General Overview

Conversation Summary: The hosts, Charles Nixon and Kiran Kapur, discussed the current technological disruption, particularly AI, through the lens of Schumpeter's theory of creative destruction. [00:22] Charles explained that economic history is marked by long waves of technological change - from water power and steam to electricity and the internet - that destroy old industries while creating new ones. [01:56] He argued that AI is likely the next major wave, emphasising that while such changes cause anxiety about job losses, they historically lead to new opportunities and increased productivity. [03:58] The speakers advised listeners to adapt, evolve, and look for roles in the application and periphery of new technologies rather than resisting them. [07:19] Charles also introduced an alternative theory that the next paradigm shift might be the abundance of energy from solar power. [15:21]

Read more: “4.6 Billion Years On, the Sun Is Having a Moment” – The New Yorker

Key Points

  • Economic and technological progress occurred in long waves of "creative destruction," a theory developed by economists like Schumpeter, which fundamentally changed economic structures. [01:28]
  • Historical examples of these waves included water power, steam power, electricity, computers, and the internet. [03:31] These cycles were initially around 50 years long but have been getting shorter.
  • The current wave of creative destruction was identified as most likely being driven by Artificial Intelligence (AI), which is still in its early stages.
  • It was noted that every technological wave has been met with fear and resistance, from the Luddites to modern-day concerns about AI, but adaptation is essential. [07:19]
  • The discussion highlighted that while some jobs are destroyed, new roles, opportunities, and significant increases in overall productivity are created. [08:42]
  • Opportunities were not just in developing the core technology but also in its application, integration, and the surrounding ecosystem of services, such as regulation and supply chains.
  • The key to leveraging AI was presented as knowing how to ask the right questions, a uniquely human skill. [12:07]
  • An alternative perspective was introduced, suggesting that the next paradigm shift might not be AI but the abundance of cheap energy from solar power, which would remove constraints on production. [15:15]

 

Podcast Transcript

Transcripts are auto-generated.

 

Kiran Kapur (00:04):
Hello and welcome to Opinionated Marketers with Charles Nixon and me, Kiran Kapur. We've had a lot of questions from our younger listeners asking us about what's going on with the marketplace at the moment, what's happening with all the technology changes? Have we ever seen market changes like this before? And I think it'd be fair to say Charles and I have been around the block a little bit, occasionally, and have seen some changes and some disruption in the marketplace. So we thought we would spend today looking at Schumpeter's theory of creative destruction and creative waves.

Charles Nixon (00:39):
That's a very interesting topic because it's also current. The Nobel Prize winner who was announced yesterday from Northwestern University in America, has done work on the latest application of waves of creative destruction and why they happened to take effect in the UK more so than they did elsewhere. And he's looking at the R and D aspects, which is basically, it's not just the research, it is the openness of society to accept new ideas and to develop them.

Kiran Kapur (01:14):
Because that's pretty much what we're going through at the moment, I believe. Charles.

Charles Nixon (01:18):
Yes. The argument as to when and what is the actual wave of creative destruction is always contentious. It's been around for probably about the last 20 years. Everybody prophesying the next fundamental change in technology. The element that one really needs to go back to is that both Schumpeter and someone called Kondratieff came up with what was known as long wave theory in the economic cycle in the mid-20th century. They were doing their evidence from the 17th, 18th, and 19th century. And what they were identifying and prophesying was that there were long waves of significant change in the economic structure of, well, the West, in those particular terms, that were different from the short waves that were seen as the boom and bust cycles of every five or so years. And the argument was that there was a fundamental change in technology, initially in power creation, that brought about significant change in the way in which the economy worked and was productive.

(02:36):
The first one being water power, so the creation of water mills and the use of water to automate some of the produce of textiles and to some degree, obviously, agriculture. That was then replaced by steam power, which was faster, although required obviously coal, which was abundant in many European countries, though not elsewhere. Then it was electricity, which meant that instead of having long beams of pulley belts, which meant that you had your factories organised in particular long lines, you could be much more flexible. You're also able to automate much more than the basic means of production. And then the question then became, well, was it computers as in microchips or printed circuit boards, which allowed for the automation of major tasks. And that really was the sort of eighties through to the turn of the last century. The discussion then was the internet. Basically these long waves were predicted to take place about every 50 years.

