297. How do we reshape our workforce in the AI era?

0:01Demis Osamis does believe that AI will replace most of us. And obviously for millions and millions of people, that's very scary. Any technology that replaces people will also augment the ones left behind. Can we stop the displacement of workers? That is very hard. I was in Paris recently meeting, I'll call him a leading French industrialist, and he said, you know, because of AI, I don't need 20 % of my workers. A lot of this technology is being adopted because people like it. So ChatGPT, when it came out in November 2022, as far as I've been able to see, was being used in every corner of the earth within 24 hours.

0:32I think this is a national emergency. I think it's been a national emergency for a couple of years. So is this just a phase thing that we're going through a period where potentially augmentation is the way forward? Or is there a world in which governments can basically prevent replacement of people? Well, first of all, these are great questions. Let me try to unpack it a little bit. So I think this augmentation versus replacement is not exactly the right way to think about it because...

0:56Simon Johnson:We're proud to say that The Rest is Money is powered by Octopus Energy this year. And Greg Jackson, the founder and CEO, is with us. Greg, I wanted to ask you about heat pumps. Octopus Energy now make them. Why not just import them from China? You know what? We want to make heat pumps that work, that are designed for British homes and that are cheaper to run, cheaper to install and actually cheaper for the hardware. And that's what we did. So, for example, Octopus created heat pumps that run at up to 70 degrees C, as hot as a gas boiler. So you don't necessarily need to worry about having excess insulation and changing your heating system.

1:35That sort of thing makes it much cheaper for British homes.

1:39Simon Johnson:Nice one, Greg. Thanks for explaining that. Right, we're going to go to the episode. This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together. to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome.

2:16You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+.

2:49hello and welcome to the rest is money with me Robert Peston and me Steph McGovern now today

2:54Simon Johnson:we want to focus on how the UK can make sure that we all do well from AI and you know basically find out where are the good jobs in AI now rightly there is a lot of concern about jobs being lost and also about the money being made and all going to the US tech giants. And the man tasked with advising the government on all of this is the Nobel Prize winning economist Simon Johnson. He's a professor at MIT, former chief economist at the International Monetary Fund. And he's also now chair of the newly set up AI Economics Institute. So lots to ask him about, Robert. Yes. And the big question is, how do we make sure if AI can't be stopped, that we all get richer rather than only a few billionaires getting richer?

3:42It's the big question for our interview with Simon Johnson. And here it is. Simon, so we wanted to talk to you about how economies should adapt in this new AI world. What is the role of government? There's an enormous amount of anxiety as well as enormous amounts of optimism associated with so much of these technological changes that we are living through. Just as a place to start, you've got some kind of advisory role for the British government. Just tell us what you're advising them on. And then both Steph and I, I suspect if you were to answer all our questions, we'd be here for a week, but we'll try and keep it reasonably concise.

4:31But tell us, Simon, And what are you doing with the British government at the moment? Well, I'm doing two things, Robert. The first is I'm the chair of the newly created AI Economics Institute, which is, I think, the first of its kind in the world, actually. It's an effort to build an interface between policymakers and the evidence. So our job is to figure out what's going on and to answer questions. And we're not policymakers, but we are hopefully bringing outside experts and experts from within government to bear on the problems that the government faces and wants to deal with. The second thing I'm doing is I'm chair of the AI Adoption Prize, which is a lot of fun.

5:13This is a sort of bottom-up initiative where we're trying to get British businesses and workers and unions to tell us what they're doing with AI and ways we want them to identify or describe the ways that they feel that the AI is helping their workers. So it's called a pro-worker adoption prize. And we think there's lots of ways to do it to be pro-worker. We've got some ideas ourselves, but, you know, we also think there's genius out there in the British economy and we'd like to understand what people are doing. And I think the first prize will be a cup of tea at 10 Downing Street or something like that.

5:46No, actually, I think the long list will come to Downing Street. And then the top three will get business school cases written about them by UK academics that we will then distribute around the world to show people how it's done and to celebrate British companies moving in a direction. So that when AI is actually helping their workers and helping the economy as a whole, as opposed to hurting the workers. And second prize will be two cups of tea in Downing Street, I'm assuming. I couldn't possibly comment on that.

