Why Household Impoverishment Will Hurt B2B Businesses Too — and What AI Has to Do with It

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I'd like to explore a question that many B2B founders seem to overlook.

Let's assume, for the sake of argument, that AI optimists are right. Imagine LLMs eliminate tens of percent of today's jobs, and many of those workers never find new employment.

Some founders shrug at this scenario.

"That's unfortunate, but I sell to businesses and governments—not consumers."

I think that's a mistake.

Here's why.

GDP can be viewed as the sum of household consumption, investment, government spending, and net exports. What's important is that, in the long run, every one of these ultimately depends on households.

Investments create productive assets whose costs are eventually paid by consumers. Government spending comes from taxes, which businesses ultimately pass on through prices. Exports are simply consumption by households in other countries.

In other words, every company's revenue eventually traces back to someone's household budget.

Now think about your own B2B business.

Your revenue is another company's expense. Their revenue becomes someone else's expense. This chain continues until a product or service is finally purchased by a household.

If households spend less, demand eventually falls throughout the entire economy—including for your business.

A temporary downturn isn't necessarily a problem. Consumers can borrow, governments can run deficits, and companies can invest while waiting for demand to recover.

But that's not the future many AI enthusiasts describe.

They're talking about permanent displacement. If millions of people never regain meaningful income, they won't have the purchasing power to sustain economic demand.

Now consider the companies replacing employees with AI.

Suppose they reduce costs by 10%.

Perhaps 1–2% of that ends up paying LLM providers. The remaining savings largely flow to shareholders.

Shareholders will certainly spend some of those gains. But consumption doesn't grow indefinitely. Wealthier people typically spend a smaller share of additional income and invest a larger share instead.

And investment only makes sense if someone will eventually buy the output.

Imagine this dynamic continuing for decades.

Why build new factories to produce goods that customers can't afford?

Idle factories don't generate prosperity. At some point, they're abandoned or dismantled.

So what's the point of this thought experiment?

If you want your business to thrive, your customers need to thrive. And so do ordinary households.

This isn't an argument against automation or productivity improvements. Higher productivity is essential.

But if maximizing efficiency becomes the only objective—and no one cares whether displaced workers can get new jobs—the market will eventually solve the imbalance on its own.

Unfortunately, it won't do so in a way that benefits businesses.

The good news is that I don't believe this outcome is inevitable.

Technology creates problems, but it also creates opportunities to solve them.

As Sarah Connor said, "No fate."

The economy our children inherit depends, at least in part, on the choices we make today.

#economicsforstartups