Intelligent Machines in a Utilitarian World
The Silesian Weavers of the AI Era
Silesia was known for its vibrant cottage textile industry. Thousands of villagers earned their livelihoods weaving cloth by hand in their homes. These weavers, mostly peasants, formed the backbone of rural economies.
In 1844, during the height of the Industrial Revolution’s eastward spread from Britain, mechanized looms and factory-based textile production began replacing traditional hand weaving.
🏡 Collapse of Cottage Industry: The prices for handmade textiles plummeted. Middlemen offered meager compensation, barely enough for subsistence.
💰 Rural Poverty: Entire villages, once self-reliant through weaving, sank into poverty. Families starved while machines in distant cities took over their trade.
🧑💻 Microsoft & Solow-Swan Model
tl;dr: In its FY2025 Q3 financial statement (ended March 31, 2025, 10-Q), Microsoft posted $32.0B in operating income, up 16% YoY, with only a modest 2.4% YoY increase in operating expenses. This is a textbook case of AI-driven productivity, resulting in more output and lower costs. Expect this profit-efficiency trend to spread fast across the industry.
Let's delve into the latest quarter reported by Microsoft, specifically FY2025 Q3.
Reported $32.0B in operating income, up ~16% YoY.
Spent about $16.1B in operating expenses, up ~2.4% YoY.
QoQ changes for Microsoft's Operating Expenses and Operating Income,
🟥 Operating Expenses Notice the slight decline 📉 QoQ from $16.2B in Q2 to $16.1B in Q3, and a slowing YoY growth rate from ~5.3% in Q2 to ~2.4% in Q3, a potential signal that cost efficiency is possibly due to AI-enabled productivity and reduction in workforce cost. 10-Q
🟩 Operating Income A modest upward trend 📈 quarter-over-quarter from $31.7B in Q2 to $32.0B in Q3, with year-over-year growth of 17% in Q2 and 16% in Q3. 10-Q
According to the Solow-Swan Growth Model, the long-term economic growth comes not just from more people or more money, but from gains in total factor productivity. Microsoft’s use of AI to drive efficiencies, such as Azure AI revenue growth of 33% year-over-year in Q3 and surpassing a $13B AI business annual run rate in Q2 while still growing income faster than expenses, is a clear example of this principle in action.
MSFT is producing more value without proportionally increasing costs, the very definition of tech-driven efficiency.
Microsoft is just the beginning. In the coming months, this trend is expected to be observed in other technology companies as well. With a reduction in the growth of operating expenses, corporations will be able to rapidly accelerate their Operating Income
Money is Energy
Money can neither be created nor destroyed, but it can be transformed from one form to another, preserving its potential.
With the increasing use of AI systems, it is inevitable that many white-collar jobs today will be transformed into other forms, along with a reduction in their demand.
This is not an existential crisis. It is the responsibility of human society to continuously make them more employable in the face of changing industrial conditions. Darwinism applies not just to biology, but also to economics. In a rapidly shifting landscape, it is the adaptable who will thrive, reshaping their lives to sustain themselves within the new economic reality.
What if all Jobs are Taken by AI?
That would be a utopian condition, during industrial revolution not all humans become unemployed instead the demand moved towards the job market that would value critical thinking and productive execution. During the decline of the industrial workforce, the new era of Information Technology boomed. One would become unemployed not because of someone else it would be often due to themselves.
White-Collar’s Silesia
In Silesia, mechanization led to a sudden obsolescence, plummeting wages, and community-wide starvation. Today’s AI-driven disruptions will slowly squeeze the white collar sector to displace and vanish.
Axios reports, citing Anthropic CEO Dario Amodei, that AI could eliminate up to half of all entry-level white-collar jobs, potentially spiking unemployment to 10-20% within one to five years (axios). Klarna's CEO has warned that AI's replacement of white-collar roles could trigger a full-blown recession, as companies slash costs by automating routine tasks. The term "white-collar recession" has gone mainstream, with Business Insider describing a job market where AI boosts corporate profits but leaves professionals scrambling amid layoffs and paranoia.(business insider)
Beyond Productivity: Ideologies for an AI-Abundant Future
The Solow-Swan model excels at explaining growth through tech-driven efficiency, as in Microsoft's AI code-writing reducing headcount while boosting output. But it overlooks a key flaw: endless growth assumes infinite resources and ignores human costs like inequality. In the AI era, alternative ideologies reframe this viewing AI not as a scarcity amplifier but a path to abundance, where work becomes optional and society prioritizes flourishing over accumulation. This aligns with historical shifts, Just as the Industrial Revolution birthed the IT boom, AI could usher in a "post-labor" era if we adapt ideologically.
Degrowth and Human-Centric Models: Flourishing Over GDP
Princeton's Arvind Narayanan (@random_walker) notes that AI hype and skepticism feed off each other, advocating for a balanced approach to adoption where technology complements human skills, such as in hybrid AI-human coding workflows.
Degrowth challenges Solow-Swan by advocating reduced consumption for sustainability, using AI for efficiency without endless expansion. For instance, in a degrowth model, AI tools like energy-efficient LLMs like light-weight models from Hugging Face could reduce computational demands, fostering sustainable innovation without environmental strain. This approach reimagines AI not as a driver of perpetual growth but as a means to downscale resource-intensive activities, while enhancing quality of life, echoing calls from the Degrowth 2025 Conference (session) to treat AI as a tool for planetary justice rather than "growthism." 🤔
Rethinking growth in the AI era emphasizes innovation without environmental strain, as highlighted in the UNDP's 2025 Human Development Report, which frames AI as a tool for empowering people and possibilities, potentially enabling shorter workweeks and equitable resource distribution to avoid inequality traps like those in historical disruptions (UNDP)
Unlike the 19th-century smashing rebellions, let us believe modern policy interventions can prevent poverty traps by focusing on reskilling, regulation, and equitable AI adoption.