Ex-Google X leader thinks AI is about to expose a fatal flaw in capitalism

• Mo Gawdat warns that AI disrupts capitalism, threatening jobs and wages.
• Capitalism relies on human labor, but AI threatens that foundation, he argues.
• Gawdat suggests AI could lead to economic restructuring and potential guaranteed income.

Artificial intelligence is colliding with capitalism in a way the system can’t absorb. That’s what Mo Gawdat told Business Insider’s Reem Makhoul over an interview in September.

After decades working inside Big Tech, including senior leadership roles at Microsoft and Google X, Gawdat has come to believe that the economic model underpinning modern capitalism breaks once machines replace most of the human workforce.

“The very base of capitalism, which is labor arbitrage — to hire you for a dollar and then sell what you make for two — is going to disappear,” he told Business Insider.

In Gawdat’s view, AI isn’t just automating tasks. It’s removing the need for human labor and, eventually, human decision-making at scale.

When that happens, wages, jobs, and consumption — the pillars that keep capitalism running — start to fall apart, he said. However, while we may be in for a rocky ride ahead, the ultimate destination is one worth aiming for.

Why AI breaks the old economic logic

Capitalism, Gawdat argues, is built on a simple idea: pay people less than the value of what they produce, sell the output for more, and keep the difference. That model depends on human labor.

AI threatens that foundation.

As machines take on more work, the cost of making things keeps falling. AI pushes production closer and closer to zero cost, Gawdat says.

When that happens, familiar ideas about pricing, profit, and scarcity stop working the way they always have.

You can’t run an economy on productivity alone, he added. If people don’t earn wages, they can’t buy things. And without buyers, the system stalls.

Job losses are only the first shock

Gawdat is blunt about what he thinks comes next.

He expects large waves of job losses across blue- and white-collar work. Lawyers, analysts, writers, executives — all of them, he said, are exposed.

“Your life and mine will witness times where there will be 20%, 30%, 50% unemployment in certain sectors,” he said.

He’s especially skeptical of tech leaders who frame AI-driven layoffs as efficiency wins. In the long run, he said, AI systems will come for them, too.

“Those CEOs forget that sooner or later the AI will replace them too,” he said, adding, “AI is better than humans at every task, including being a CEO.”

What will happen when the capitalist system built around jobs suddenly has far fewer of them?

Without some form of guaranteed income, consumption collapses. And when consumption collapses, capitalism can’t function. Governments will be forced to rethink how money flows through society.

“Without consumption, there is no economy,” he said, adding, “So they’re going to have to give people some kind of income to keep going.”

He thinks different regions will handle this transition differently. Western economies, which place heavy value on productivity and individual output, may struggle the most.

AI isn’t the enemy, he says

Despite the warnings, Gawdat doesn’t see AI itself as dangerous.

He describes intelligence as neutral — powerful, but directionless on its own. The real risk, he said, is what happens during the transition, when AI systems are highly capable but still answering to human incentives built around greed, competition, and power.

“The challenge that humanity faces today is not the rise of AI, it’s the rise of AI in an age where humanity is at its lowest morality,” he said.

Over time, Gawdat believes machines will make more rational decisions than today’s political and corporate leaders. That shift, he argues, could ultimately produce a fairer system than the one we have now.

Capitalism, in his view, won’t survive in its current form. But that doesn’t mean the future has to be bleak.

“It’s an invitation to change,” he said. “And if you change, you would create not only an opportunity to survive, but an opportunity to thrive.”