6:16Simon Johnson:Can I ask about your AI use? Because am I right in thinking you use it as little as possible in your kind of working life? Oh, yes. Actually, I have a research team at MIT and they're free to use it and they evaluate it. And we are pretty active in understanding that. And I do teach a course on it and I have students and colleagues are very active. But for my own writing, Steph, I don't trust it. I'm very worried about exfiltration of my ideas. I've written a novel, a science fiction novel about AI 25 years from now. I'm not going to let AI get a whiff of what I'm saying there. No, I'm going to smack it around the head when the book comes out.

6:51So I think that, and I think it's also a little tricky and a little worrying. Other people have obviously pointed this out that, you know, AI can become a little too easy and a little too, you can lose your critical thinking a bit. Maybe I worry about that a bit too much, but I'm not a big AI user right now. That's right. So we are, I'm afraid, this is one area where we're definitely in competition because I've just written an AI themed thriller.

7:17Simon Johnson:And I've written a thriller about a cult. So, you know, basically that's what AI is. isn't it so we're all in it all in the game we're all in competition in different ways competition is a good thing driver question to you did did you use ai to write your ai theme thriller no of course not you're gonna be joking it's cheating isn't it right we're on the same page i mean i mean look i do use ai to automate various basic tasks but you know then i would never use it for anything creative i mean you know because voice is so important right and you know Our own voices are precious. Don't give them away.

7:52Now, the fundamental question I would need to start by asking you is it's fantastic, I think, that you are awarding a prize for applications of AI that make individuals more productive, businesses more productive through the workforce. So what they call augmentation rather than replacement. How serious, though, do you take the risk? Demis Osabis does believe that AI will replace most of us in our paid employment. I mean, he has said it very publicly. Dario Amadei says exactly the same. And obviously for millions and millions of people, that's very scary. And what governments should be doing to prepare for that is completely different from what they should be doing to prepare for a world where AI essentially makes humans more powerful individually, more productive individually.

8:58So is this just a phase thing that we're going through a period where potentially augmentation is the way forward? Or is there a world in which governments can basically prevent replacement of people? Well, first of all, these are great questions. Let me try to unpack it a little bit. So I think this augmentation versus replacement is not exactly the right way to think about it, because any technology that replaces people will also augment the ones left behind. So think about the arrival of weaving machines in Manchester in the early 1800s. Now, that knocked out a lot of people from handloom weaving.

9:33So there was massive displacement and a lot of poverty followed. But the people who remained behind in the factories, or maybe we just say the managers in the factories, had their human capabilities massively advanced by these machines. So I think actually, Robert, the key is much more new task creation, which is exactly what Demis Sabis represents to me. If you can use AI to crack problems that humans have faced forever and problems that were previously seen as insurmountable, and if from that you can build new products and services that you can sell to the world, then you're on a winner because you're going to increase the demand for human expertise.

10:09The alternative is that you will hollow out the labor force. You'll de-skill it. A few people will be augmented, and they'll do very well. And perhaps they're just the owners of the capital, actually. But everyone else is going to get pushed down to the poverty level. And I think that's what we're trying to counter. And on the critical question that you asked at the end, can we stop the displacement of workers? That is very hard. I was in Paris recently meeting, I'll call him a leading French industrialist. And he said, you know, because of AI, I don't need 20 % of my workers, but I'm not going to fire anyone because it's France.

10:42However, I'm not going to hire anyone and I have 5 % attrition every year, so that'll take care of my problem. So I think the automation is coming anyway, Robert. The new task creation is what we need to accelerate. That's my own personal position, but that's also, I think, a lot of what you'll see around the AI Economic Institute and the language we're using there is very much, how do we get onto that pro-worker path? How do we try to shape technology and encourage technology to move in that pro-worker direction? It's not easy, but I think we need to try.

