Everyone is talking about how much money AI saves them. Am I the only one thinking about the people who used to earn that money?
Suppose you used to pay an agency $1,000 to make a marketing video. Now you can make a surprisingly usable one with Claude and Higgsfield. You spend a tenth of the time. You spend a tenth of the money. And… that agency you used to use loses a customer.
The AI tools got good. METR’s task-completion time horizon tracks how long a human needs to perform tasks an AI can complete. The horizon has been growing exponentially. Today, AI can complete tasks that would take a human over 16+ hours.
Video editing, website design, software language porting. Check.
And all that for a fraction of the cost of human labor.
A company can compete with a new competitor that’s 10-20% cheaper. It can cut costs. It can cut fat in the org. But when a new competitor is 10-20x cheaper? That’s rough. The existing cost structure stops working. You can’t fire your existing processes, and you can’t ask your employees to work for pennies on the dollar. Payroll, rent, and debt are fixed costs and you can’t just magic wand away.
And I expect this to hit freelancers and small businesses especially in the creative and service space the hardest. Think of the companies you know for what they do, not for their names. That company that does good video editing, not the Corridor Digitals.
In the near term, I expect to see these firms wake up one day and lose droves of customers to new AI-first replacements. Every company saying, “Let’s try AI to replace X solution,” is the catalyst. The companies boasting about their wins and getting others excited about using more AI will wake up one day to find their own customers boasting about leaving them for a dirt-cheap new product.
Now, the effect of that lost revenue will not stop at those companies. One company’s spending is someone else’s income, creating a multiplier effect. That money would have paid employees, downstream freelancers, and other businesses. They would then have spent some of it on groceries, restaurants, rent, and everything else. Other businesses then lose revenue and cut spending too. The drop in spending spreads and compounds through the economy.
In the longer term, I expect the economy to find a new equilibrium. It always does. Cheaper services will make new businesses possible. People will find new uses for their money and new work to do. And… many of the firms losing customers today will not survive long enough to reach the new norm.
With every company cheering how much AI has helped cut its costs, what happens when you’re the one getting cut?
Someone still has to buy your product.