"People will become billionaires overnight": The forecast of a Nobel laureate and the dangers

TL;DR

Prof. Philippe Aghion won the Nobel Prize in Economics for his work that turned the idea of "creative destruction" into an economic model that explains how innovation drives growth over time. He believes that the AI revolution is also primarily a growth engine and not a threat. According to him, countries should not protect companies and industries from change, but rather the workers who are affected by it. In the interview, he argues that in Israel too, competition, education, and integration into the labor market are much more important than protecting existing interests, and warns against using fears and security threats to justify barriers to competition.

For nearly two decades, the American company Chegg was one of the great promises of the digital education world. Millions of students around the world paid every month to get solutions to homework assignments, explanations, and tutoring for exams. On Wall Street, the company was valued at its peak at more than $15 billion, and it seemed that it had found a business model that was hard to challenge. And then, in November 2022, ChatGPT was launched.

Within a few months, students began to abandon it. Instead of paying for a closed database of answers, they could get an immediate explanation from artificial intelligence, at any hour and for free. In May 2023, Chegg itself admitted that ChatGPT was hurting its growth rate, and the stock crashed by tens of percent in one day. Within less than two years, almost the entire market value of the company was wiped out, and it was forced to fire employees, change strategy, and fight for its survival.

This is perhaps one of the fastest collapse stories of the artificial intelligence era. But from the perspective of the French-Jewish economist, Nobel laureate Prof. Philippe Aghion, it is not just a tragedy; it is an expression of "creative destruction," the process by which new technology displaces companies and business models that have become obsolete, while simultaneously creating new opportunities for growth and innovation.

Prof. Philippe Aghion (69)

Personal: Married and a father, lives in Paris

Professional: Professor of Economics at the Collège de France and the INSEAD business school in France; visiting professor at the London School of Economics (LSE)

Something else: His mother is the founder of the luxury fashion house Chloé

"In our research, we actually completely changed the theory of growth and created a new model," says Prof. Aghion in a special interview with Globes about the findings that earned him the 2025 Nobel Prize, which he received in Stockholm from the hands of King Carl XVI Gustaf of Sweden. "The idea of creative destruction has always existed, but when I was a student, the leading growth model was the neoclassical one, where growth is driven by capital accumulation. There was no model where growth is driven by innovation, which entails creative destruction. We developed a mathematical model with which one can confront theory and data. One can examine, for example, what is the overall impact of competition on growth and look at things differently."

The idea of creative destruction is not new. In fact, it is a concept coined more than 80 years ago by the Austrian economist Joseph Schumpeter, who described how innovation displaces old companies, products, and technologies and makes room for new ones. However, what earned Aghion the Nobel Prize in Economics, along with Prof. Peter Howitt (who was his research partner) and the Israeli Prof. Joel Mokyr, who shared a prize of about one million dollars, was the development of the theory and the understanding of the conditions under which this process generates growth and prosperity.

Their research showed that competition, innovation, investment in research, education, economic institutions, and a safety net for workers do not contradict each other - but rather allow creative destruction to accelerate growth.

"I, for example, am in favor of the Scandinavian model - which they call flexicurity (flexible security)," Aghion demonstrates. "What is beautiful about this method is that in Denmark, if you lose a job, you receive 90% of your salary for up to two years after the layoff. Meanwhile, the state retrains you and helps you find a new job. And this is in addition to a good education system, where you learn in school how to be an adaptable person. In such a system, people are much more willing to accept changes and take risks - because they have safety nets."

Theory of continuous growth through creative destruction

By Prof. Philippe Aghion and Prof. Peter Howitt:

Growth is not driven only by capital accumulation, but also by innovation that entails creative destruction.
Creative destruction occurs when innovation displaces old companies, products, and technologies - and makes room for new ones.
To successfully navigate the stage of destruction and the transition from old to new, the state must create a safety net for workers.
Competition, innovation, investment in research, education, economic institutions, and a safety net do not contradict each other. They allow creative destruction to accelerate growth.

"Do not protect jobs, protect people"

To understand Aghion's model, one can think of the economy as a continuous race between companies. At any given moment, there are companies that lead the market and the global or local economy, but to maintain their status, they must continue to innovate. If they stop investing in research, development, and technology, new competitors will appear with better or cheaper products and push them out. This is creative destruction.

Therefore, according to Aghion, economic growth does not stem only from investments or increasing the workforce, but primarily from the ability of an economy to encourage competition, entrepreneurship, and new inventions. In his model, the government's role is not to protect existing companies from competition, but to create the conditions that will allow new entrepreneurs to grow through investment in education, research, and infrastructure, alongside maintaining competitive markets.

