsewhere. In their conclusion, they write, AI amplifies outcomes.

9:46It can amplify fragility if institutions fail to adapt, and it can also amplify prosperity if productivity outpaces disruption. The anthropic takedowns are signals that workflows are being repriced and cognitive labor is becoming cheaper, a clear transition. But transition is not the same as collapse. As every other major technological revolution has looked destabilizing at the start, the most underpriced possibility today is not dystopia, it's abundance. AI may compress rents, reduce friction, and restructure labor markets, but it may also deliver the largest real productivity expansion in modern history.

10:19And it wasn't just internet newsletters that were publishing rebuttals. No less than Citadel Securities got in on the game. Their piece, which they called the 2026 global intelligence crisis, and they pointed out that much of the evidence just points in a different direction. Easily the most referenced part of the Citadel rejoinder is the chart of Indeed job postings for software engineers that shows them going up dramatically over the last few months. They also point out that maybe the biggest x-factor in all of this is AI diffusion speed. Not how much of the white-collar work AI could do right now, theoretically, but at what speed will enterprise actually allow it to do that work?

10:54Citadel writes, The first-order presentation of AI adoption is generally a binary question. Do you use AI? The more important question, insofar as it relates to the AI displacement narrative, is how intensely is AI being used for work? Looking at St. Louis Fed data, they say, the data presents little evidence of any imminent displacement risk. Recursive technology, they point out, is not recursive adoption, and point out that the risk of displacement declines with a slower pace of adoption. Finally, calling upon the example of history, they write, In 1930, John Maynard Keynes wrote Economic Possibilities for Our Grandchildren, predicting that productivity growth would be so powerful that by the early 21st century, the workweek would fall to 15 hours.

11:33He was directionally correct about productivity growth, but profoundly wrong about labor market implications. Rather than working dramatically less, societies consumed dramatically more. Why? Because rising productivity lowered costs and expanded the consumption frontier. Preferences shifted towards higher quality goods, new services, and previously unimaginable forms of expenditure. Leisure increased modestly, but material aspiration expanded far more. History suggests productivity gains do not automatically translate into labor withdrawal or demand collapse, as they alter the composition of demand, expand real incomes, and generate new industries.

12:08Keens underestimated the elasticity of human wants.

12:16You've heard me talk about Assembly AI and their insanely accurate voice AI models, but they just ship something big. Universal 3 Pro is a first-of-its-kind class of speech language model that lets you prompt speech recognition with your own domain context and vocabulary, instead of fixing transcripts and post-processing. It's more flexible than traditional ASR and more deterministic than LLMs, so you get accurate output at the source and can capture the emotion behind human speech that transcripts often miss, all without custom models or post-processing hacks. And to celebrate the launch, they're making it free to try for all of February.

12:48If you're building anything with voice, this one's worth a look. Head to assemblyai.com slash free offer to check it out.

13:21meaningful outcomes in weeks, not months. They don't build big teams. They build high-impact, nimble ones. The people there are wicked smart with patents, published research, and work that's helped shape entire categories. They work in velocity pods and studios that stay focused and move with intent. If you're ready for career-defining work with peers who challenge you and have your back, Robots and Pencils is the place. Explore open roles at robotsandpencils.com slash careers. That's robotsandpencils.com slash careers. There's a new standard that I think is going to matter a lot for the enterprise AI agent space.

13:54It's called AIUC1, and it builds itself as the world's first AI agent standard. It's designed to cover all the core enterprise risks, things like data and privacy, security, safety, reliability, accountability, and societal impact, all verified by a trusted third party. One of the reasons it's on my radar is that Eleven Labs, who you've heard me talk about before and is just an absolute juggernaut right now, just became the first voice agent to be certified against AIUC1 and is launching a first-of-its-kind insurable AI agent. What that means in practice is real-time guardrails that block unsafe responses and protect against manipulation, plus a full safety stack.

14:28This is the kind of thing that unlocks enterprise adoption. When a company building on 11 labs can point to a third-party certification and say our agents are secure, safe, and verified, that changes the conversation. Go to AIUC.com to learn about the world's first standard for AI agents. That's AIUC.com. Weekends are for vibe coding. It has never been easier to bring a passion project to life, so go ahead and fire up your favorite vibe coding tool. But Monday is coming, and before you know it, you'll be staring down a maze of microservices, a legacy COBOL system from the 1970s, and an engineering roadmap that will exist well past your retirement party.

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15:38And this idea of human wants, both in terms of their ability to expand, but also just in terms of their manifestation in reality and theory, was the subject of my ponderance, written in the midst of a 20-hour forced layover in the Amazonian rainforest, that I called, we're all missing the most important market force that will shape AI, or, my plane made an emergency landing in the Amazon and all I got was this lesson about the future of the world. The piece reads, it's a weird week, man. A bomb cyclone blizzard with the force of a category 2 nearly 3 hurricane shut down New York and the rest of the east coast.

16:08This was problematic for lots of reasons, not least of which was that it completely torpedoed our family's return from Uruguay to the Hudson Valley. Meanwhile, back home, the latest AI Doomer sci-fi, I say that with a lot less derision than it probably sounds, struck a nerve deep enough to rip the throats out of IBM, Visa, and many others just because of what AI might do. As I sit here in Manaus, Brazil, I find myself contemplating how my family's experience over the last 24 hours or so demonstrates just how wrong I think we are about how AI ends up playing out in the economy. I'll give you a moment to finish ralphing at the utter LinkedIn-ness of that statement, and then let me explain why we're all missing the most important market force that will shape AI.

