Human Labor is the New Steam Engine

The existing enterprises based on human labor and their supporting structures resemble remarkably the group drive system in the electrification revolution. The use of AI of today is just merely swapping the "steam engines" for "electric motors". Shall history rhyme again, we should see new enterprises and social structures emerge, which will be the new "unit drive" paradigm shift.

After reading The State of Enterprise AI report by OpenAI, an idea is stuck with me. The idea is interesting but also merciless in a way: Human labor in existing enterprises are just the “steam engine” in the electrification revolution. Another leap forward is not about AI replacing human labor, which will happen anyway, but about reforming everything about enterprises and their supporting structures to enbrace a new electricity - the abundance of intelligence created by AIs.

A bit of Prelude

The following is a summary, generated by Gemini 3 with a focus on restructuring, of the influential 1990 paper The Dynamo and the Computer by Paul David:

Paul David’s 1990 paper, “The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox,” explains why computers weren’t showing productivity gains by the late 1980s, drawing a historical parallel to electrification. The central insight is that general purpose technologies require fundamental organizational restructuring before they deliver productivity improvements, not just technological adoption.

The Restructuring Lesson from Electrification

David observed that the electric dynamo, established by the 1890s, didn’t produce a productivity surge in US manufacturing until the 1920s—a four-decade delay. The critical insight was that early factories simply replaced steam engines with large electric motors in a “group drive” configuration, maintaining the same factory layouts and production processes. This superficial adoption yielded minimal efficiency gains.

Real productivity only emerged when factories completely redesigned themselves around “unit drive”—small individual motors for each machine. This enabled single-story buildings, flexible workflow arrangements, elimination of dangerous overhead belt systems, and fundamentally different manufacturing processes. The technology was the same, but the organizational structure had to be reinvented to unlock its value.

Application to Computers

David argued that in 1990, businesses were making the same mistake with computers: overlaying them onto existing processes rather than restructuring work fundamentally. He predicted that significant productivity gains would only materialize once organizations completely redesigned their operations to leverage digital capabilities, just as factories had to be rebuilt around electricity decades earlier. The “productivity paradox” was thus a temporary measurement problem reflecting the natural lag between technology adoption and the organizational learning required to use it effectively.

Machines Made of Human Labor

Despite workers who do physical labor, workers in offices are also analogous to mechanical components in an enterprise. Think about it. Transmission systems in real machines have hierarchies (of gears, shafts, and pulleys), so do enterprises. The components of such business machines are made of humans. Human labor and intelligence are distributed in an entreprise in a centralized way. Human labor (and intelligence), in an abstract sense, is the steam engine of an enterprise while managers, rules and bureaucracies are the “transmission” for it. A significant portion of our social structures are built around human labor. These social structures (conventions, laws, etc.) support the engine and prevent it from being misused or abused. For example, worker wellfare, labor laws and worker unions. Even VCs talk about it, and they say “all problems are human problems”.

AI as a Turbo Charger and as a New Engine

Now everyone is talking about AI, AI taking over jobs, AI taking over businesses, AI taking over everything. Some pragmatists say AI can boost the productivity of human labor, but not replace it. That’s reasonable. And indeed, in the report, it mentioned that

Enterprise users report saving 40–60 minutes per day

When I read this, I feel a bit strange. Why only 40–60 minutes per day? I was expecting something like 2x boost, which means hours of productivity saved per day. But I think I knew the answer already - the people components. By people components, I mean people and the structures around them. For example, despite AI is all around, I still need to read files that are hidden deep on a website, fill out forms that even myself cannot understand and go through bureaucracies that are designed to be as complex as possible. This is not a rant, but an example.

Moreover, even if AI helped me with a lot of stuff, I still need to take time to review the results and honestly I’m lazy to do that, so I am the limiting factor. AIs can read and write pages in minutes, but I can’t review them in minutes.

These facts keep reminding me of the friction in the machines made of human labor. We now call AIs copilots, but if we take the human labor engine analogy seriously, the use of copilots is merely installing a turbo charger to the human labor engine. It can of course boost the engine, but much of the boost gets lost in the “transmission” of the machine.

Even though some companies are replacing human labor with AIs, this is essentially installing a new “electric motor” to the machine. There needs to be a new “unit drive” paradigm shift, but all 2B AI companies are competing to install more turbo chargers or new electric motors for the factories that are steam-powered by human labor.

Implications and the Future

History does not repeat itself but it rhymes. We’ve seen gigafactories of AI and probably they will remain, just like power plants. Tokens and compute will be infrastructural resources, just like electricity. If we take the analogy further, what will happen when a new “unit drive” paradigm shift happens? A few implications are clear:

Everyone is an individual entrepreneur and enterprise: There will not be any more “group drive” structures built for human labor. The labor and intelligence resources will not be distributed centrally inside a company, no more group drive of labor and intelligence. Instead, everyone is an independent enterprise, equipped with “electric motors” (that are AIs), which is the true new unit drive paradigm.

Universal Basic Income and Token Care: When there’s no good-old enterprises, UBI is inevitable to sustain individual enterprenuers. Access to tokens will be a new human right, just like access to electricity and Internet. The price of tokens will continue to decrease until it’s asymtotically close to the cost of electricity due to mass production.

2B will be 2C: When there’s no giant enterprises, selling services to enterprises equals selling services to individuals. We’ve seen such trends in “To Pro Users” services.

Open technical and social protocols prevail: There will not be all-in-one proprietary solutions or applications anymore. Every enterprise and everyone build their own “electric motors” based on open-source solutions, templates and protocols.

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Version: 0.1.0

Date: 2025-12-09

License: CC BY-SA 4.0