"I think that one should not protect jobs, but people. This is the Danish approach. Of course, sometimes there are unique events, and during them, entire industries are threatened - like the global financial crisis or COVID. Then the state should also protect jobs and companies.

"In routine times, we should primarily protect private individuals and ensure that they receive an income. Yuval Noah Harari talks a lot about universal basic income. I am not so much in favor of universal basic income, but I am not far from it. I think that anyone who undergoes training or works - should be entitled to a fair income."

Although his perception has components of social-democratic policy, Aghion is averse to a hostile attitude towards the rich and opposes calls like that of New York City Comptroller Brad Lander, a member of the Democratic Socialists of America party - to seize the means of production.

"Even in my country, there are people with such positions and it hurts, some of them are respectable, and what I tell them is that they are obsessed with the rich. I, on the other hand, am obsessed with the poor, and my main goal is to lift people out of poverty. What causes me disgust is that there are people who are obsessed with the fact that others have become rich.

"If you don't allow people to become rich, you don't grow, because innovation is driven by people who said: I will innovate. Of course, it also comes from scientific curiosity, but also from the fact that I want to earn money from my idea. If the moment you become rich, I will attack you and threaten to punish you - the economy will become much poorer, and there will be much less to distribute. Therefore, everyone will be poor."

Safety net for workers who will be affected in the transition period

Since President Donald Trump entered the White House, he has promoted a policy of raising tariffs intended to protect American industry and encourage local production - even at the cost of reducing international trade volumes.

However, according to Aghion's perception, international competition is an important engine for economic renewal: it indeed leads to the closing of factories and professions, but also to the growth of new and more efficient industries. The challenge, according to this approach, is not to stop the process, but to ensure a safety net for workers who will be affected in the transition period.

"Unlike Denmark, in the USA there is no good social system, so to attract voters, politicians turn to populist steps. Instead of offering good and proper institutions, which are suitable for harnessing the next new economic revolution, they offer simplistic solutions, like tariffs.

"Why is it a bad idea to impose tariffs? Why is it good to have free trade? First, there is a larger market for innovation. Second, competition is an engine of innovation. The third reason is that trade involves technology transfer - and this also helps growth. So when you impose tariffs, you oppose growth that will benefit all citizens."

"Adopt a carrot and stick approach towards the rich"

One does not have to go far to understand the connection between growth and creative destruction, we all live in such an era. But precisely now, when AI is changing the world order, Aghion sharpens the need for a safety net as a condition for growth from destruction. "We might find people who will become billionaires overnight. This is a complicated situation, which requires significant competition policy to ensure that they do not use their wealth to prevent the creation of innovations.

"In addition, it will be necessary to make them invest part of their wealth in funds. I am pushing very hard in France for the establishment of funds for education, research, and protection - that the rich will have an incentive to invest in. These will be funds for the public good, that the names of the donors will be recorded in. This is a kind of carrot and stick approach, and I think it can be very creative."

But you will agree that the welfare system today, in many Western countries, is so broad, that instead of the money going to places that would encourage employment or growth, it goes to places that encourage unemployment?

"Definitely. I think the approach should be that you have rights and duties. This is the essence of the flexicurity that I support. The state retrains you to find a new job, but if you refuse more than two jobs - unemployment benefits are cancelled. On the other hand, everyone who wants to work should have the possibility to do so. Also, everyone should have access to education and health."

You recently signed a letter warning against incorrect government policy regarding artificial intelligence. Why do you actually allow yourself to claim that you understand better than others what the use should be in the field?

"I do not pretend to know better than others. I like to do research, and as a researcher, I think you should be humble and say 'I don't know'. Because if you think you know, you are not a researcher. This is my approach.

"I am a very ignorant person when it comes to artificial intelligence. I am trying to work on the effects of artificial intelligence on growth and employment. Based on my work, I believe that artificial intelligence has growth potential. Why? Because it makes it easier to produce goods and services and to create ideas.

"New ideas are often a recombination of old ideas, and with AI, one can recombine much more and much faster. I am trying to quantify its growth potential. In my eyes, it could be an addition of 0.7%-0.8% economic growth per year. This is huge."

So what are you afraid of?

"The problem is that the potential will not be utilized because of unsuitable institutions. For example, a country that does not have a good competition policy might eventually be left with few companies using AI to prevent the entry of new innovators - and then the potential of artificial intelligence will not be realized.

