297. How do we reshape our workforce in the AI era?

Summary

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Podcast Summary: The Rest Is Money

Episode 297: How do we reshape our workforce in the AI era?
Hosts: Robert Peston and Steph McGovern
Guest: Simon Johnson (Nobel Prize-winning economist, Chair of the AI Economics Institute, Professor at MIT, former IMF Chief Economist)
Date: July 19, 2026

Episode Overview

This timely and in-depth episode examines how the UK—and the world—should navigate the challenges and opportunities of artificial intelligence (AI) in the workforce. Hosts Robert Peston and Steph McGovern interview Simon Johnson, a leading economist advising the British government on AI policy. The core focus: ensuring the benefits of AI diffuse broadly rather than concentrating wealth and risk among a few. The conversation spans job displacement fears, the critical need for new “human expertise” roles, the significance of unions and regional policy, and the urgency for government action.

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Key Themes and Insights

1. AI’s Disruptive Power: Augmentation vs. Replacement

[03:28–09:45]

• Robert Peston highlights “enormous anxiety” about AI-led job loss, questioning whether we can “get richer rather than only a few billionaires getting richer.”

• Simon Johnson explains his advisory roles:

  • Chair of the AI Economics Institute: provides evidence-based advice to policymakers.
  • Chair of the AI Adoption Prize: promotes pro-worker uses of AI by awarding businesses that show AI is helping—not hurting—workers.

• Johnson’s Perspective:

  • The augmentation vs. replacement dichotomy is “not exactly the right way to think about it.”

  • “Any technology that replaces people will also augment the ones left behind.” ([09:49])

  • The real answer is to accelerate new task creation—opportunities requiring uniquely human expertise, not just automating old roles.

  Memorable Quote:

  “If from that you can build new products and services that you can sell to the world, then you’re on a winner…The alternative is you’ll hollow out the labor force.” – Simon Johnson, [10:37]

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2. Union Involvement and Worker Representation

[11:43–13:57]

• Steph asks about unions’ roles: can they shape a “coexistence” with automation rather than simply resisting it?

• Johnson: Unions must be at the table, not just as opponents of job loss but as advocates for shaping new, human-centered tasks and policies.

  Memorable Quote:

  “Why rely on me, who lives in America and has been out of the UK for 40 years, to tell you what’s pro-worker for British workers? Let’s have a representative of British workers at the table…having unions at the table…could be a plus.” – Simon Johnson, [13:40]

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3. Historical Perspective: Why This Industrial Revolution Might Be Different

[13:57–17:58]

• Peston challenges the “rosy view” that new jobs always emerge after technological shocks (“it always was created in the past, it will definitely be created this time”).

• Johnson cites MIT colleague David Autor’s research:

  • 60–70% of today’s U.S. jobs didn’t exist in 1940.
  • Since the 1980s, automation outpaced new task creation, hollowing out middle-income jobs.

• The risk: AI could amplify polarization—helping the highly skilled, pushing the rest down.

  Memorable Quote:

  “If I create a lot of new tasks that anybody can do…you’re not going to get paid a premium wage. There has to be a demand for human expertise in new task creation.” – Simon Johnson, [17:22]

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4. Regional Disparities and “Tech Towns”

[19:35–23:47]

• Steph, referencing the North East’s deindustrialization, asks how to avoid repeating past mistakes.

• Johnson agrees prosperity must be more widely shared and details the “Tech Towns” initiative (starting in Barnsley)—focusing on partnerships with local government, investment, skills, and well-being.

  Memorable Quotes:

  “People feel like they've been left behind. They feel that prosperity may have been created in other places, but they were not included…What you’ve got to do…is find ways to generate more good jobs.” – Simon Johnson, [20:11]

  “It’s a public-private partnership…to encourage the people already there to generate more good jobs.” – Simon Johnson, [23:47]

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5. AI Adoption: Productivity vs. Public Backlash

[23:47–28:20]

• Peston worries rapid AI rollout is viewed as a “Trojan horse”—paralleling lost manufacturing jobs to China.

• Johnson points to consumer-driven AI adoption (ChatGPT, Waymo taxis): “It makes customers happy…It’s not being imposed by anyone.” ([27:13])

• Key advice for UK: Speed up new task creation, ramp up science R&D, and retain top talent.

  Memorable Quote:

  “The game is a global game…What are you going to be selling to the world? How do you get those productivity gains and not just keep the good jobs you have…create a lot more good jobs.” – Simon Johnson, [27:52]

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6. Brain Drain, Retention, and the Value of Innovation

[28:20–29:51]

• Steph and Robert lament British innovations acquired by American companies.
• Johnson: Not all the value needs to be kept; “rotation” of talent is global advantage, but UK should “anchor breakthrough science and innovation in universities,” as they are physical talent magnets.