(03:48):
That's certainly historically true in the 17th, 18th, and to some degree 19th century, but they were getting shorter by the time we got to the point of computers. And then the internet, if you see those two are separate, then obviously there was a much shorter interval and the discussion as being whether or not the next one is coming along, whether or not that is bio and pharmaceutical. But now the argument probably is fairly straightforward that it is going to be AI and the productivity boom that is being brought about. But within each of these waves, you have, if you like, mini waves or ripples, which are the application of the technology to different sectors. So the microprocessor, which might be said to have been created in the 1940s, was still rippling out into the creation of mobile phones forty, sixty, seventy years later. And so what we are in at the moment, is really only the beginnings of the change that may come, which is why everyone's talking about the potential for AI, but no one quite knows where it's going to go.

Kiran Kapur (05:02):
One of the things we can take from that is that yes, there are waves of creative destruction and they are on a longer cycle than perhaps we see on a day-to-day basis when we're concerned with our day-to-day work or our day-to-day living or where the next bill is going to be paid from and so on. But also that those cycles are getting faster. But the other thing to take from it, because I think a lot of our, particularly our younger listers are very scared about the job market at the moment. Where are the jobs going to be? Where are they going to go? What's going to happen is that at each stage, people have sat and worried from the Luddites breaking the mills and the weaving looms, thinking that they were going to take their jobs through to people at the moment refusing to use any form of smart technology, et cetera. So this has always happened. How do people live through it? What do they do?

Charles Nixon (05:55):
Well, the flippant answer to that is riot. And so well,

Kiran Kapur (06:00):
It's happening around the world. Look at Nepal.

Charles Nixon (06:05):
There is a significant, so the wave is an important aspect in its own right, because what it's basically saying is that as it builds up to, and the buildup is its penetration of the use of that particular technology, the use of steam to generate power starts off as being very small in terms of tin and copper mines, which are very deep, and then it becomes coal mines, and then it becomes steam engines, and then it becomes locomotives, et cetera. As the technology evolves and penetrates, more and more people are replaced from the old technology, and those people have to either retrain or find new jobs. And that is the same whether it happens to be in electricity transistors, automation computing, et cetera. And certainly I can still remember the BBC broadcasting programmes in the 1980s about the change that was going to come with the personal computer.

(07:12):
They obviously had an insight because they probably helped change the UK bringing out the BBC micro. The element that we are seeing now is the usual reaction of either I don't like it, I don't want it, or I'm going to stick my head in the sand and ignore it until it goes away. Or you get people who adapt to it. And I think you have to adapt and you have to evolve. Before we started this call, I was working with an AI programme to create a CRM system for the museum that I'm a trustee of. And the system basically, in this instance, takes out the drudgery of the creation of a document from the blank piece of paper. It isn't significant in the fact that it's going to replace me or other people in the future. It could replace certain jobs. And in many instances, what we are seeing over time is the less meaningful jobs, let's put it that way, are taking away.

(08:15):
And people who did them did them because they either had to, because that was a skill they had or that it was a necessity for economic survival. It's not a pleasant job to be a coal miner. It isn't a pleasant job to work in a very loud textile factory. So you want to think about the way in which those jobs are transformed by a wave of creative destruction. And that's the important aspect. Yes, there is destruction, but it creates a lot of new jobs, new opportunities, and a major increase in productivity overall. So it's thinking about the adaption of AI. If we assume that that is the new wave to all of the potential activities that you do, your company does or could do, and whether or not it will add to productivity by doing so.

Kiran Kapur (09:13):
I think it's also if you are looking at jobs, job roles and careers, it's looking at the edges, because what everyone will concentrate on is, let's go back to your steam locomotive. So everyone concentrates on the steam and the fact the that locomotive can go faster from A to B. So you think that the railways are where the money is being made, but actually the money still comes in from, and the work still comes in from creating the machines that are needed, supplying the coal, supplying the water that is needed, understanding the regulations. There are things around that often sort of get ignored. They're not the exciting thing. So sometimes I think you need to widen your perspective and look around, as where are the opportunities.

Charles Nixon (09:55):
Yes, that's very true. I mean, your point about the railways is very interesting. When we're into 200 year celebration of the Stockton to Darlington railway, and in the 1825 innovation, if you like, here was a passenger train with freight going on a regular basis from one city to another, and within 15 years, you've got a huge boom of railway building all over the UK. And then there was a bust as speculation got the better of economic reality. And the same is true of all of these cycles. And so at the moment, there's this discussion as to whether or not the AI stock market rally could continue for much longer, and whether or not all these companies can continue to make money in one respect, it isn't the companies themselves. It is, as you say, it's the application of it and its integration that offers a lot of the opportunities. And certainly when we're talking about AI, which can automate many, many things, it is understanding what are the applications, and if you like how to ask the right questions. The machine can answer them because it can search the internet as you do. The question is, it does not know the right questions. Do you?

