From Muscle to Matrix (www.aviraj.dev)

A recent analysis emphasizes a profound shift in the economics of labor and productivity due to advancements in AI, particularly large language models (LLMs). The cost of generating code using an LLM has dropped dramatically—from $100 for a human developer to just $0.01 for an API call—signifying a "phase transition" in how work is valued. This transition marks the end of human time as a critical factor in production, replaced instead by energy consumption and inference efficiency. As a result, companies can capture nearly 90% of economic value, while the share for human workers diminishes to 5%. The implications for the AI/ML community and the broader economy are substantial. As AI models continue to improve, the productivity gap will likely lead to widespread job displacement in knowledge work. Additionally, with rising interest rates forcing companies to cut costs and improved AI tools providing viable replacements for human labor, the newfound dynamics have created a "sandwich effect" that exacerbates the pressure on workers. This compression could permanently change the landscape of labor markets, raising essential questions about the future economic role of humans in a world increasingly driven by AI capabilities.