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7. Investment Culture and Financial Security

[30:24–33:57]

• Aside from AI, an interlude examines UK attitudes toward investment.
• Peston and Steph explain that most people lose money by relying on cash savings (due to inflation), and encourage long-term, managed investments for wealth building.

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8. Welfare Reform and Government Responsibility

[34:28–37:49]

• Peston emphasizes the “national emergency” of preparing the population for mass job changes.

• Johnson responds that government leaders “absolutely understand this and see it as a top priority,” but notes the dignity of work and effects on public revenues complicate the response.

  Memorable Quotes:

  “Even if you could provide people with welfare and retraining, do they get good jobs…that have respect in their communities? That’s even harder.” – Simon Johnson, [36:13]

  “My only suggestion to break this Gordian knot is to run faster and invent more…generate more new tasks.” – Simon Johnson, [36:44]

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Notable Moments & Quotes (With Timestamps)

• “Any technology that replaces people will also augment the ones left behind.”
  — Simon Johnson, [09:49]

• “If from that you can build new products and services that you can sell to the world, then you’re on a winner…The alternative is you’ll hollow out the labor force.”
  — Simon Johnson, [10:37]

• “If I create a lot of new tasks that anybody can do…you’re not going to get paid a premium wage. There has to be a demand for human expertise in new task creation.”
  — Simon Johnson, [17:22]

• “Why rely on me…to tell you what’s pro-worker for British workers? Let’s have a representative of British workers at the table.”
  — Simon Johnson, [13:40]

• “It’s a global game…How do you get those productivity gains and not just keep the good jobs you have…create a lot more good jobs.”
  — Simon Johnson, [27:52]

• “My only suggestion…is to run faster and invent more and generate more new tasks. Drive that with science, spread it around the country.”
  — Simon Johnson, [36:44]

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Key Timestamps & Segments

• AI Augmentation vs. Replacement, Government Role – [03:28–09:45]
• Union Involvement – [11:43–13:57]
• Historic Industrial Revolutions vs. Today’s Risk – [13:57–17:58]
• Regional Development & “Tech Towns” – [19:35–23:47]
• Public Acceptance and Productivity – [23:47–28:20]
• Brain Drain and Talent Retention – [28:20–29:51]
• Investment Culture – [30:24–33:57]
• Welfare Reform & Policy Gaps – [34:28–37:49]

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Overall Tone and Takeaways

The discussion is frank, analytical, and optimistic—a mix of “cautious realism” and practical advice. Johnson’s message is clear: to avoid repeating past mistakes that left communities behind, the UK must actively shape AI adoption toward “new task creation”, invest in science and talent, include unions, and ensure prosperity and dignity are broadly shared.

Essential Listen For:
Anyone concerned about the AI revolution, policymakers, business leaders, economists, and citizens interested in the future of work and public policy in the AI age.

Transcript

[Robert Peston]

Demis Hassabis does believe that AI will replace most of us. And obviously for millions and millions of people, that's very scary.

[Simon Johnson]

Any technology that replaces people will also augment the ones left behind. Can we stop the displacement of workers? That is very hard. I was in Paris recently meeting, I'll call him, a leading French industrialist, and he said, you know, because of AI, I don't need 20% of my workers. A lot of this technology is being adopted because people like it. So ChatGPT, when it came out in November 2022, as far as I've been able to see, was being used in every corner of the earth, which within 24 hours.

[Robert Peston]

I think this is a national emergency. I think it's been a national emergency for a couple of years. So is this just a phased thing that we're going through, a period where potentially augmentation is the way forward, or is there a world in which governments can basically prevent replacement of people?

[Simon Johnson]

Well, first of all, these are great questions. Let me try to unpack it a little bit. So I think this augmentation versus replacement is not exactly the right way to think about it, because we're proud to

[Steph McGovern]

say that the rest is money is powered by Octopus Energy this year, and Greg Jackson, founder and CEO, is with us. Greg, I wanted to ask you about heat pumps. Octopus Energy now make them. Why not just import them from China?

[Robert Peston]

You know what?

[Simon Johnson]

We want to make heat pumps that work, that are designed for British homes and that are cheaper to run, cheaper to install, and actually cheaper for the hardware. And that's what we did.

[Robert Peston]

So, for example, Octopus created heat pumps

[Simon Johnson]

that run at up to 70 degrees C, as hot as a gas boiler.

