The disruptive path to productivity
I realise the war in the Middle East and fuel prices are dominating headlines and investors’ current concerns, however, there will come a time when markets and conversation will return to those topics that made headlines before Trump triggered the latest conflict in the Middle East.
One of those topics is the disruption to employment expected to be wrought by Artificial Intelligence (AI), especially now that AI has itself moved from prompting Large Language Models (LLMs) to deploying Agentic AI. The question on my mind is whether, assuming a large shift in employment roles, that shift will be smooth or unstable.
From the vantage point of 2026, progress through history tends to look like a smooth upward curve. But I suspect, for those living through each major technological shift it felt less like a smooth ride and more like a seismic shock.
It’s true that each step change in technology ultimately produced a leap in productivity (greater output per hour worked) and a higher standard of living, but was the cost high?
And having just had OpenClaw demonstrated to me in my home by a friend’s adult kids, I believe the advent of Agentic AI might have placed us on the precipice of an imminent seismic shift in employment.
Witness, for example, Atlassian cutting 10 per cent of its workforce or 1,600 jobs on March 12, Block cutting 40 per cent or 4000 jobs, Meta eliminating 16,000 roles or 20 per cent of its workforce, Amazon 16,000, Oracle 25,000 and Wisetech 2,000 jobs.
These are tech companies demonstrating the requirements for building and running their business have fundamentally changed. What if this is the edge of a much larger upheaval that results in radical shifts in geography, and the slow, often painful process of human re-skilling? And what are the lessons of history?
From fields to factories
The shift from an agrarian society to an industrial one was arguably the first great “de-skilling” event. Before the late 18th century, productivity was limited by muscle and wind. The introduction of the steam engine and mechanised weaving represented a tipping point in the changes to human labour.
Placing oneself in that moment, it’s obvious the change didn’t occur overnight. In fact, the change is said to have taken between 40 and 80 years. And the disruption was social as much as economic. In the early 19th century, the “Luddite” riots – a series of violent protests by British textile artisans against the industrial revolution’s machinery, which threatened their livelihoods and skill-based wages – weren’t born of a hatred for tech, but of a fear of obsolescence.
While we don’t have official unemployment statistics from 1810, history tells us there were massive spikes in localised poverty as cottage industries collapsed.
Eventually, the ability to mass-produce goods meant that, by the mid 1800’s, the average person could afford more than two sets of clothes. But that was at least 40 years after the technology emerged.
And perhaps more importantly, we need to be aware of Engels’ Pause – the period from roughly 1790 to 1840 in Britain, where rapid technological advancements and industrial growth did not lead to increased wages for workers.
The assembly line
In the early 20th century, Henry Ford and Frederick Taylor introduced Scientific Management (Taylorism) to maximise industrial efficiency through worker specialisation and time studies. Productivity didn’t just come from a better machine; it came from turning humans into a component of the machine.
That transition was more rapid than the first and is said to have taken two decades to become the global standard. But it was, nevertheless, highly disruptive because it stripped ‘craft’ away from the worker. The blacksmith who understood the whole process was replaced by ten men, who each understood only one step in that process.
During the 1920s, productivity soared by over 40 per cent, but this era also saw the unemployment of skilled artisans. The transition was so jarring it’s said to have contributed to the social instability of the Great Depression, where unemployment famously hit 25 per cent in the U.S.
Eventually, there was a payoff: The assembly line gave birth to the ‘middle-class’ lifestyle. Lowering the cost of complex goods (like cars) created entirely new industries – suburbs, petrol stations, and tourism – that absorbed the labour displaced from the old artisan shops. But it’s also true that some never worked again, becoming too old to upskill.
The digital revolution
Beginning in the 1960s and accelerating through the 1990s, computers triggered another great employment migration, this time from factory floors to office cubicles. We shifted from physical labour to knowledge work.
This transition took about 30 years. It was, however, characterised by an observation from Nobel Prize recipient and MIT economist Robert Solow: “You can see the computer age everywhere but in the productivity statistics.”
As manufacturing moved to automation (and overseas), Rust Belts formed in the U.S. and elsewhere. The people losing factory jobs weren’t the people being hired for new IT jobs. The transition produced a permanent skills gap that lasted a generation. And between 1970 and the early 1980s, U.S. unemployment rose from 4.6 per cent to just shy of 11 per cent.
Mobile phones, smart phones and the cloud
By 2010, the “office” began a phase of status anxiety. It ceased being a place and became an app. The shift to Cloud computing and mobile connectivity removed proximity as a physical barrier to productivity.
Unlike previous transitions, however, this shift coincided with central banks discovering unconventional ways to defer or stall recessions. So while the transition was rapid, the disruption was more psychological.
First was the advent of an ‘always-on’ culture, blurring the lines between work and life. We also saw the emergence of the gig worker, which kept unemployment numbers low on paper, but introduced a different kind of instability. Many full and part-time roles with benefits have been replaced by unstable platform-based labour. And finally, technology levelled the playing field at the same time, connectedness meant new businesses could emerge and immediately reach a global audience.
Agentic AI
We may now be witnessing the most compressed labour transition in human history. In just two years, Generative AI, and then Agentic AI has moved from a novelty to core infrastructure.
But unlike the Industrial Revolution, which replaced muscle, or the Digital Revolution, which replaced filing cabinets, AI is replacing human thinking. This wave of disruption is expected to hit the white-collar class, including lawyers, coders, and creatives, hardest.
Over the last 18 months, many firms have paused hiring for entry-level white-collar roles. We’re also seeing a spike in frictional unemployment as some workers scramble to learn prompt engineering and AI-augmented workflows.
Will everybody who loses a job to an AI agent find another role? Or will the lowered cost of idea generation prompt a wave of business start-ups? Not everyone who loses a steady jobs, is up for the risk of starting a business. But could thousands of smaller businesses emerge to employ those people?
The idea of a Force Multiplier has some credibility: A single developer can now do the work of a five-person team; a single marketer can produce a global campaign in an afternoon. The productivity gains could be huge, but only if there’s a sufficiently large pool of customers who are gainfully employed and able to afford the products and services on offer.
History suggests that while technology has destroyed millions of manual and routine cognitive jobs, it has created a net gain in employment. However, the new jobs (App Developers, AI Ethicists, UX Designers) often require vastly different skills, leading to significant skills gaps for those displaced from traditional roles. One positive from history seems to be that each successive transition is shorter than the one that preceded it.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
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