11:09Simon Johnson:And can I ask you then, Simon, where do you see the roles of unions in this? Because do you think they're important in this? Because often, you know, when we talk about unions, it can feel that they're quite anti-automation. And, you know, there's a sense of progress is held back sometimes because unions don't want the jobs to go. But do you think actually that they're part of this in terms of forming, getting people on side, as it were, and forming the plans for how it coexists rather than just taking all the jobs out? Yes, absolutely. I think if you present the union with a plan to phase out jobs, of course, they're not going to be excited about that.

11:48But if you've got better ideas, other ideas about ways you're going to create new tasks and build the business, I think that's a different conversation. One of my grandfathers, Steph, ran a big steel mill in Sheffield at the peak of his career. And I'm well aware that the union history and the difficulties arose from that, and the fact that the steel industry declined, and there wasn't that much you could do about it. So at the level of the economy as a whole, the government's job is to find ways to encourage that new task creation, raising and increasing the demand for human expertise. and that conversation with trade unions is incredibly important and not easy.

12:24I absolutely agree.

12:25Simon Johnson:Is that going to be part of what you're doing with your government advisory role then? When you talked about with the Economic Institute, it's going to be looking at real workplace data based on these information you're getting with the different corporations involved. Is a union part of it as well? I hope so and I think I'm allowed to tell you not the name of the person but the fact that I believe we do have one of the co-judges of the AI Adoption Prize, the Pro Worker Prize, is a union person, a prominent union person, because that makes sense, right? Why rely on me, who lives in America and has been out in the UK for 40 years, to tell you what's pro worker for the British workers?

13:02Let's have a representative of the British workers at the table. I mean, the whole thing is going to be transparent as well, so everyone can kick the tires and complain as much as they want or admire it. But I think having unions at the table, Steph, is incredibly important and not something the US is very good at. So if the UK can use the fact that you've got more legitimacy around union voices, that could be a plus. Now, one of the things that many economists will say and many pro-market politicians will say is, you know, stop being, you know, so lily-livered about this AI industrial revolution.

13:40You know, they will say, look, all these fears about, you know, vast numbers of people being laid off and no new jobs being created. You know, we've seen in every industrial revolution and, you know, in time, lots of new occupations were created. And I suppose I've got sort of two sort of points about that. One is, if you go back to the Industrial Revolution, which you've just been talking about, which is, you know, the automation, you know, the steam, you know, the automation of the weaving industry and then, you know, the steam age and all of that. But as you know better than almost any economist, from the late 18th century to quite well into the 19th century, this Industrial Revolution was associated with stagnating living standards for the vast majority of people, a period known as Engels' Poor's.

14:35So that was an Industrial Revolution which benefited very small numbers of people for decades. And obviously, we don't want that to happen again. But equally, I suppose the thing that always slightly causes me anxiety is this. It's all very well to say in previous industrial revolutions, we just didn't know the jobs that were going to be created, the new occupations, the new paid work that was going to be created. but it always was created. And therefore, because it was always created in the past, it will definitely be created this time. Well, yes, of course, history should always be a guide, but this just may be a different kind of industrial revolution.

15:16And I think we've just got to take that seriously as a risk. This may be an industrial revolution where it is going to be very difficult to come up with activities for humans, which are going to generate income. Yes, I think you put that very well. Look, the automation of spinning in Lancashire, cotton spinning at the end of the 1700s, did create opportunities for weavers because it drove down the price of spun cotton. But when weaving was automated, it didn't create similar kinds of opportunities upstream or downstream of weaving. And it wasn't until the arrival, I would argue, of the railways in the late 1830s into the 1840s that you really got this spreading of opportunity and a restructuring of the economy and everything started to change.

15:54And that's where your new task came from. And my colleague, David Autor at MIT has absolutely established two things. One is that something like 60 or 70 % of the jobs we have today in the United States didn't exist in 1940. Secondly, and we created actually a particular wave of those jobs in the 1940s with a lot of new science and new industries coming out of World War II. But the other thing he's established is that from the 1980s, the rate of new task creation did not keep up with the pace of automation. So it's true, we didn't have massive unemployment, partly because we don't pay generous unemployment benefits in the US.