Kiran Kapur (11:14):
That's another extremely good point. So again, it's looking around the issue as opposed to jumping on the headlines, what you'll read about in, I'm afraid a lot of the way that it's reported in the media, social media, wherever concentrates on the big exciting stories. Look for the wider applications because actually those are the ones where people make the money and where there will be jobs and where there will be roles. And if you are an expert or make yourself an expert in those, that tends to be where the work tends to be.

Charles Nixon (11:43):
Yes. The other element I think I would say when looking at things like that is try to make sure that you become the expert on the subject and making it as good as the alternative. So a lot of people don't like new technology because it isn't as good as the previous technology. So for example, people don't like AI chatbots because they're not as good as a human being. So concentrate on making them better, make sure that yours actually does have all the information, can answer the questions, does appear to be more humanistic than the others. And indeed, the benefits from a theoretical lender and programming point are significantly easy to demonstrate, in the fact that it doesn't get tired. It can handle multiple conversations at any one time much faster than a human. It just needs to be good at what it does rather than being put into hundreds of other different approaches or applications. So now look at what you do, look at what an AI could do and concentrate on making it the best that there possibly is.

Kiran Kapur (12:51):
And if you are really struggling, look for careers and jobs that cannot be used by AI. I very much doubt we're going to see AI dentists anytime soon, and we're certainly not going to see AI carers.

Charles Nixon (13:02):
Well in both instances, I possibly, as a contrarian, tend to disagree. In Japan, you can see robots using AI for caring. They admittedly have human oversight, but they are taking a lot of the backbreaking activity out of looking after a generation, which is over a hundred. And there are significant downs reductions in the number of young people going into the caring industry. So automation and AI in Japan is quite an interesting one. I personally have got a tooth which was constructed using AI, and it was applied to a 3D printer, so I had a new implant in less than two hours, but it required a human to understand what was actually going to be put into the system and to do the analysis in the first instance, certainly from the amount that I had to pay, I'm assuming therefore or he got a wage rise because someone else was not doing the bit that the AI did.

Kiran Kapur (14:11):
On the other hand, you probably also need a human to encourage you to open your mouth and allow this new implant in and reassure you that it would work, et cetera, et cetera. This is what I mean about edge cases. It's looking for where those extra bits are, and if it means that the job is becoming the reassurance between the person and the technology, that's not a bad role either.

Charles Nixon (14:33):
No, absolutely. And I think this is probably where a lot of the alarm tends to come in newspapers and media in the basis that when they see an AI being presented as a very human-like, especially the AI influencers out of China and on social media, there is a considerable alarm because it's very hard to tell the difference between one and the other. And there is an assumption that the AI could be malevolent.

Kiran Kapur (15:03):
That's way too many Hollywood horror films, I think. But I mean, I'm all for being healthily sceptical about things and thinking about the ethics of what they're doing and what's being created. I think that's a very important thing, and that is, again, a human skill and a human role and something that we should be doing.

Charles Nixon (15:21):
Can I just add an extra subject, which is the fact that there is a recent major book and article which says that the next paradigm shift is actually not AI, it is solar power. It's an interesting view, which basically says that the adoption of solar power means that power becomes unlimited and therefore the idea of constraint on production because of the cost of power is removed. The discussion and things like desalination, so where you have a drought, but you are next to the sea. Well, the real problem for desalination is this huge amount of power that requires to take the salt out of the seawater. Well, with solar panels, that can be done fairly straightforwardly. There are other byproduct issues, but the main one is taken away. And so one alternative aspect, if you like, of the next wave is that it could be the abundance of electricity and power.

Kiran Kapur (16:27):
That's an interesting one. Do you know the author?

Charles Nixon (16:30):
The author? I put it on my LinkedIn profile. I'll send you the link so that you can point to it. It was an article in the New York, I think about a month ago.

Kiran Kapur (16:42):
That was fascinating as ever. I hope that it answers some of the listeners' questions, which we'd had around the cycles of creation and destruction, and good as ever to speak to you, and we'll catch you next week.

Charles Nixon (16:56):
Thank you very much, Kiran. Bye-bye.