The Dead Economy Theory

I’m writing this as a tl;dr for this article: https://www.owenmcgrann.com/p/the-dead-economy-theory.

When AI is increasingly capable of performing cognitive work at the fraction of cost of human labor, what happens next?

1. A company fires employees and replace them with AI labor. They think they “saved” company cashflow. They made investors happy.
2. Those fired workers stopped spending money.
3. The company that fired the workers realizes its own customer is those worker. Now nobody is buying.