16:28But what you did have was a hollowing out of the middle and a pushing down of the middle to the lower end of the labor market. So this is the job market polarization. People with a lot of education like me and you did well. People without much education struggled to get any kind of increase in their real incomes. And the middle, geographically, skill-wise, education-wise, income-wise, got pushed down to the bottom. So, Robert, it's not the question of, okay, will this time be different from what we've been in? No, will this time be an intensification of what we've seen since the 1980s? And can we find some version of the 1940s and 50s where we did a much better job, including through deliberate government policy of new task creation?

17:07These tasks have to demand, this is really important, they have to require human expertise. If I create a lot of new tasks that anybody can do, I hire off the street tomorrow and I can fire those people and hire new people the next day, you're not going to get paid a premium wage. So there has to be a demand for human expertise in the new task creation.

17:24Simon Johnson:Simon, lots more still to ask you, but let's go to a quick break.

17:32Simon Johnson:This episode is brought to you by Vanguard. Look, if you're listening to a podcast about finances, you likely already know that your money could be working harder. But we know it can feel overwhelming knowing where to get started and even dipping your toe into investing can make you feel out of your depth. It's a mindset that's pretty hard to shake without the right guidance. You might even find yourself wishing you could just get the pros to invest your money for you. Well, you can. With their managed ISA, Vanguard's experts do the hard work for you. They'll match you to an investment plan that feels right for you and they'll handle the rest.

18:11Simon Johnson:No second guessing, just smart professional management. So stop wondering how to start investing and start making your money work harder. Search Vanguard managed ISA to find out more. When investing your capital is at risk, tax rules apply.

18:30When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs.

19:00Simon Johnson:As someone who is from the North East, lives there now, I've watched industries come and go. The steel industry that you've talked about, the chemicals, ICI, British Steel, all big employers in the area which have disappeared. there's still the oil sector as well. There's been a lot of people who've lost their jobs in that area. Some of them have gone to renewables, but there are still huge problems with unemployment and deprivation, child poverty, you name it. The North East is suffering with it. How do you then make sure that they are part of this and not left behind then? So my stepbrother, who sadly passed away, was a professor of statistics at Durham University and captain of the local golf club.

19:45And he played golf with a lot of people in the industry. And when Brexit happened, the vote happened, I rang him up and said, what happened in Sunderland? Because that was actually seen by many people as a benchmark. And he talked to me about exactly this, Steph, the de-industrialization, which we also saw, of course, in Sheffield and other parts of the North, that people feel like they've been left behind. They feel that prosperity may have been created in other places and for other people, but they were not included in that. And I think the arrival of so much high profile technology, like phones with remarkable computer power that we carry in our pockets, just reinforces the idea that, all right, the world's moved on.

20:22Everything's got better. Heck, Arsenal even won the Premier League. I mean, you know, it's a different day, right? But where's my piece of it? I got left behind. I'm not included. And I think what you've got to do with all technological transformations, including AI, is find ways to generate more good jobs. And the only way to do that on a sufficient scale is to help shape the technology that you adopt, hopefully that you also develop, in a way that increases the demand for human expertise all around the country.

20:52Simon Johnson:If I understand right, tech towns is part of what you're working on with the government, very much looking at this, not just about the Northeast. I know I always bang on about it, but this is about making sure all the money isn't just coming to London in this kind of technological revolution. Can you tell me more about that? Yes. So I think the point of the Tech Towns initiative, and right now we only have one, which is Barnsley, where my dad used to work, by the way, a long time ago. I hope we can get more of them and I hope we can have them in more parts of the country. But the point is twofold, I would say, Steph.

21:25First of all, it's to address what you're saying, which is, from a regional perspective, how do you make sure the opportunities are much more dispersed in different places? What does that look like? But secondly, what's the partnership with local government? And I think Barnsley's local government gets very high marks for having worked super hard over decades to come back from the history of coal mining. But this is widely shared public information, healthy lives in Barnsley are still very short. What is it that Barnsley can build? What can you bring to Barnsley and other tech towns that will have a meaningful positive impact on life expectancy and the quality of life, as well as obviously incomes.