Very good post from the Head of Economics at Anthropic. They’re finding that jobs have been less negatively impacted by AI than expected, as we continue to see time and time again in the data. The reason for this is that AI - at least so far - still requires people to operate to produce value in most cases. Most jobs can’t be fully automated with AI, only certain tasks in those jobs. And when you automate specific tasks, you actually can get even more output from those jobs, raising the demand (or at least maintaining it) in many cases. “So far, AI is both skill-biased and labor-augmenting. It complements domain expertise. It relies on humans in the loop to direct and evaluate the most complex work. And it rewards AI proficiency. Model capabilities are improving fast, but remain stubbornly jagged. To fill in the pockets of the jagged frontier, expert oversight is needed to steer incredibly capable AI systems, and to recover when they falter.” I suspect that we continue to see this in a number of critical areas of work. It’s clearly happening in software engineering, where software produced is being multiplied, all of which still requires developers to manage the work agents are doing. Software engineers are needed in a wide variety of industries now and companies of all sizes can now light up software projects that would have been impractical before. But there will be plenty of other domains of work where demand remains strong in a world where agents can accelerate the output of that job. Jevons paradox is alive and well.

The layer that can route to the best AI model for the particular job is going to increase in value substantially. There are at least 3 big reasons: * Cost optimization: there are plenty of use cases where you need frontier intelligence for some tasks and something far cheaper for others. Even in the same task you may use frontier intelligence for planning and review of the work, but an OSS or cheaper model for the bulk of the workload. This is going to be standard across large buckets of work going forward. * Capability maximization: despite the bitter lesson and models generally getting better in the same direction, there are still lots of differences between models. Some are better at tool use, others better at coding, and others again better at certain domains of knowledge work. The ability to route between these at different times is a huge advantage. * Risk mitigation: while the Fable situation is somewhat of a black swan, it’s possible we’re heading toward a regulatory environment where governments may restrict models at different times based on their approval mechanisms or new things they discover. This means you’re going to want flexibility in being able to deploy workloads across different providers as a form of risk mitigation. Ultimately, it’s going to increasingly be a a strategic advantage for the applied AI layer that they can effectively route between models. Will be very interesting to see how this evolves.