How are you feeling about all of this?
This being the economic paradox we’re diving into.
By all traditional measures, the market appears robust, yet there is a palpable, growing sense of fragility. Over 80% of the S&P 500’s record-breaking growth this year has come from AI stocks, specifically the Magnificent10 (NVIDIA, Microsoft, Meta etc.). Remove them, and the market is flat.
We all know, when America sneezes, the rest of the world catches a cold. We are at the starting point of a chain reaction that is reshaping our economy, local investment landscape and redefining the future of white-collar industries.
We also know how heavily dependent Australia is on our services sector. Nine in every ten workers are white-collared. And whilst we’re not being overly productive (with overall output still stuck at pre-COVID levels), the pressure to perform has never been higher…
Efficiency = Unemployment.
Our immediate challenge.
Dario Amodei, CEO of Anthropic publicly stated earlier this year that “AI could wipe out half of all entry-level white-collar jobs — and spike unemployment 10%–20% in the next one to five years.”
We are witnessing the birth of a profound economic paradox: whether the massive bets on AI pay off spectacularly or fail dramatically, the outcome for employment could be the same.
- If the AI bets succeed, they will justify their trillion-dollar valuations through unprecedented cost-cutting, leading to widespread white-collar job displacement.
- If the AI bets fail, the resulting market crash will evaporate capital, forcing all companies—healthy or not—into defensive positions (layoffs).
… Heads or tails, unemployment surges.
“According to Okun’s Law, for every 1 percentage point increase in the unemployment rate, real GDP falls by approximately 2 percentage points.
But AI could be a different story, with some experts predicting jobless growth… The canary in the coal mine may be recent college graduates. Stanford economists found that early-career workers (ages 22 to 25) in the most AI-exposed jobs have experienced a 13% relative decline in employment.
If this trend accelerates, today’s challenges around wealth inequality and political volatility will seem quaint.” – Scott Galloway.
Chasing Moonshots
When so few companies are set to gain such astronomical returns, VCs and Investors have no choice but to back these moonshot opportunities above all else. And these companies are taking unprecedented advantage of that.
The leader of the new world order, Sam Altman, made it clear – “Whether we burn $500 million a year or $5 billion—or $50 billion a year—I don’t care, I genuinely don’t.”
This is creating a “barbell effect.” Where investors are bifurcating their bets, focusing capital on two extremes:
- the pre-seed idea that might be a x1000 company, who loudly and proudly do not want to employ many human beings, and
- the mega-tech companies at their C, D, E Series.
This leaves solid, sustainable businesses— those who have historically been the engine of broad-based employment, and the kind that might generate healthy 4x-5x returns, stranded smack bang in the middle.
OK, I get it… now what’s the smart money doing about this?
Answer = Rebuilding, Reinvesting and Rehiring.
Rebuilding:
Jackie Vullinghs, General Partner at Airtree describes this trend perfectly. Vullinghs told Capital Brief last week that “Many founders we’re meeting aren’t planning to sell software into professional services firms… They want to rebuild those firms from the ground up, with technology and AI at the core.
Done right, the rebuild model lets you deliver a better, faster, cheaper service while accruing proprietary workflow data.”
Reinvesting & Rehiring
Fiercer storms require stronger anchors.
You cannot control the S&P 500. You cannot dictate VC funding trends. You cannot stop the march of AI. In a volatile environment, your focus must turn inward to the only true source of durable competitive advantage: your core team.
Your core team is your moat, anchor, rock, bae.
The teams that are winning, large or small, are critically assessing their core team – they want superior judgment, creativity, hustle and adaptability. If they don’t have that, they are re-hiring.
Hiring for these qualities is the most critical defensive and offensive strategy you can deploy. This means:
- Hiring ‘Owners’: When times are tough you need owners, not employees.
- Hiring for Resilience: Past performance in a stable market is no longer a reliable predictor of future success.
- Hiring for Judgment: The highest-value human skill right now is judgment. Create opportunities for your team to exercise critical thinking and complex problem-solving, and reward them for it.
- Pay what is needed for an ‘A Player’ in a core position: Don’t low-ball, show your core team you are investing in them for the long term and their performance/loyalty/longevity will follow.
- Summary – hire bigger, better players.
Contrary to my tone here, I’m a huge fan of AI. We’ve just built a backend agent with AmplAIfy which has revolutionised how we work – the results we’ve achieved in a very short amount of time are mind blowing.
It already has, and will continue to allow us to hire more expert consultants at Real Time.
I can see AI, like any new technology leading to a net-hiring-gain, eventually. But until we understand that we are in a ‘leadership’ and ‘organisational’ revolution much more than a ‘technical’ one, the only tool we’ll keep using is the axe.
We will continue defaulting to the path of least resistance and treat our most valuable asset—our people—as a liability. The resulting brain drain and loss of institutional knowledge will be a far greater long-term cost than any immediate payroll savings.
So, my advice. While others are distracted by the volatile whims of the market, focus on forging the strongest, most adaptable, and most committed team possible.
It is the one competitive advantage that cannot be replicated.
– As always I’d love to hear your thoughts. Good luck out there! 😇