[Steph McGovern]

So.

[Simon Johnson]

So you don't necessarily need to worry about having excess insulation and changing your heating system. That sort of thing makes it much cheaper for British homes.

[Steph McGovern]

Nice one, Greg. Thanks for explaining that. Right, we're gonna go to the episode.

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[Simon Johnson]

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[Robert Peston]

My champions, I have sold my chariot on Carvana.

[Steph McGovern]

Twas a lovely suv, an inexplicably queenly offer. They're even coming to the castle to collect it.

[Simon Johnson]

Tonight we fe an offer you can feast on. Sell your car today on Carvana. Pickup fees may apply.

[Robert Peston]

Hello and welcome to the Rest Is Money with me, Robert Peston and me, Steph McGovern.

[Steph McGovern]

Now today we want to focus on how the UK can make sure that we all do well from AI and you know, basically find out where are the good jobs in AI now, rightly there is a lot of concern about jobs being lost and also about the money being made and all going to the US tech giants. And the man tasked with advising the government on all of this is the Nobel Prize winning economist Simon Johnson. He's a professor at mit, former chief economist at the International Monetary Fund, and he's also now chair of the newly set up AI Economics Institute. So lots to ask him about, Robert.

[Robert Peston]

Yes, and the big question is how do we make sure if AI can't be stopped that we all get richer rather than only a few billionaires getting richer? It's the big question for our interview with Simon Johnson. And here it is. Simon, so we wanted to talk to you about how economies should adapt in this new AI world. What is the role of government? There's an enormous amount of anxiety as well as enormous amounts of optimism associated with so much of these technological changes that we are living through. Just as a place to start, you've got some kind of advisory role for the British government. Just tell us what you're advising them on and then both Steph and I, I suspect we, you know, if you were to answer all our questions, we'd be here for a week. But we'll try and we'll try and keep it reasonably concise. But tell us, Simon, what are you doing with the British government at the moment?

[Simon Johnson]

Well, I'm doing two things, Robert. The first is I'm the chair of the newly created AI Economics Institute, which is, I think the first of its kind in the world. Actually. It's an effort to build an interface between policymakers and the evidence. So our job is to figure out what's going on and to answer questions. And we're not policymakers, but we are hopefully bringing outside experts and experts from within government to bear on the problems that the government faces and wants to deal with. The second thing I'm doing is I'm chair of the AI Adoption Prize, which is a lot of fun. This is a sort of bottom up initiative where we're trying to get British businesses and workers and unions to tell us what they're doing with AI and ways we want them to identify or describe the ways that they feel that the AI is helping their workers. So it's called a Pro Worker Adoption Prize and we think there's lots of ways to do it to be pro worker. We've got some ideas ourselves, but we also think there's genius out there in the British economy and we'd like to understand what people are doing. And I think the first prize will be a cup of tea at 10 Downing street or something like that. No, actually I think the long list will come to Downing street and then the top three will get business school cases written about them by UK academics that we will then distribute to around the world to show people how it's done and to celebrate British companies moving in a direction so that where AI is actually helping their workers and helping the economy as a whole as opposed to hurting the workers.

[Robert Peston]

And second prize will be two cups of tea in Downing Street. I'm assuming

[Simon Johnson]

I couldn't possibly comment on that.

[Steph McGovern]

Can I ask about your AI use? Because am I right in thinking you use it as little as possible in your kind of working life?

[Simon Johnson]

Oh yes, actually I have a research team at MIT and they're free to use it and they evaluate it and we are pretty active in understanding that. And I do teach a course on it and I have students and colleagues are very active. But for my own writing, Steph, I don't trust it. I'm very worried about exfiltration of my ideas. I've written a novel, a science fiction novel about AI 25, five years from now. I'm not going to let AI get a whiff of what I'm saying there. No, I'm going to smack it around the head when the book comes out. So I think that. And I think it's also a little tricky and a little worrying. Other people have obviously pointed this out that AI can become a little too easy and a little too. You can lose your critical thinking a bit.

[Robert Peston]

Maybe.

[Simon Johnson]

I worry about that a bit too much. But I'm not a big AI user right now. That's right.

[Robert Peston]

So we are. I'm afraid this is one area where we're definitely in competition because I've just written an AI themed thriller and I've

[Steph McGovern]

written a thriller about a cult. So, you know, basically that's what AI is, isn't it? So we're all in it, all in the game.

[Robert Peston]

Competition in different ways. Competition is a good thing.

[Simon Johnson]

Drama question to you, did you use AI to write your AI themed thriller?

