The State We're In

(Initially published in Grant Williams’ February “Things That Make You Go Hmmm..” Letter)

"Civilizations begin to disintegrate when enough people start to gain status through unproductive and destructive behavior that they impose unsustainable costs upon it" -

Baruch Hasofer

“How Things Collapse” Postkahanism Substack

Disruptive Technology

Early exposure to technological disruption - whether positive or negative - often shapes entrepreneurs' later approach to innovation and business management. A powerful example of this is Andrew Carnegie’s family experience in Edinburgh, Scotland in the first half of the 19th Century, where his father was one of many private hand-loom operators to whom the job of weaving cotton into cloth was outsourced, in a distributed raw materials processing model. From The Autobiography of Andrew Carnegie and the Gospel of Wealth, we learn that "The change from hand-loom to steam-loom weaving was disastrous to our family. My father did not recognise the impending revolution, and was struggling under the old system. His looms sank greatly in value..."

Worse perhaps than the actual fact of technological disruption was Mr. Carnegie Snr.’s unwillingness to accept the reality of this profound technological advancement and the subsequent obsolescence of his capital and skill. This unwillingness to accept translated itself into depression and a sense of victimhood which prevented him from that most important of survival responses, adaptation. It did not take long for the Carnegie family to become destitute and only with the assistance of family and friends were they able to scratch together the wherewithal necessary to pay for the family’s passage to America, in the hope of finding work, income and a restoration of their fortune and dignity in the new country. The rest, as they say, is history, at least as far as Andrew is concerned - his father’s subsequent fate was not further commented on in his numerous biographies.

The early experience of the devastating effects of innovation profoundly shaped Carnegie's approach to technology. From victim to victor: while Carnegie's father was ruined by technology, Andrew became one of its greatest beneficiaries by embracing and investing in innovations at every stage of his career.

I have thought of this story often in the past year, whilst watching and reflecting on the changes being wrought within the marketing services industry as a new wave of technological innovation in the shape of AI cut and continues to cut broad swathes through a sector previously thought to be more or less immune to it. One of my best friends runs a highly successful boutique marketing services business in the US which has been around now for some three decades and we talk often about the profound changes taking place and the damage being done to participants in that market. He is unusual in that he has always maintained a deep “tech bench” in his business, rather than being exclusively staffed by creatives, writers and account managers with logistics skills. He is acutely sensitive to the emergence of new technological innovations and to the flow of technological adoption in the component parts of his industry and has been quick to evolve his firm’s offerings as paradigms shift. He was, for instance, early in recognising that the “website building” bonanza was becoming commoditised in the early teen years of the new millennium and responded by shuttering that offering entirely by 2015 and moving to higher value added digital marketing services. In the early ‘20s he recognised that the constant manipulation of the Google algorithm and the proliferation of content was destroying the efficacy of the previous SEO-based approach to marketing with its focus on clicks and reframed his firm’s offering away from that to a more targeted content and email nurturing focus in service of genuine business development for his primarily B2B clientele.

In late 2023 he saw the potential for both disruption and productivity being offered by the emergence of AI, notably Chat-GPT, Claude and other early providers and directed his tech team to begin building a specialised content writing tool for digital marketing. Within six months he was telling me that the quality of content production from the algorithm, given their ability to write highly specific prompts, was matching the creative output of his best writers and within nine months was able to create entire strategy briefs, extracted from deep subject matter and industry research. In combination with other AI based process tools, the technology can now identify innovative ideal customer typologies, simulate accurate target customer group responses, draft individualised campaign emails, extract the emails, pen Linked In posts, create and illustrate in-depth white papers, blog posts and other content and then execute the campaign, whilst constantly monitoring the feedback and results, as well as adjusting the campaign in a constant feedback loop to optimise the responses. All this can be designed and executed within an hour rather than the weeks and months a well-staffed agency would have needed to have expended in time and resources not even a year ago.

Google and Open AI’s new Deep Research tools, recently unveiled, are capable of doing this and more, if not for free then as good as, whilst producing both master and doctoral thesis level research papers which meet the highest standards of scholastic benchmarking. The ability of even a highly capable small firm to out-innovate the competition in the face of such rapid technological innovation and distribution is severely limited - it is becoming impossible profitably to outrun or outsmart this wave at its current velocity.

The results of all this innovation is breathtaking in its scope for productivity enhancement, i.e. increasing the output for a given quantity of labour or maintaining a specific level of output for a significantly reduced quantity of labour. In the case of AI derived marketing services (which are complex but not rocket science level complex) the reductions in time (the single most important factor in the provision of services to OEM customers) and labour, whilst potentially increasing quality and process efficiency are proving to be exponential. It is no exaggeration to say that the verb “decimation” (which literally means the removal of every tenth) is insufficient to describe the level of destruction of firms and jobs currently being experienced by this industry, many of whose participants do not even know what has hit them yet. I have not seen any reliable figures for what is likely to happen to the population of this industry, but given the current disintermediation and impossible-for-humans-to-match productivity increases it would not surprise me if at the end (which will come sooner than I dare predict) the small to medium sized marketing services firm in its current form will have gone the way of hand loom weavers.

My friend and a few others like him will be fine - if exhausted - as they, like Carnegie before them, understand the challenge posed by technological innovation and have the mental agility, technical competence and thought leadership capabilities to re-invent themselves. They are Schumpeterian heroes who can ride the wave of innovation and creative destruction, by letting go of previous paradigms and deeply understanding the constant underlying social need of their customers. Firms will always need to market to develop business and grow, just how they do it will be subject to change in paradigms of what is both possible and effective. It is as sure as eggs are eggs that the power of AI content and distribution, if applied to the (now) old paradigm of marketing, will break it and inflate the concept and quality of “content” to the point of zero utility. The new firms and leaders will be the ones who both recognise that and formulate a new paradigm, whatever that looks like.