How AI is a blessing and a curse
How the AI Gold Rush harms the Real Economy
AI1 is amazing and will be transformative, but its riches will come with a big price - not just in the transformation of human productivity and how labor is rewarded, but because the appearance of valuable ‘natural resources’ creates problems of its own. We’ve seen this movie before, just not in Silicon Valley. It’s a phenomenon that we have been aware of for at least 3 centuries.
When oil was discovered in Nigeria in the 1950s, it looked like a miracle. Instant wealth. Foreign investment came flooding in. GDP numbers were climbing up from the baseline of an agricultural-based economy. But fifty years later, Nigeria’s economy is more fragile, more unequal, and more dependent on a single volatile resource than it was before the discovery. Meanwhile, the agriculture and manufacturing sectors that once employed millions withered away, crowded out by the easy money flowing from oil exports.
Economists call this the “resource curse” or “Dutch disease” when a natural resource windfall distorts an entire economy, siphoning talent and capital away from every other sector, until the nation is left vulnerable, unequal, and structurally weaker than before the boom.
Sound familiar?
The AI gold rush isn’t happening in Lagos or Luanda. It’s happening in San Francisco, New York, and every tech hub that’s decided the only thing worth funding is the next frontier model or AI-powered SaaS wrapper. And just like oil in Africa, it’s creating instant wealth, massive investment (and de-investment), and a dangerous monoculture that has the potential to hollow out the rest of the economy while everyone pretends the party will never end.
The Pattern: Instant Wealth, Long-Term Weakness
Let’s start with the basics. When a country discovers oil or some other motherload of natural resources, here’s what happens:
Phase 1: The Rush. Capital floods in. Skilled workers abandon other sectors for high-paying oil jobs. Government revenue spikes. GDP looks great on paper (it’s an average).
Phase 2: The Crowding Out. Agriculture, manufacturing, and other profitable and necessary industries can’t compete for talent or investment. The value of the local currency rises (because of foreign demand to pay for the natural resource production), and that makes it hard for export-based industries - a lower value of currency means increased international demand. These industries atrophy. The economy becomes a monoculture around the natural resource, impoverishing other sectors that are not related.
Phase 3: The Vulnerability. When oil prices crash (spoiler: they always crash) the entire economy collapses because there’s nothing else left standing. No buffer, no diversification.
Phase 4: The Inequality. The wealth concentrates at the top. A small elite gets fantastically rich while everyone else gets left behind, often worse off than before. Cue instability.
Now let’s map that to AI.
Phase 1: The AI Rush Is Here
AI investment in 2024-2025 hit unprecedented levels. Nvidia’s market cap exploded past $5 trillion!? OpenAI raised billions at a valuation of hundreds of millions and converted to a for-profit. Every major tech company is spending hundreds of billions on data centers and GPUs. Venture capital is pouring record sums into anything with “AI” in the deck.
The numbers look incredible. Tech valuations are soaring. The Magnificent Seven stocks (Apple, Microsoft, Google, Amazon, Meta, Tesla, Nvidia) now represent nearly more than a third of the S&P 500’s total market cap. Investors want Nvidia-like performance, and index funds are mechanically overweighting these stocks, creating a self-reinforcing feedback loop.
This is the “oil discovery” moment. Everyone can see the wealth being created in real time. And wants to be part of it.
Phase 2: The Crowding Out Is Already Happening
Here’s where it gets ugly, and where most people aren’t paying attention.
Good companies can’t get funded
A B2B SaaS company with $5M ARR, 100% YoY growth, and strong unit economics used to be a slam-dunk Series A. Not anymore. If you’re not “AI-native” or can’t credibly claim AI is your moat, venture capital has dried up. Founders are literally adding “AI-powered” to their pitch decks for features that amount to basic automation or ML. It’s not strategy; it’s survival. The lipstick is mandatory.
Meanwhile, genuinely innovative companies solving real problems in logistics, healthcare workflows, or supply chain management are getting passed over because they’re not part of the AI narrative. Capital is being misallocated at scale, not because these businesses aren’t valuable, but because they’re not part of the hype cycle.
Talent is being siphoned away
The best engineers, product managers, and operators are all moving to AI companies or the AI divisions of big tech. Compensation packages at OpenAI, Anthropic, and Google DeepMind have reset salary expectations across the industry at the same time that middle / low-level talent are losing their jobs.
If you’re not working on frontier models or AI infrastructure, you’re increasingly seen as yesterday’s engineer. Fewer people are making a lot more.This isn’t just a tech problem. It’s an economy-wide problem. Companies in “boring” sectors (finance, education, healthcare, manufacturing) are losing their top talent to the AI boom. The people who could be building the next generation of critical infrastructure are instead optimizing token prediction or building yet another AI chatbot wrapper.
Early-stage capital is disappearing
Seed and Series A rounds are down significantly for non-AI companies. Late-stage funds are increasingly focused on AI “mega rounds.” The entire venture ecosystem is becoming a monoculture, and the companies that would have been the job creators and innovation engines of 2027-2030 are dying in the cradle because they can’t get funded in 2025.
Phase 3: The Fundamental Weaknesses Are Being Masked
Here’s the really dangerous part: the AI boom is covering up serious structural problems in the U.S. economy.
Corporate margins are under pressure. Outside of tech, companies are struggling as consumers retreat. They’re not replacing workers with AI because it’s more efficient; they’re laying people off because they can’t raise capital, can’t make their numbers, and can’t compete for talent. But the headlines blame “AI disruption” instead of calling it what it is: companies failing in an economy that’s increasingly bifurcated between AI winners and everyone else.
