Chapter 1: What sparked the viral reaction to the Citrini Research report?
Our colleague David Uberti was doom-scrolling on Sunday night, like a lot of us do, when a certain post caught his eye.
I was reading in bed on my iPad this interesting sub-sec post from a financial research firm I hadn't heard of before.
It was published by a relatively unknown firm called Citrini Research, and it was written like a memo from the future, from June 2028, looking back at how artificial intelligence transformed the economy.
And they basically framed this report as sort of like a post-mortem on what happened over the time between now and then and how the economy has changed. It read to me like really good science fiction. I didn't put it down, despite the fact that it was 7,000-plus words long. The picture the Citrini report painted of the future was bleak.
We described it as a doomsday report, and very much so it was. In the scenario that they outlined, there was something like 10.2% unemployment across the United States, which is worse than what it was in the depths of the Great Recession.
The report proposed that AI will become so good at writing code and replacing jobs that it could become very bad for the broader economy.
Basically, the question is not whether, like, AI is bearish or bullish for the economy, is that what if it's so bullish that it becomes bearish?
David wasn't the only one reading the Citrini post that night. It was going viral, and it was freaking people out.
Pretty soon after the market opened on Monday morning, a lot of stocks that we follow in the software space in particular were all flashing red on our screens. And when something across the entire sector is moving in the same direction, it tends to mean something big is happening.
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Chapter 2: What future does the Citrini Research report predict for employment and AI?
I think people who think a lot about this space and the uncertainty around it are looking for ways to understand it. And this definitely tapped into that vein.
Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson. It's Friday, February 27th. Coming up on the show, the AI doomsday report that shook the stock market. At the end of last year, the biggest worry about AI in the stock market was that it was a bubble, that the technology was overhyped, and the companies were spending too much money on it.
There's a lot of questions about AI companies overinvesting in AI, basically throwing billions upon billions of dollars into data center construction, chips, and more, and that all of that wouldn't actually pan out. But over the last couple of months or so, there's been a vibe shift of sorts, and it's shifted more.
from this idea that there's a bubble that might burst to this idea that AI might actually pan out.
This vibe shift was sparked by massive advancements in AI tools. Tools that allow for AI agents, or digital assistants, to actually do stuff for you. And there have been advancements in coding tools, like Anthropic's Cloud Code and OpenAI's Codex, which make it possible for just about anyone to write computer code.
I mean, when you see people like me who are able to go into Claude with no previous coding experience and do in a couple of hours what trained software engineers would take much longer to do, traditionally speaking, I mean, that's a pretty big development. And it raises the question of, you know, how quickly can people spin up new pieces of software?
It wouldn't take the type of massive investment that you'd have from a traditional software company that takes billions upon billions of dollars to do this stuff. The idea being that it's actually much cheaper to do this now.
One AI founder compared this moment to February 2020, when we could see a pandemic brewing on the horizon in other countries, but didn't know exactly what was about to hit us.
There's been this sort of deer-in-the-headlights moment on Wall Street of what people should do, and it has left the market in this very herky-jerky, trigger-happy mode. So it just sort of speaks to how this particular sub-stack post played into an existing trend, and in many cases exacerbated that trend.
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Chapter 3: How did the stock market react to the doomsday scenario presented?
Most notably, there is no mention of purchasing power here. We have to think about what normal people can do and how their lives are going to get better.
Software engineering postings are still rising. Data center construction is booming. Capital spending is accelerating. The apocalypse, they argue, is simply not in the numbers. The math doesn't matter.
David says the criticism falls into two broad camps. The first has to do with that ghost GDP concept, the idea that the value created by AI won't go back into the real economy.
It goes against a lot of what mainstream economists think and how they think about GDP. A normal economist would tell you if you create more money through additional productivity, through something like AI, that money has to go somewhere. And also it overlooks the idea of political economy at all. The idea that the U.S.
government and public policy would slow walk into this without any meaningful changes on how to tax people, for example. If you have all of these incredible benefits accruing to a tiny number of companies or individuals in ways that really fundamentally alter the economy in a bad way, it seems unlikely that the government would just let that happen.
The second big camp of criticism is that the piece focuses too much on the negatives of AI without getting into the possible upsides.
This post really focused on the destruction of white-collar jobs as we understand them right now. There was no real discussion of any potential new types of jobs that might be created, new types of businesses that might form in response to that. Over the last century or so, whenever we've had these huge technological sea changes and productivity has gone up, that money has gone somewhere.
It has expanded what we think of as consumption. People in the United States have bought more stuff generally in response to all that. that would seem to create a lot of opportunities for new businesses to pop up as well.
I've heard some critics say that human desires are limitless. As long as humans have desires, there will be jobs out there to satisfy those desires.
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