Fears of AI-driven unemployment unfounded, says leading venture capitalist Marc Andreessen

Concerns over the impact of artificial intelligence (AI) technologies that could make much human labour redundant have become more prevalent since a slew of AI-powered free-to-use systems became widely available in 2022.

For software engineer, entrepreneur and venture capitalist Marc Andreessen, however, these fears are unfounded, as he compellingly explains in a recent Substack post.

Mr Andreessen is co-founder of the Silicon Valley capital management firm Andreessen Horowitz – the largest venture capital company by assets under management.

Andreessen Horowitz is best known as a major investor in tech firms, with Facebook, Twitter, Skype, Airbnb, Foursquare, Coinbase, Substack, and many others included in its portfolio.

Mr Andreessen himself gained fame as the co-author of Mosaic, the first widely-used web browser with a graphical user interface, and later as co-founder of Netscape, the browser that had a market share of over 90 per cent in mid-‘90s, before falling into obscurity.

It is therefore safe to say that his experience and position affords him a privileged insight into the role of technology in the future economy.

“We had two such anti-technology jobs moral panics in the last 20 years — ‘outsourcing’ enabled by the Internet in the 2000s, and ‘robots’ in the 2010s. The result was the best national and global economy in human history in pre-COVID 2019, with the most jobs at the highest wages ever,” he writes.

“Now we’re heading into the third such panic of the new century with AI. ‘This time is different; AI is different,’ they say, but is it?”

Noting that “fears about new technology replacing human labour and causing overall unemployment have raged across industrialised societies for hundreds of years,” Mr Andreessen says that there are many “standard arguments against technologically-driven unemployment” – but concludes: “I don’t even think the standard arguments are needed, since another problem will block the progress of AI across most of the economy first.”

This problem, he argues, is that “AI is already illegal for most of the economy, and will be for virtually all of the economy. Because technology is already illegal in most of the economy, and that is becoming steadily more true over time.”

To back up his claim, Mr Andreessen argues that the economy can be split in two: those sectors where technological innovation is allowed to push down prices while increasing quality, and those sectors where it is not allowed to do so, thanks to heavy government regulation and industry bottlenecks controlled by oligopolies and cartels.

The latter are characterised by “extensive formal government regulation as well as regulatory capture, price fixing, Soviet-style price setting, occupational licensing, and every other barrier to improvement and change you can possibly imagine.”

“Technological innovation in those sectors is virtually forbidden now,” he writes.

The chart below shows price changes, adjusted for inflation, across a dozen major sectors of the US economy, with the blue being those where technological developments are integrated and capitalised on, and the red being those where they are not.

“We are heading into a world where a flat screen TV that covers your entire wall costs $100, and a four year college degree costs $1 million, and nobody has anything even resembling a proposal on how to systemically fix this,” he writes.

Libertarian views like Mr Andreessen’s have fallen out of favour in many quarters, particularly after the Great Recession which was in part caused by deregulation.

In 1928, famed British economist John Maynard Keynes expressed his dream that technological progress over the next 100 years would free humanity from the need for endless labour: “For the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.”

Only five years away from the date, we are certainly a long way off from the realisation of that vision. Could the increasing integration of AI in the workplace hold the key?