Google: Cloud Computing, Machine Learning–and Self-Destruction?

Google recently announced a new machine learning engine that it will make available to software developers. Machine learning is a form of artificial intelligence (AI) in which an application can learn from processing real data and become more proficient over time. By making the tool available, Google will enable businesses and entrepreneurs to use AI in wide range of new applications.

In the coming years, artificial intelligence is going start showing up in more and more places. AI will be incorporated into productivity applications and into the enterprise software used by large companies. I’m not talking about science-fiction level general artificial intelligence (“Open the pod bay doors, HAL”), but rather specialized or narrow forms of AI. Narrow AI applications can already land jet aircraft and beat virtually any human being in a game of chess. In the near future, they will be able to do far more.

Google’s new AI tool is being offered as part of the company’s cloud computing strategy. Cloud computing is a new model in which computer hardware resources as well as application software are made available on an as-needed basis, in much the same way that utilities like electric power are provided.

The thing you should know about cloud computing is that it tends to concentrate information, power and income. The information technology resources of thousands of businesses and organizations will increasingly “migrate into the cloud.” One immediate result of this is increased concentration and automation of jobs. Information technology workers are already seeing significant job losses as a result of the move toward cloud computing.

Once artificial intelligence becomes integrated into the cloud, the effect will quickly be felt by far more than just IT professionals. Anyone with a knowledge-based job will be highly susceptible. Organizations will get flatter as more middle managers are eliminated. It’s also quite possible that AI tools will be used to amplify the capabilities of low wage off-shore workers—allowing them to move up the value chain and compete directly with professionals who have high skill and experience levels.

And AI-enabled cloud computing isn’t just about direct job automation: it will also allow larger organizations to leverage economies of scale, perhaps as never before. Companies like Wal-Mart and the big box retailers will gain, while smaller businesses continue to lose. Sophisticated applications will make it easier to run larger, more complex organizations with fewer people, and that will be an important enabler of corporate consolidations. Low interest rates are already driving a new wave of merger activity on Wall Street, and you can be sure that mass layoffs will follow.

The point here is that technologies like cloud computing and narrow AI are going to result in less opportunity for most workers—while concentrating income and power in the hands of the few (as if that is a new story). Corporations will need fewer managers and knowledge workers, while at the same time many of the small business opportunities that have traditionally led to middle class, or even upper middle class, success will continue to evaporate. The demise of the blue-collar middle class is already pretty much a done deal. College educated white-collar workers—even those with relatively high incomes—are next in line.

The broader trends that are driving income concentration and the destruction of the middle class—globalization, advancing technology, supply side economics—are of, course, not Google’s fault. However, within the IT field Google is becoming a poster child for the concentration of wealth and power: and it is making important contributions that will accelerate the process.

But here’s the rub: Google’s current business model is almost entirely dependent on a world in which income—and therefore purchasing power—is at least somewhat reasonably distributed. Google’s revenue comes primarily from its AdWords program, which allows businesses of all sizes to place highly targeted online advertisements.

AdWords is an enormously successful money machine, and it works because businesses know that among Google’s huge number of users there will be a significant slice of traffic with a high interest in a particular product or service. Here’s the thing though: AdWords advertisers aren’t interested in reaching web surfers. They want customers—customers with discretionary income.

In the long run, as income becomes more and more concentrated—as more average people in the population find themselves unemployed or forced to take lower wage jobs—the businesses that advertise on Google are inevitably going to see more surfers and fewer paying customers. As that happens, they will drop out of the program entirely, or they will be willing to pay less for the ads, and Google’s revenue will have to decline. If the economy continues on its seemingly relentless path toward increased concentration of income and consumption, then at some point, Google’s advertising model will no longer be an especially effective way to reach the few people who still have money to spend.

Of course, if the entire economy continues on that path, then the viability of Google’s business model may be the least or our worries. We already have BMW owners sleeping in their cars, and upper crust New Yorkers worrying about civil unrest or even revolution. Watch out.