[Robert Peston]

No, of course not. You gotta be cheating.

[Steph McGovern]

It's cheating, isn't it?

[Simon Johnson]

We're on the same page.

[Robert Peston]

I mean, I mean, look, I do use AI to automate various basic tasks, but you know, then I would never use it for anything creative. I mean, you know, because voice is so important. Right. And you know, we've all got our own. Voices are precious. Don't give them away. Now, the. Though the quest, the fundamental question I would need to start by asking you is it's fantastic, I think that you are awarding a prize for applications of AI that make individuals more productive businesses more productive through the workforce. So augment what they call augmentation rather than replacement. How serious though, do you take the risk? Demis Hassabis does believe that AI will replace most of us in our paid employment. I mean, you know, he has said it very publicly. Dario Amade think says exactly the same. And obviously for millions and millions of people, that's very scary. And what governments should be doing to prepare for that is completely different from what they should be doing to prepare for. A world where AI essentially makes humans more powerful individually, more productive individually. So is this just a phase thing that we're going through, a period where potentially augmentation is the way forward? Or is there a world in which governments can basically prevent replacement of people?

[Simon Johnson]

Well, first of all, these are great questions. Let me try to unpack it a little bit.

[Robert Peston]

Yeah.

[Simon Johnson]

So I think this augmentation versus replacement is not exactly the right way to think about it because any technology that replaces people will also augment the ones left behind. So think about the arrival of weaving machines in Manchester in the early 1800s. Now, that knocked out a lot of people from handloom weaving. So there was massive displacement and a lot of poverty followed. But the people who remain behind in the factories, or maybe we just say the managers, managers in the factories had their human capabilities massively advanced by these machines. So I think actually, Robert, the key is much more new task creation, which is exactly what Demis has Harvest represents to me, if you can use AI to crack problems that humans have faced forever and problems that were previously seen as insurmountable, and if from that you can build new products and services that you can sell to the world, then you're on a winner because you're going to increase the demand for human expertise. The alternative is that you will hollow out the labor force. You'll de skill it, a few people will be augmented and they'll do very well. And perhaps they're just the owners of the capital actually, but everyone else is going to get pushed down to the poverty level. And I think that's what we're trying to counter. And on the critical question you asked at the end, can we stop the displacement of workers? That is very hard. I was in Paris recently, meeting, I'll call him, a leading French industrialist, and he said, you know, because of AI, I don't need 20% of my workers, but I'm not going to fire anyone because it's for France. However, I'm not going to hire anyone. And 10%, I have 5% attrition every year, so that'll take care of my problem. So I think the automation is coming anyway. Robert, the new task creation is what we need to accelerate. And that's my own personal position. But that's also, I think, a lot of what you'll see around the AI Economic Institute and the language we're using there is very much how do we get onto that pro worker path? How do we try to shape technology and encourage technology to move in that pro worker direction? It's not easy, but I think we need to try.

[Steph McGovern]

And can I ask you then, Simon, where do you see the roles of youth unions in this? Because do you think they're important in this? Because often, you know, when we talk about unions, it can feel that they're quite anti automation and, you know, there's a sense of progress is held back sometimes because unions don't want the jobs to go. But do you think actually that they're part of this in terms of forming, getting, getting people on side, as it were, and forming the plans for how it coexists, rather than just taking all the jobs out?

[Simon Johnson]

Yes, absolutely. I think if you present the union with, you know, a plan to phase out jobs, of course they're not going to be excited about that. But if you've got better ideas, other ideas about ways you're going to create new tasks and build the business, I think that's a different conversation. One of my grandfathers Steph ran a big steel mill in Sheffield at the peak of his career. And I'm well aware that, you know the union history and the difficulties arose from that and the fact that, you know, steel industry declined and there wasn't that much you could do about it. So at the level of the economy as a whole, the government's job is to find ways to encourage that new task creation, raising increasing the demand for human expertise. And that conversation with the trade unions is incredibly important and not easy. I absolutely agree.

[Steph McGovern]

Is that going to be part of what you're doing with your government advisory role then is, you know, when you talked about with the Economic Institute, it's going to be looking at real workplace data based on these information you're getting with the different corporations involved. A union's part of it as well.

[Simon Johnson]

I hope so. And I think I'm allowed to tell you not the name of the person, but the fact that I believe we do have one of the CO judges of the AI Adoption Prize, the Pro Worker prize, is a union person, a prominent union person, because that makes sense, right? Why rely on me, who lives in America and has been out of the UK for 40 years to tell you what's pro worker for the British workers? Let's have a representative of the British workers at the table. I mean, the whole thing's going to be transparent as well. So everyone can kick the ties and complain as much as they want or admire it. But I think having unions at the table, Steph, is incredibly important and not something the US is very good at. So if the UK can use the fact that you've got more legitimacy around union voices, that could be a plus.