16:43When we got the notification that we were making an emergency landing in Manaus, the trip had already been an utter calamity. A few days earlier in the middle of the night, we got the text notification from Delta that, almost assuredly, our upcoming trip from Montevideo to JFK was going to get 86'd by the impending snowstorm. The options for rescheduling weren't great. It was basically stick around Uruguay till Friday, when we were supposed to have gotten home Monday morning, or scurry on Monday to do a new multi-leg trip through Sao Paulo and Atlanta. We figured that even if things were still gnarly in New York on the back end, solving that from Georgia was easier than solving that from Sao Paulo.

17:15Dutifully, we drove the two hours from Jose Ignacio to the Montevideo airport, returned our tiny VW rental, and let the kids scarf some Mickey D's before the 27 hours of upcoming travel. In retrospect, it was the last peaceful moments of optimism we'd have for some time. We got to the check-in line, and instantly it was clear that something was wrong. I can't check you in, said the attendant. Wait, what? Why? We can't check in anyone whose final destination is New York. But the storm is over. We're not even getting there until tomorrow when it will be even more over. And we've got stops in Sao Paulo and Atlanta.

17:43Let us get stuck there. I can't. It's our policy. And after a call to her supervisor, it remained their policy. We didn't have a lot of great options. Turn around and hang out for another five days. Or call Delta, have them delete the final Atlanta to JFK leg so we could at least get to the U.S. Atlanta it was, and after some frantic searching, we've booked what seemed like the last rental car in America to do the 15-hour drive home from Jackson Hartfield. Fast forward about 10 hours. We've made it through the first leg of the flight, a couple hours in the actually kind of excellent GRU airport in Brazil, and all of us, including 4-year-old Gus and 7-year-old Alden, are passed out dreaming of a next day full of Kia Souls and a dozen Wawa and Red Bull stops.

18:21That is until, at 4am, the captain gets over the loudspeaker and says that, sorry, a generator has stopped working and we have to make an emergency diversion into Manaus. That's the capital of the Amazon for those keeping track at home. We hadn't even made it out of Brazil. So much for at least if we get stuck, it will be in the US. Airports are stressful at the best of times. 300 people dropped out of the sky into a place many of them had never heard of and at the mercy of the gods of airplane mechanics, hotel availability, and Brazilian customs authorities, and you've got something else entirely.

18:49But this is supposed to be the setup to a story about AI, right? We're now sitting here at the lovely hotel Villa Amazonia in the old part of Manaus, waiting for a room to be ready so we can catch a few winks before trudging back to catch another plane. Hopefully a new one, to be honest, that will somehow, someway get us back to the US of A. It is absolutely undeniable how much AI has made this experience better. I've used LLMs to translate back and forth in a language I barely know how to say thank you in, researched the safety profile of different areas. It's not a war zone, but it's not low risk either.

19:19Gee, thanks, ChatGPT, real reassuring. And I've also used LLMs to hunt for rental cars, plan driving routes, and of course, reassure myself that Airbus 330s really can fly with just one generator in those tense 45 minutes between when we got the announcement and when we touched down. And yet, as awesome as AI has been, every part of the story has really been about human interaction and human discretion, either that went for us or against us. The attendant at MVD and her supervisor who didn't buck a clearly stupid policy that might have made sense 24 hours earlier but certainly didn't anymore. The customer service reps of the Delta Diamond Medallion status line, who ranged from wildly unhelpful on the one end of the spectrum to hustling to find us a flight to Philly on the other.

19:56The hotel staffers who overlooked that we hadn't technically booked our kids on the reservation and who hustled to get us in a room before the 3pm check-in time. AI has been extremely helpful during this trip. But at no point would I have rather interacted with AI than these humans. That's not just because I prefer human interaction out of some historic sense of legacy of the way things have always been done. In fact, I'd venture to say that I'm exactly the type of person who, in many situations, would wildly rather interact with an anonymous robot. The reason that I preferred human interaction is the possibility of exception.

20:28Human systems are built with an implicit assumption of discretionary non-compliance. Rules tend to be written much tighter than anyone expects them to be followed. Everyone knows this. The rule writers know it. The managers know it. The humans interacting with the system as customers. Human judgment is the shock absorber between the world the policy was designed for and the messy reality. To be clear, this is a feature, not a bug. The whole system would be significantly more brittle if everyone just followed the rules perfectly. You can probably see where I'm going with this. A world where AI agents perfectly followed the policy all the time would be, in many, many real-world contexts, much worse than the one where humans follow it only imperfectly.

21:05Call it the paradox of perfect compliance. But couldn't AI have grace and flexibility programmed in as well? Sure, and as we design agent-led systems, it will probably be important to remember that in people's real lived experience, exceptions are as important as rules. But kindness as governance, an unspoken and yet nearly universal aspect of well-functioning human systems, is hard to program. Small acts of bureaucratic rebellion tend not to be the byproduct of clear, rational calculations. Instead, they are felt decisions. They are a split-second judgment call that comes on the heels of the utterly relatable exhale of an exhausted parent at their wits' end, just trying to keep it together for their even more exhausted kids.