\n<\/p>\n
The scenario begins with AI agents undergoing a \u201cjump in capability\u201d. This has already happened. Citrini refers to Anthropic\u2019s Claude Code and OpenAI\u2019s Codex, both of which have wowed users with their performance in recent months.<\/p>\n
The agents dent software-as-a-service companies such as Monday.com, Zapier and Asana, because they offer businesses a cheaper way to do in-house tasks , for example, managing databases and organising workflows. This forces businesses such as Oracle that rely on long-term contracts with customers into \u201ca race to the bottom\u201d on pricing.<\/p>\n
Meanwhile the AI agents wreak havoc elsewhere. The scenario imagines every consumer deciding to use their own personal agent to transact and conduct business. This completely sidelines companies that monetise \u201cfriction\u201d in the economy, such as travel and estate agencies that operate as middlemen in processes such as booking holidays or buying property.<\/p>\n
Instead of using DoorDash, developers \u2013 and civilians \u2013 code up their own food delivery apps, all of which compete, fragment the market, and destroy the margins of legacy businesses. Business for Uber and other ride-sharing apps also evaporates. Instead of using Visa and Mastercard, AI agents decide to do all business in cryptocurrency, because transaction costs are cheaper. This guts traditional payment providers.<\/p>\n
To Citrini, this is a logical endpoint for tireless AI agents that have the time and capability to optimise everything. \u201cHabitual app loyalty, the entire basis of the business model, simply didn\u2019t exist for a machine,\u201d it writes.<\/p>\n
In the real world, Uber, DoorDash, Mastercard and American Express shares have all fallen this week on the back of this scenario.<\/p>\n
<\/span>An Uber cab in Manhattan, New York City.<\/span> Photograph: Andrew Kelly\/Reuters<\/li>\n Traditional narratives about progress envision the latest technologies creating new jobs as they destroy others. Not so with AI.<\/p>\n \u201cAI is now a general intelligence that improves at the very tasks humans would redeploy to. Displaced coders cannot simply move to \u201cAI management\u201d because AI is already capable of that,\u201d Citrini writes.<\/p>\n Instead, white-collar workers redeploy en masse into unstable, gig-economy jobs \u2013 the writers describe a hypothetical friend of theirs laid off from Salesforce driving for Uber. This in turn suppresses wages in the sector. The layoffs meanwhile drive down consumer spending. Companies, suffering from weakening demand, decide to invest not in workers but in more AI.<\/p>\n This is \u201ca feedback loop with no natural brake\u201d, Citrini writes. The consequences are far-reaching when the wallets of the 10% of US workers who account for 50% of consumer spending suddenly snap shut.<\/p>\n<\/li>\n The scenario imagines that job losses and the evisceration of software companies will ripple out into broader markets in two ways: through defaults in private credit and a mortgage crisis.<\/p>\n Private credit firms, or lenders that are not banks, have been involved in restructuring a number of software businesses in recent years, taking out loans based on those businesses\u2019 predicted annual revenue far into the future. The example Citrini gives is how Hellman & Friedman and Permira, an asset manager, took Zendesk, a software company, private in 2022 for $10.2bn (\u00a37.6bn). The acquisition included a loan structured around the assumption that Zendesk\u2019s revenue would be stable.<\/p>\n After AI agents, that assumption is no longer holds.<\/p>\n This leads to \u201cthe largest private credit software default\u201d in history. It should be contained to software, writes Citrini, but it isn\u2019t, because the capital on the balance sheets of the asset managers includes life insurance policies and \u201cthe savings of American households\u201d.<\/p>\n Regulators downgrade this software debt, which contributes to a 2027 crash.<\/p>\n Meanwhile, there is a mortgage crisis. White-collar workers no longer have white-collar jobs and are unable make repayments on their home loans. \u201cPeople borrowed against a future they can no longer believe in,\u201d writes Citrini.<\/p>\n<\/li>\n All this makes the negative feedback loop worse.<\/p>\n The first-order spiral is companies laying off workers, which weakens demand and consumer spending, which in turn leads companies to invest in more AI and lay off more workers.<\/p>\n The second-order spiral is that the private credit turmoil and mortgage concerns mean that markets tighten, consumer confidence is shaken, there are more layoffs and more mortgage impairment. \u201cEach reinforces the other,\u201d writes Citrini.<\/p>\n No financial policy tools exist to address this, because the crisis that is happening in the real economy \u2013 job losses and suppressed wages and spending \u2013 is not a result of tight financial conditions that central banks can address, but of investment in AI, which makes \u201chuman intelligence less scarce and less valuable\u201d.<\/p>\n The upshot is a crash in late 2027, driven by the mortgage markets. It wipes out 57% of the S&P.<\/p>\n<\/li>\n <\/span>Protesters take part in an Occupy Wall Street rally near the New York Stock Exchange in November 2011. <\/span> Photograph: Justin Lane\/EPA<\/p>\n Citrini imagines the crash will throw governments into a crisis they will be unable to manage.<\/p>\n \u201cThe system wasn\u2019t designed for a crisis like this. The federal government\u2019s revenue base is essentially a tax on human time. People work, firms pay them, the government takes a cut,\u201d it writes.<\/p>\n \u201cThe government needs to transfer more money to households at precisely the moment it is collecting less money from them in taxes.\u201d<\/p>\n AI companies, however, are doing well. The big-tech players who build and sell AI models are making fabulous sums. Because their companies make up a large share of the markets, the economy looks great on paper.<\/p>\n Citrini has a term for this: ghost GDP, that is \u201coutput that shows up in the national accounts but never circulates through the real economy\u201d.<\/p>\n The social fabric frays and a movement styled after Occupy Wall Street blockades the offices of AI firms for weeks on end.<\/p>\n Citrini\u2019s scenario ends with a caution: \u201cThis is the first time in history the most productive asset in the economy has produced fewer, not more, jobs. Nobody\u2019s framework fits, because none were designed for a world where the scarce input became abundant. So we have to make new frameworks. Whether we build them in time is the only question that matters.\u201d<\/p>\n The impact of the Citrini scenario has startled some commentators, including experts who say AI tools are not yet capable of enacting it. Stephen Innes, a managing partner at SPI Asset Management, says AI thought pieces have become market movers.<\/p>\n \u201cWe have watched this market absorb wars, sticky inflation, banking tremors and tariff theatrics with a shrug, yet a widely circulated Substack thought piece is enough to knock it sideways,\u201d he said.<\/p>\n<\/li>\n","protected":false},"excerpt":{"rendered":" 1. AI agents remove all \u2018friction\u2019 in the economy The scenario begins with AI agents undergoing a \u201cjump in capability\u201d. This has already happened. Citrini refers to Anthropic\u2019s Claude Code and OpenAI\u2019s Codex, both of which have wowed users with their performance in recent months. The agents dent software-as-a-service companies such as Monday.com, Zapier and<\/p>\n","protected":false},"author":1,"featured_media":45146,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[1564,21985,6032,23304,1443,14939,2884,293,590],"class_list":{"0":"post-45145","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-artificial","9":"tag-brake","10":"tag-doomsday","11":"tag-feedback","12":"tag-intelligence","13":"tag-loop","14":"tag-markets","15":"tag-report","16":"tag-shook"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/45145","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=45145"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/45145\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/45146"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=45145"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=45145"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=45145"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}2. <\/span>Mass white-collar unemployment<\/h2>\n
3. <\/span>Ripples out into the broader economy<\/h2>\n
4. <\/span>Downward spirals<\/h2>\n
5. <\/span>Occupy Silicon Valley and Ghost GDP<\/h2>\n