[Robert Peston]

Now, one of the things that many economists will say and many pro market politicians will say is stop being so lily livered about this AI Industrial Revolution. You know, they will say, look, all these fears about, you know, vast numbers of people being laid off and no new jobs being created, you know, you know, we've seen in every Industrial revolution and you know, in time lots of new occupations were created. And I suppose I've got sort of two sort of points about that. One is, if you go back to the Industrial Revolution, which you've just been talking about, which is, you know, the automation, automation, the automation of the weaving industry and then the Steam Age and all of that, as you know better than almost any economist from the late 18th century to quite well into the 19th century, this industrial Revolution was associated with stagnating living standards for the vast majority of people. A period known as Engels Paul. So that was an industrial revolution which benefited very small numbers of people for decades. And obviously we don't want that to happen again. But equally, I suppose the thing that always slightly causes me anxiety is this. It's all very well to say in previous industrial revolutions, we just didn't know the jobs that were going to be created, the new occupations, you know, the new paid work that was going to be created. But it always was created and therefore, because it was always created in the past, it will definitely be created this time. Well, yes, of course, history should always be a guide, but this just may be a different kind of industrial revolution. And I think we've just got to take that seriously as a risk. This may be an industrial revolution where it is going to be very difficult to come up with activities for humans which are going to generate income.

[Simon Johnson]

Yes, I think you put that very well. Look, the automation of spinning in Lancashire, cotton spinning at the end of the 1700s did create opportunities for weavers because it drove down the price of spun cotton. But when weaving was automated, it didn't create similar kinds of opportunities upstream or downstream of weaving. And it wasn't until the arrival, I would argue, with the railways in the late 1830s into the 1840s, that you really got this spreading of opportunity and a restructuring of the economy and everything starts to change. And that's where your new task came from. And my colleague David Autor at MIT has absolutely established two things. One is that something like 60 or 70% of the jobs we have today in the United States didn't exist in 1940. Secondly, and we created actually a particular wave of those jobs in the 1940s with a lot of new science and new industries coming out of World War II. But the other thing he's established is that from the 1980s, the rate of new task creation did not keep up with the pace of automation. So it's true we didn't have massive unemployment, partly because we don't pay generous unemployment benefits in the U.S. but what you did have was a hollowing out of the middle and a pushing down of the middle to the lower end of the labor market. So this is the job market polarization. People with a lot of education like me and you did well. People without much education struggled to get any kind of increase in their real incomes. And the middle, geographically, skill wise, education wise, income wise, got pushed down to the bottom. So, Robert, it's not the question of, okay, will this time be different from what we've been in? It's no will this time be an intensification of what we've seen since the 1980s? And can we find some version of the 1940s and 50s where we did a much better job, including through deliberate government policy of new task creation? These tasks have to demand. This is really important. They have to require human expertise. If I create a lot of new tasks that anybody can do, hire off the street tomorrow, and I can fire those people and hire new people the next day, you're not going to get paid a premium wage. So there has to be a demand for human expertise in the new task creation.

[Steph McGovern]

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[Steph McGovern]

as someone who is from the Northeast lives there now, I've watched, you know, industries come and go. The steel industry that you've talked about, the chemicals, ici, British Steel, all big employers in the area which have, you know, disappeared. There's still, you know, the oil sector as well. There's been a lot of people who've lost their jobs in that area. Some of them have gone to renewables. But there are still still huge problems with unemployment and deprivation, child poverty, you name it. You know, the the Northeast is suffering with it. How do you then make sure that they are part of this and not left behind, then.

[Simon Johnson]

So my stepbrother, who sadly passed away, was a professor of statistics at Durham University and captain of the local golf club. And he played golf with a lot of people in the industry. And when Brexit happened, the vote happened. I rang him up and said what happened in Sunderland? Because that was actually seen by many people as a benchmark. And he talked to me about exactly this, Steph, the deindustrialization, which we also saw, of course, in Sheffield and other parts of the north, that people feel like they've been left behind. They feel that prosperity may have been created in other places and for other people, but they were not included in that. And I think the arrival of so much high profile technology, like phones, with remarkable computer power that we carry in our pockets, just reinforces the idea that, all right, the world's moved on, everything's got better. Heck, Arsenal even won the Premier League. I mean, it's a different day, right? But where's my piece of it? I got left behind, I'm not included. And I think what you've got to do with all technological transformations, including AI, is find ways to generate more good jobs. And the only way to do that on a sufficient scale is to help shape the technology that you adopt, hopefully that you also develop in a way that increases the demand for human expertise all around the country.