"As happened in the USA: in the IT revolution, at first, there was an increase in growth between 1995 and 2005. But then there was a rise of superstar companies that eventually deterred the entry of new companies. In fact, those same superstar companies are the ones that are today also at the forefront of the artificial intelligence value chain: the cloud is controlled by Google, Microsoft, and Amazon, and there is only one player in the market of graphic processes (Nvidia). If you want to harness the growth potential, you need appropriate competition policy."

Many fear the loss of jobs as this technology develops.

"Work is a collection of tasks. Artificial intelligence will replace some tasks, and there are some jobs where it will replace most of the tasks. But artificial intelligence will also create new jobs, because companies that adopt AI become more productive, and therefore more competitive - and the global demand for their products increases.

"In addition, artificial intelligence generates new ideas. New ideas are new jobs. So there will be, in fact, destruction of more jobs, but also creation of more jobs."

"If you raise tariffs, you deter innovation"

Aghion also has a personal and family connection to Israel. His parents, who were born to Jewish families from Alexandria in Egypt, stayed in the country after World War II, and then moved to France. During this period, the family lived in the Aghion house in Jerusalem, a house originally built for the Jewish-Egyptian businessman Edouard Aghion, a member of their family, and which serves today as the official residence of the Prime Minister of Israel.

As a Jew with roots in the country, Aghion has firm opinions regarding the actions required for the growth of the country, stemming from his model. While Trump is expanding tariffs, the Israeli economic model relies on many tariffs - but in relatively limited areas. At the same time, a discourse is developing that it is important to protect local industry, mainly in the fields of food and ammunition, so that these will not be lacking due to dependence on other countries during wartime.

"I think it is good to understand first of all Israel's right to defend itself," Aghion relates to the Israeli model. "I have family in Israel, and for all Jews in the world, Israel is very important. When the events of October 7 occurred, we felt that it was a threat to all of us.

"So maybe Israel should rely more on itself and manage industrial policy in the fields of weapons, that I understand completely. But the food part is less clear to me. I don't think there will be a situation where Israel will starve. I don't see who will prevent that. I fear that there are some politicians in the country who want the population to live in constant fear, to prevent competition in industries they want to favor. I can imagine that in agriculture, very many lobbyists use the excuse of war to prevent competition - and this harms the average citizen.

"If you raise tariffs, you deter innovation, because you shrink the market and reduce competition. So the more effective way to deal with enemies from outside is actually to increase competition."

If you agree that tariffs are intended to raise prices and suppress innovation, and a tariff is actually a tax on the consumer - then why don't you support lowering taxes to zero? After all, it would increase innovation and growth to the highest level.

"It won't work. If you want to fund a good education system, a good security system, and a good industry - you need to be able to raise tax. Without the tax, there is no ability to fund this climate, which is important for the development of creative destruction."

Israel, in fact, is characterized by two opposing forces: on one hand, many branches in the economy suffer from centralization that harms competition and growth; and on the other hand, the high-tech industry is competitive, innovative, and the main growth engine of the economy. Can this model hold up over time?

"What needs to be done is competition policy that says: I must have good antitrust in all other sectors - except technology and high-tech. Instead of saying 'let's keep local industries', there needs to be more competition in food - internal and/or foreign.

"When there is no competition, you don't innovate and don't improve the quality of your products. And of course, you operate a lobby - to ensure that there won't be competition from abroad, because you know that products from abroad will be better than yours, when they innovate and you don't. And this is exactly the place where Israel is right now. My hope is that you will have a government that will push for reform in antitrust policy and competition policy."

What will prevent Israel from being the leader of the region?

You signed the economists' letter against the judicial reform. Many here wondered what economics has to do with these laws?

"In fact, you need a triangle between companies that innovate, a government that implements competition policy, and civil society that will ensure there is a minimum of collusion between producers and government officials. For all these things to be able to exist together, you need a functioning and independent judicial system."

One of the big issues today in Israel is the integration of the Haredi society into the economy. If the current situation continues and we don't do anything significant about it, what will happen in your opinion in the next decade?

"What will happen is that the skilled Israelis will leave the country, and it will miss the opportunity to become the economic leader of the region. They will get tired of paying taxes for people who do nothing and also hold extremist views regarding them. In such a situation, Israel will change its face and it will be poorer and perhaps also less safe."

Security costs money.

"That is true. The challenge is to defend yourself, to keep who you are, and to continue to prosper in a sustainable way."