Observed Signal · Aug 18, 2026 · Other · Source: UX Collective · Impact: 2/5 · Sentiment: Neutral
Large Language Models (LLM) & AI Market: Purpose of Software in the Age of AI
Michael Burnett argues that despite enormous increases in computing power and visible efficiency gains, software has not produced sustained macroeconomic productivity growth. Reviewing historical economic research and productivity data (citing Solow, Krugman, Gordon and others), he contends the purpose of software is to increase the density of information in digital outputs rather than to raise value output per hour. Burnett revisits the "productivity paradox," discusses Baumol's cost disease, and hypothesizes a "disengagement curve" driven by search/chat workflows. He warns that AI and LLMs will act as force multipliers for software production but are unlikely to change software's fundamental relationship to measured productivity, even as they create more digital output and new efficiencies.
Analytical long-form perspective linking AI/LLMs to macro productivity debates; informs strategic thinking but does not announce platform policy, product releases, or market-moving transactions.
Key Takeaways & Evidence Grounding
- Author Michael Burnett published a long-form essay arguing software has not increased macroeconomic productivity.
- Computing power at the frontier has increased by roughly 10^12 (a trillion-fold) since 1971, with transistor counts and FLOPS rising dramatically.
- Burnett cites economists and studies including Robert Solow, Paul Krugman, Robert J. Gordon, Federal Reserve analyses (Oliner & Sichel), Brookings, NBER, and others to support his analysis.
- He proposes the purpose of software is to increase the density of information per unit of digital output, not to increase productivity (value output per hour).
- The essay introduces the author's hypothesis of a 'disengagement curve' and revisits the 'Productivity Paradox' and Baumol's cost disease in the context of IT and AI.
Connected Companies & Entities
12 Entities mappedNetflix
Streaming platform with subscription and advertising revenue.
“Has quality of life increased since the semiconductor was invented? We have Spotify, Netflix, LLMs, and very large TVs....”
Anthropic
Foundation model company selling AI assistants and model APIs.
“Chart generated by Claude based on publicly available data points....”
Spotify
Audio streaming platform with subscriptions, ads and creator tools.
“Has quality of life increased since the semiconductor was invented? We have Spotify, Netflix, LLMs, and very large TVs....”
Apple
Consumer electronics giant with integrated software, services and advertising platforms.
“2023 (Apple M2 Ultra): 134 billion transistors...”
NVIDIA
Accelerated computing company spanning AI software, cloud and gaming.
“2018 (NVIDIA V100, as the frontier moved from CPU to GPU): ~125 TFLOPS 2023 (NVIDIA H100): ~2,000 TFLOPS (2 petaFLOPS at the low precision A...”
Gallup
Research, assessment and analytics platforms for organisations and institutions.
“Gallup found that globally 41% of employees experienced a lot of stress the previous day (2024 report)....”
AMD
US semiconductor company designing processors and computing chips.
“2018 (AMD Ryzen 7 2700X): 4.8 billion transistors...”
Intel
Computing infrastructure company combining chips, AI tooling and enterprise platforms.
“1971 (Intel 4004): 2,300 transistors 1993 (Intel Pentium): 3.1 million transistors...”
The New York Times
Subscription-led news publisher with premium advertising, games, cooking and sports.
“Paul Krugman, another Nobel winner, wrote in his NYT column in March 2023, “Like previous leaps in technology, [AI] will make the economy mo...”
Statista
Subscription market intelligence and statistics platform for business research.
“22% of US employees rate their level of burnout as high or very high....”
Medium
Subscription-based digital publishing platform for readers and writers.
“Get Michael Burnett’s stories in your inbox Join Medium for free to get updates from this writer....”
OpenAI
Foundation model company selling AI software, APIs and subscriptions.
“ChatGPT generated this “newspaper style cartoon” in seconds....”
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