Regular economy jobs are disappearing. Not because of automation. Because of capital starvation. Companies that would normally be hiring are instead cutting costs to survive in an environment where investors only care about AI returns and are uncertain about the future. The job losses aren’t a sign of AI progress; they’re a sign of economic distortion.
The stock market is at all time highs. The S&P 500 looks healthy because five to seven stocks are carrying the entire index. Passive investors think they’re diversified, but they’re actually massively overweight on a handful of AI-adjacent tech giants. When the reversion comes, and it will come, the losses will be brutal and widespread.
This is exactly what happened with oil economies. The resource boom masked underlying weaknesses until the boom ended, and then the whole structure collapsed because nothing else was left standing.
Phase 4: The Inequality Is Accelerating
The AI wealth is concentrating fast.
Nvidia employees are millionaires/billionaires. OpenAI engineers are getting life-changing equity packages. Big tech workers in AI divisions are making multiples of what their peers in other divisions earn. Even in AI itself, you are seeing vibe-coded and narrow “solutions” attract tens of millions in investment due to their rocketship growth of revenue, but with an exit strategy that resembles musical chairs more than a battle plan. Meanwhile, workers in non-AI sectors are facing layoffs, wage stagnation, and shrinking opportunities.
This isn’t just about individual companies. It’s about entire regions and populations being left behind. If you’re not in the right zip code, with the right educational background, working on the right technology, you’re on the wrong side of a widening chasm.
The resource curse doesn’t just distort economies; it makes societies unstable. Nigeria’s oil wealth created a tiny elite and left the majority poorer and more vulnerable. The AI boom is doing the same thing, just faster and with better PR.
The Norway Exception: What It Takes to Avoid the Curse
There’s one major escapee of the resource curse: Norway.
When Norway discovered oil in the North Sea in the 1960s, it did something radical. They created a sovereign wealth fund, ring-fenced the oil revenues so it would not leak unchecked into their economy, and invested externally and globally to avoid overheating their domestic economy. From this seat of control, they kept investing in more mundane sectors - education, manufacturing, etc. They didn’t let oil become their entire economy, and their structural firewall enforced it.
Today, Norway’s sovereign wealth fund is worth over $1.6 trillion, which is more than $300,000 per citizen. Their economy is diversified, resilient, and more equal than almost any other developed nation. They took the windfall and used it to build long-term strength instead of short-term excess. BTW, this stuff is at risk now, given current Norwegian politics, but up to this point, they have got a lot right.
So what’s the AI equivalent?
We need to ring-fence AI investment. Not literally, but conceptually. Venture capital needs to consciously maintain capital allocation to non-AI innovation. Limited partners need to demand it. Funds need to resist the temptation to go all-in on AI and abandon everything else.
We need to protect talent pipelines. Universities and companies need to keep training people for the “boring” work that actually keeps the economy running. We won’t actually know what AI can do better for a while, and some stuff may be impossible to automate cost-effectively. We can’t let an entire generation of engineers optimize solely for token prediction and ignore infrastructure, manufacturing systems, and enterprise workflows.
We need to support the real economy. Policymakers need to recognize that the AI boom is creating dangerous distortions. That means supporting small businesses, investing in job retraining for displaced workers, and ensuring that capital remains available for companies solving non-AI problems.
We need honest accounting. Stop calling every layoff “AI disruption.” Stop pretending the stock market or the economy is healthy when it’s just a few companies. Stop slapping “AI-powered” on every product and pretending it’s innovation. The dishonesty makes the problem worse because it prevents us from seeing the actual damage being done.
We need to use AI to rewrite the operating system of the real economy. This means replacing the software and thus powering-up how every enterprise does its business. China’s 2035 plan encodes this fundamentally. We should do the same in the Western world.
The Uncomfortable Truth
The AI boom is real. The technology is transformational. The value creation is genuine. But so was the oil in Nigeria. So were the Gas fields in the Netherlands.
The question isn’t whether AI is valuable. It’s whether we’re building a resilient, diversified economy that can withstand the inevitable correction, or whether we’re creating a brittle monoculture that will collapse the moment the hype cycle turns.Right now, we’re doing the latter. Capital is flooding into one sector. Talent is concentrating in one area. Valuations are distorting the entire market. And the rest of the economy, the part that employs most people and creates most actual value, is withering.
This isn’t about being anti-AI. It’s about being pro-economy. Norway didn’t reject oil; they managed it intelligently. We need to do the same with AI.
The resource curse isn’t inevitable. But avoiding it requires discipline, foresight, and a willingness to say “no” to easy money in favor of long-term resilience.
Want to dive deeper?
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🎥 In case you missed it…The AI economy is getting spooky. 🎃
In this (late, late) Halloween edition of the ProductMind Podcast, Oji, Ezinne, and Ted unpack how AI is reshaping jobs, distorting markets, and testing the moral compass of tech leadership.
They’re talking about:
🚀Why job losses aren’t really about AI.
🚀How the stock market got disconnected from reality.
🚀Why VC is chasing hype instead of healthy businesses.
🚀What responsible leadership looks like in this new era.
🚀It’s a timely conversation about human resilience in a machine-driven world.
🎧 Tune in now - if you dare...
🎥 YouTube → https://www.youtube.com/watch?v=zZ2zEuSIc0U&t=1s
🎵 Spotify → https://open.spotify.com/episode/4KkqE9I2FntJ9AnUoPp2Jw
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We are always talking about transformer-based AI unless we specify otherwise.