Note: For more on AI, unemployment, the concentration of income, and the impact on Google’s business model, see the free PDF of  The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future (pages 67-73, 81-84, and 180-183).

27 thoughts on “Google: Cloud Computing, Machine Learning–and Self-Destruction?

  1. I think we don’t need to worry about this new technology. Look at the past, many things are invented and they never steal workers jobs. Only those people lost their jobs who are not ready to learn new things. And this is a fact, if anyone wants to stay in competition learning is the key factors.

    1. And what of the people who can’t learn the new things needed in the new economy? Shall we just tell them to die quietly?

    2. In fact the ‘technological unemployment’ bogey has been raised since the Luddites were founded in 1811 to destroy mechanical looms.It was as misguided then as it is now – there can not be such a thing as ‘technological unemployment’ as long as labor remains the scarcest of the factors of production and not all human wants are satisfied.

  2. BodHost should perhaps go back in time and try telling that to the Luddites, the Tolpuddle martyrs, and many of the people in the workhouses in England. Technology has not been a total disaster for most working people so far it because it not only made labour more productive (and its employment therefore more profitable) but it also created a raft of entirely new jobs, such as writing software. It is a little difficult to see how cloud computing will create more jobs than it replaces.

  3. Google wants to compete globally. If the global middle class is growing faster than the American middle class is shrinking, there may be no downside at all for Google and other multinational companies when they promote job cuts. We’re not really all in this together. Google executives and shareholders have different goals than American workers.

    In an equitable society, each labor-saving advance should be greeted with joy. Eliminate 10% of all man-hours needed? We can all be 10% richer with no additional effort, or have 10% more leisure time with no decrease in material wealth. The problem is that most people do not live in equitable societies. Whether the solution looks more like Sweden or the October Revolution, or even a direct redistribution scheme a la The Lights in the Tunnel, is an open question.

  4. And again, it’s a matter of perspective. The death of the economy of scarcity is inevitable, but it will force the economical, technological, and sociological changes that must occur to make the transition to an economy of abundance.

    This is a phase change in the way “wealth” is determined, that is all.

    We can’t stop evolution, and as much as the transition phase is going to suck, all we can do is ride it out, and try the best we can to mitigate it’s worst effects on society.

  5. Doesn’t take too many brains to open the pod bay doors. Just some basic voice recognition. My mom’s 2010 Accord takes all kind of voice commands.

  6. A Great Article ! Simple Awesome !

    I just have one comment :
    You said :
    “Cloud computing is a new model in which computer hardware resources as well as application software are made available on an as-needed basis, in much the same way that utilities like electric power are provided.”

    Aren’t you mixing here between Cloud Computing and Utility Computing ?

    Utility Computing (Wikipedia) : the packaging of computing resources, such as computation and storage, as a metered service similar to a traditional public utility, such as electricity

  7. AI can never replace manual workers.. i had this experience at my workplace easily… anything that involves the mind cannot be done through AI…

    I was told that only manual taks which can be done by a 6th standard kid can be replaced with the help of AI…. for ex. step 1, step 2, step3 etc

    after all weren’t the computers and the internet built by us

  8. I am a practicing surgeon, and in medical fields AI will gain importance to make complex and clinical decisions in the business of health care. When it comes to healthcare econoimics, quality controls, management of population health, maintaining productivity of the lobor force, identify the excess use of finanaces for their health are unanaswered and are poorly addressed, soaring the cost to the customers, patients, payors, and the Governments. The cost of care and results of health care delivery are often questioned, and now biomedical technologies with AI assistance will become power tools for the Governments, Iusurers, and the future customes of the health care industry to assess, analyze, and differentiate the effective systems from those that are ineffcient and produce poor results. One must realize that health care and farming are the largest economies of the future, and we cannot ignore the impact that the AI can create to steamline the delivery of those two industries, to make this world better, and offer rewards to finanacial players and workers in these markets based on performance, and reduce economical redundancies, curtail fraud and abuse, and police the industry behavior using rewards and punitive actions based on AI implementation.
    Avi Deshmukh. MD, FACS, MBA

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