[Steph McGovern]

If I understand right, Tech Towns is part of what you're working on with the government, very much looking at this, not just about the Northeast, I know I always bang on about it, but this is about making sure all the money isn't just coming to London in this kind of technological revolution. Can you tell me more about that?

[Simon Johnson]

Yes. So I think the point of the Tech Towns initiative, and right now we only have one, which is Barnsley, where my dad used to work, by the way, a long time ago. I hope we can get more of them and I hope we can have them in more parts of the country. But the point is twofold, I would say, Steph. First of all, it's to address what you're saying, which is from a regional perspective, how do you make sure the opportunities are much more dispersed in different places? What does that look like? But secondly, what's the partnership with local government? And I think Barnsley's local government gets very high marks for having worked super hard over decades to come back from the history of coal mining. But this is widely shared public information. Healthy lives in Barnsley are still very short. What is it that Barnsley can build? What can you bring to Barnsley and other Tech Towns? That will have a meaningful positive impact on life expectancy and the quality of life, as well as obviously incomes. It's not an easy question at all, but I think it is the right question to ask.

[Steph McGovern]

But the idea of them is these areas will be supported in terms of being able to be part of this. So they'll be watching, got like investment there. Will there be tax incentives? Like, what. What's the. Will there be, you know, focus on skilling people in the area? Like, how are they going to work?

[Simon Johnson]

Well, I think it's all of the above in some combination still being worked out. Steph, you know, I, I think the very positive thing about this initiative from my. I'm a professor of entrepreneurship at mit. MIT being a big engineering school in, in the United States. And I work, I've worked in business schools in, in America for 35 years. And, and so I, I like a pro business, pro entre to everything. And I think the point is to bring private investment and employers and encourage the people already there to generate more good jobs. And then the question is, what are the policies that support that? How much does it cost? How can you afford that? Yes, those are all tough issues, but I think it's a private sector, it's a public private partnership, broadly defined, that the government is articulating that. I, in fact, most of my career has been about versions of that.

[Robert Peston]

So the government is committed to diffusing the use of AI throughout private and public sector as rapidly as possible. Because there's a view which I share, which is this could be a boon to productivity and competitiveness for the economy as a whole. Now, there are all these associated questions we've been talking about, which is if people lose their jobs, how do you help them to gain new skills? How do you support them through a period of unemployment? And these are really big and important questions which I'm not clear in my own mind that the government is taking seriously enough. But just on the sort of public acceptance question, there will be lots of people who will fear that any government that is trying to diffuse AI in this way is, in a sense, it's a Trojan horse. The faster we diffuse it, it's a bit like shipping all those jobs which we've talked about already. It's a bit like that period where the treasury just took the view we're uncompetitive in manufacturing and therefore we should shed no tears over the fact that all these manufacturing jobs are going to China. And if you look around the UK today, you would say one of the reasons we have such a divided, such an angry society is because we were just naive. It didn't matter that certain good jobs were going, that the market would somehow take care of it, and it didn't. Whole communities were destroyed. I mean, Steph has just been talking about the savage problems that were inflicted on her neck of the woods in the Northeast. I mean, this is all a bit rambling, but how do you persuade British people that this isn't a Trojan horse? Any government that's encouraging the spread of AI isn't basically repeating the China experiment, which was, for many people, a disaster?

[Simon Johnson]

Well, it's a very good question, and I think, you know, it has to be asked, and I'm glad you're asking it. I think I hear versions of that pretty much every day in all the conversations I have, Robert. You know, I think it's actually a little bit more complicated because while there's obviously a backlash against AI in general terms, you know, happening in the United States, for example, people have fear about the jobs. A lot of this technology is being adopted because people like it. So ChatGPT, when it came out in November 2022, so far as I've been able to see, was being used in every corner of the Earth within 24 hours. Nobody was forcing anyone. And I often speak to my audiences in America about this issue, and I say, right, who's ridden in a Waymo taxi? So Waymo taxis are part of the Google Alphabet empire, and they're pretty big in some American cities. And the CEO of Google's got a big incentive from his board to make it happen in more American cities. And a good chunk of people raise their hands. They've written it in San Francisco or Austin or Arizona somewhere. And I'll say to them, how was it? And they'll say, fantastic, I loved it. Don't want to go back to Uber. Don't want a human driver. Don't want to talk to a person. That's a problem, isn't it, Robert? Which is the technology is coming because customers want it.

