- Aswath Damodaran warns AI's bullish forecasts risk massive white collar job losses
- To justify $26 trillion valuations, half of white collar workers may lose jobs
- AI-driven job losses could harm broader economy by reducing consumer demand
Aswath Damodaran, professor of finance at NYU Stern School of Business, has warned that the market's most bullish forecasts for artificial intelligence carry a hidden cost: job losses on a scale that would be catastrophic for the broader economy, not just disruptive for individual sectors.
In an exclusive interview to NDTV Profit, Damodaran said that for AI to justify valuations in the region of $26 trillion, the kind of numbers that have been attached to companies such as SpaceX, roughly one in every two white collar workers would need to lose their job. "Lawyers, consultants, bankers, journalists, where do they go? What are they going to do?" he said, questioning who would be left to buy the products and services AI delivers once that income leaves the economy.
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This, he said, is the tension investors are failing to confront. "You don't want the best case AI scenarios to play out, because while they may be great for AI companies, it will be catastrophic for the rest of us," Damodaran said. A future where AI becomes a productivity tool rather than a replacement for labour would mean a smaller market and would disappoint AI bulls, but it would be better for the rest of the economy, he added.
Damodaran's own expectation sits between the two extremes. He said he expects white collar job losses in specific pockets of the economy, but not on the scale that the most optimistic AI advocates are pricing in, and not as benign as those who dismiss the technology's impact altogether suggest.
The clearest test of which jobs are vulnerable, he added, is how mechanical and how interaction light the work is. Roles built around scripted, repetitive tasks are most exposed, while work requiring sustained human interaction is likely to prove more resistant to displacement.
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