Artificial Intelligence Advancements Outpace Software Industry Progression, Dubbed as "AI Consuming Software's Gains"
The software industry, which has been a cornerstone of the global economy for decades, is facing a seismic shift with the rise of artificial intelligence (AI). The industry, which currently accounts for 10% of the economy, employs over 12 million people directly and indirectly, but the advent of AI is set to redefine its landscape.
AI services are projected to account for 15% of the economy by themselves, as software and IT move from their current 10% share to just 2%. This transition is not without its challenges, as AI models, infrastructure, and applications are dominated by a handful of companies, with 5-10 firms leading in each category.
For software companies, the new reality requires a swift response. They must maximise their value, find niches, and sell early. A complete retooling may be necessary, as traditional CRM providers are already feeling the heat from AI-driven startups like Synthflow AI, which offer advanced language models capable of improving customer data management and context retention across interactions.
The impact on workers is equally significant. Displacement is a reality that must be accepted, and workers must move fast, go adjacent, build relations, and create options. The AI reality is unsettling, with skills becoming obsolete in months and revolutionary change on the horizon. This could lead to career destruction for many, as the traditional career path may no longer be viable.
However, it's not all doom and gloom. Scenario 2 presents a more manageable transition, with some software surviving, albeit with AI augmenting rather than replacing. This would result in new job categories emerging, and while the transition would be painful, it could be navigated successfully.
On the other hand, Scenario 1 paints a grim picture of all software categories being replaced, leading to mass unemployment, economic collapse, social revolution, and the need for a new economic system.
The rapid pace of AI's progress has been compared to a category 5 hurricane, dubbed Creative Destruction 2.0. It's a storm that promises mostly destruction and little creation, with a concentration of power in a few AI companies.
Despite these challenges, there is no clear replacement employment for displaced workers, making it a critical issue that society must address. Acknowledging the speed of change, providing safety nets, restructuring education, rethinking economic models, and responding politically to unprecedented challenges are all necessary steps to mitigate the impact.
OpenAI, with its $90 billion valuation and fewer than 1000 employees, is a testament to the potential of AI. As the industry continues to evolve, it's clear that those who can adapt quickly will thrive, while those who cling to the past may find themselves left behind.
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