[Robert Peston]

Yeah, yeah.

[Simon Johnson]

And it makes customers happy. It's not being imposed by anyone. It's not sneaking in behind, you know, your tariff barriers. It's not, you know, any kind of cheating or anything like that. They want it. And so I think the answer is that it's coming, like it or not. You might be able to slow it down, but would you regret that later? What would your position be in the global economy? I think, Robert, you've got to run faster. I think you've got to up the speed on the new task creation you've got to take. You gotta figure out what made Demis'sibi successful and how do we get 10 more of them. You've got to up the spending on science and make it easy to commercialize innovations coming out of universities, turn that into companies, companies that want to stay in the uk. The fact the Americans are backing off scientific investment is a big opportunity for the uk. The fact the US is becoming very diffic place for talented foreign technical people to come and get degrees. Big opportunity for the uk. You've got to play the game. The game is a global game. You've got labor force about 40 million in a world of 8 billion going to 10 billion. What are you going to be selling to the world? How do you get that those productivity gains and not just keep the good jobs you have, Robert, create a lot more good jobs. That's my perspective on this.

[Steph McGovern]

So how do you capitalize on that opportunity? Because that's something Robert and I talk about all the time. Is that, you know, brain drain to America or the money or going, you know, we get, we create something it and then an American company buys it and off it goes. How do we then capitalize on that opportunity you're talking about?

[Simon Johnson]

Well, that's a great question. And I don't know you necessarily have to keep it all. I think bringing it back would also

[Robert Peston]

be a good goal.

[Simon Johnson]

Having a rotation of people around the world that's actually served a lot of countries very well and there's many people in the US who would like to look at other places to live and you got some fantastic combinations of circumstances in the uk. So I think figuring out how to bring people back and also to develop your own talent and have ways in which your talent does get global experience and does learn how to run big global businesses and wants to bring more of those opportunities back to the uk. Look, Demis Hassabis, who I know comes up a lot in these conversations, is a terrific chap. I mean he told me that he was. I mean you should ask him directly. But at least what I understand is that he was offered to move to the US with his operation. He said no, I want to stay in London. So I think figuring out how to do more of that would seem to me to be critical and certainly to the extent that you can anchor breakthrough science and innovation in the universities. Well, universities don't move, do they? So you've got big labs, you've got talent, you've got a cluster of talent, you've Got graduate students, you've got a pipeline. Those can be real magnets, I would say, for your own talent and for talent coming in from outside.

[Steph McGovern]

This segment is brought to you by Vanguard. Now. Saving feels familiar. Investing is where a lot of people pause. There's jargon, numbers that move, and the worry that you need to understand it all before you take the first step. But this isn't really about saving versus investing. It's about how the two might work together when you're thinking about money for the longer term. So today we're asking, why do so many people wait to feel confident before investing when confidence often comes from starting?

[Robert Peston]

Yeah, I mean, we have a cultural problem in this country. I mean, unlike America, you know, people think investing in stocks and shares is for rich people. And I mean, some of this is just rooted in history. Some of it is that, as you and I have discussed, financial education in schools is pretty basic and not very helpful. And there's just this sort of general sense that somehow it's incredibly risky to put your money in the stock market versus, you know, somehow people think it's incredibly safe to put your money in a cash ISA or, or in some kind of bank savings product.

[Steph McGovern]

Yeah. And when you look at things historically and compare, yes, of course, your money can go down as well as up when you're investing. That's what you always hear on the adverts. But if you compare it to someone who's put in, for example, in a cash account, often the people who've invested the money will do better than those who've put it in just a cash account with a regular interest rate.

[Robert Peston]

No, that's completely right. Almost any time doesn't always happen. But at almost any time, the interest you're going to receive on cash savings in a bank account will be less than the rate of inflation. So by definition, even if you're getting, you know, an interest rate on your savings, you're losing money. Because, you know, if, if the interest rate is, I don't know, two and a half percent, inflation is 3%, you know, on that basis, the real value of your money is going down by about half percent a year. Whereas all the statistics show that if you invest in shares, particularly if you've got a balanced portfolio of shares, if you hold them for the long term, you will do better than the rate of inflation and you'll certainly do better than having your money just in cash savings.

[Steph McGovern]

I guess the difference is when you're looking at your cash savings, you don't see the impact inflation's having on it, do you? You just see your money slowly grow, it's harder to get your head around.

