Sorry Screen Actors Guild, AI is Here to Stay
Creative Destruction Should be Encouraged and Not Feared in a Free Market Society: A Reflection
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In his lecture on Creative Destruction, Entrepreneurship, & Discovery, Dr. Russell Sobel discusses some of the theories of Joseph Schumpeter, specifically the idea that entrepreneurship requires creative destruction to create value in a society. In my opinion, this was the best material I have engaged with so far in this course, and I found this to be a very convincing and reassuring argument for free enterprise in society. In my reflection, I discuss some principles Sobel shared and specifically discuss creative destruction and its relationships to AI and present-day pushback against the technology.
The Profit and Loss System is Not Only Cheap Feedback, It’s Free
Sobel discusses how the profit and loss system is the best possible indicator as to whether or not something will be successful, or valuable, in the marketplace. Many people have good ideas, but the price and value in a free market will truly indicate whether the product will be successful or not. An example Sobel uses is gasoline created from chicken manure; while a seemingly good idea that could increase sustainability, the research showed that a gallon would cost over five hundred dollars. In this case, it was not even necessary to bring the product to market because it was not viable; but, for other products where the outcome is not as obvious, simply bringing the product to market and seeing how it is valued is a great indicator at whether something will be successful. I think this framework of getting feedback from the profit/loss system is genius and something I had not ever considered. It is a way to gauge what society feels is important and useful, and I think this should be used more often as a measure of how the public feels. An interesting comparison to this is political betting markets which are now legal in the United States; while betting is not necessarily equivalent to the profit/loss mechanism when finances are involved, the results of polls are generally more accurate than when finances are not involved. I just find this interesting.
Creative Destruction and AI
I had never heard of the concept of creative destruction before, but the process was something I have examined, especially through our recent discussions about monopolies. Sobel explains creative destruction as the replacement of existing companies with other companies that can produce a better product through innovation. Sobel described different types of innovation, too. He described how most of the creative destruction occurs from outsiders and not those that already exist within the company. Sobel discussed the principle of incremental innovation as well, and how large companies that are well established are great at incremental innovation, but not usually very successful at large-scale innovation that causes creative destruction. An example he provides is Google Glasses, which never took off. However, Google continues to innovate incrementally on their existing products, which are used by millions of people every day. The fact that creative destruction most often occurs through outsiders is very intriguing.
Sobel gives a great example of creative destruction as the elimination of the horse and buggy and the creation of the automobile. The horse and buggy industry was massive until the automobile came and replaced it. So, what about all the individuals who lost their jobs producing materials related to horses and buggies? Well, in the short term, they were replaced, but the automobile industry boomed and created thousands of subsequent industries that have created millions of jobs for people for the better part of the last century.
So should we mourn the loss of the horse and buggy industry today? By no means! What about the Sears catalog that was then replaced by department stores, that were then replaced by shopping malls, that are now being replaced by online retail? The innovation of industry through creative destruction will most certainly affect individuals in affected sectors, but in terms of providing collective value to most people, creative destruction has many more positives than negatives. The idea that specific industries should be protected, that innovation should be stifled, and value creation should slow just to ensure employment for a certain sub-group of the population seems backward to me.
AI is Here to Stay, In Film and Probably Everywhere Else
I took a Public Policy course during my undergraduate career at OSU, and throughout the entire semester, we did research on AI policy and how it was going to affect industry in the United States. A quote that has stuck with me that we uncovered during our research 60% of the jobs that existed in 1980 did not exist in 1940 (a quick ChatGPT search just confirmed this metric and I couldn’t remember the source, but it is from a study published Quarterly Journal of Economics). 60% is a huge number! I think this fact should give great hope to individuals who are afraid AI is going to take over all industries in the United States because, in my opinion, it won’t. I was not familiar with the term ‘creative destruction’ before Sobel’s lecture, but that is exactly what is happening with AI.
And now for my final point and what I reference in my title. In 2023, the Screen Actor’s Guild (SAG) went on strike for several months over AI use in the film and television industry, claiming that their industry should be protected from AI. Recently, I saw that James Cameron (director of ‘Titanic’ and the Avatar movies) will include a disclaimer in the new Avatar movie that ‘no AI was used’. When I saw that I kind of scoffed, because in all actuality, if the movie is better because of AI, what consumer is going to care at all about whether AI was used or not? Did people care that CGI was first used? They most certainly don’t care now. How is this different? If AI creates more value in society and makes work easier, then why should there be any movement to stifle that production of value? Sure, there most certainly needs to be regulations regarding safety and protection of likeness and image, but that is not what SAG or James Cameron seem to be concerned about.
The film industry is not the only industry concerned. Employees from industries from across the spectrum are concerned that AI automation will replace them, from teachers to tax professionals. While it is important to make wise decisions to ensure that large swaths of the American population are not suddenly unemployed, it makes little sense to prevent AI advancement that is most certainly going to happen, whether groups like SAG approve or not. Creative destruction is part of the free market, and I think those scared of AI could be encouraged by learning about that principle.
*While I have explored various perspectives in this essay, it is important to note that I do not necessarily ascribe to any argument made here 100%. This is a writing exercise, and I sought to explore various perspectives after watching the lecture, as per the assignment instructions.