[Robert Peston]

I think that is certainly right. I think the other issue that lots of people have understandably is you can't just, just put your money into any old stocks and shares fund or any old stocks and shares. People think, oh my God, it's incredibly scary. I've got to research the companies or, you know, if I'm putting my money into, I don't know, North American shares, I need to know more about North America. So the research challenge I think puts people off.

[Steph McGovern]

Yes. I think people overestimate, don't they? Kind of what it's going to take to even start. Is that why I was called the fear of getting started, the fogs. But actually it's a lot easier than you might think.

[Robert Peston]

I think the big point is if you are going to invest in equities or a stocks and shares fund of some sort, don't do it on the basis that you're going to get rich quick.

[Simon Johnson]

Right?

[Robert Peston]

This is about making sensible long term investments, money that you know, you might want in a few years time for a holiday or indeed if you're investing for longer than that for your, your pension. But it is, you know, all the evidence shows that it is the best way to give yourself the kind of significant pot that could be hugely beneficial to you.

[Steph McGovern]

So the point is people don't have to become experts before they start. Like for many, the first step just has to feel clear enough to take. And Vanguard can help you with that. Their Managed ISA is designed as a simple expert managed way to start investing. Helping, helping to reduce the pressure of choosing and managing investments yourself. Search Vanguard Managed ISA to find out more. When investing your capital is at risk, tax rules apply.

[Robert Peston]

Look, it was brilliant that Demis kept so much of the research operation in London, but ownership of the capital and the intellectual capital moved to America and you know, a business that was worth a few hundred million is, you know, almost certainly worth half a trillion, maybe a trillion now. And I do think there was an opportunity cost to the UK in terms of lost tax revenues and lost value creation for British investors. But anyway, it's a different issue finally and this is going to be one of those why doesn't anybody listen to me moments. I mean, something like three or four years ago I wrote a book called Bust which said this AI industrial revolution is coming and we need to completely reform our welfare system so that people who lose their jobs, you know, keep a certain level of income as they retrain, you know, I think, you know, Denmark offers quite an interesting model in that respect. And we've got to have much better institutions when it comes to giving people the. The new skills for this new age. I don't see any sign of this government really taking the. You know, I think this is a national emergency. I think it's been a national emergency for a couple of years, but we haven't seen the government moving. You're now talking to them. Do you think they do understand not only the opportunities, but what they have got to do to protect British citizens in that way? Change welfare, improve skills training so that, you know, as we roll out. As roll out, given that we can't stop the rollout of AI and we want to roll it out as quickly as possible, you know, the minimum number of people suffer and the maximum number of people benefit.

[Simon Johnson]

Yes. Look, I mean, this is just my own personal observ of my direct conversations. I think people at the top of government absolutely understand this and see it as a top priority. I think it's actually a little bit harder, even on two dimensions, Robert, than you're saying. The first is the dignity of work matters, right? So even if you could provide people with welfare and retraining, do they get good jobs? Do they get jobs that they. Within which they feel respected and that have respect in their communities? That's even harder. And the second thing is what happens to your revenue? Now? You just made the point about Demis, Hassabis and DeepMind and there being a loss of. Of potential revenue there for the UK as well as investment opportunities. Now, if that happens on a bigger scale, what happens to the revenue for the government and our ability to support social welfare? My only suggestion to break this Gordian knot is to run faster and invent more and generate more new tasks. Drive that with science, spread it around the country. I mean, when I have a lot of global experience and I. I work on these global issues, I was the former Chief Economist of the imf, among other things. And I think the UK has got some tremendous assets or cards to play in this global poker game. But you've got to play the cards and you've got to be. You've got to take some risks and you've got to assert and place your bets and try a lot of things. And I think to the government's credit, that's what they are doing and that's what they were announcing in London Tech Week, and that's real stuff. Now, are we doing the right things? Should we do more of one, less of another. I mean, that's part of the job of the AI Economics Institute, I think, is to look at the evidence and to try and get feedback. And some of the feedback will be quantitative and some of it will be you complaining on this show or in your books.

[Robert Peston]

We'll try to take it.

[Simon Johnson]

I promise. We will try to take it all on board and process it.

[Steph McGovern]

Simon, we should let you go. Thank you so much for your time. It's been lovely to chat for you. Once you fully settled in the job and you're getting on with all the different things you're doing as you're advising the government, we'd love to have you back back. But for now, thank you very much.

[Simon Johnson]

Well, maybe I'll come up to the Northeast and you can show me around. Steph, I would love to talk to people there, but that could be very interesting.

[Steph McGovern]

Excellent. We'll definitely organize that. But thank you very much for now, Simon. And that's it from us. Bye bye.

[Robert Peston]

Goodbye.

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