Jevons Paradox is the economic observation that when a technology makes a resource more efficient to use, total consumption of that resource tends to increase rather than decrease. Torsten Slok just applied this concept to AI in his Daily Spark, and I haven’t been able to stop thinking about it — because it’s the single best explanation for what we’re experiencing at LoanBoss right now.
What Slok Actually Said
Slok’s argument is elegant: when you make something dramatically cheaper and faster, people don’t just do the same amount of it for less money — they do vastly more of it. AI isn’t replacing work. It’s making work so much more accessible that demand for it explodes. He draws a direct line from this dynamic to Excel, the most transformative tool the finance industry has ever adopted.
Here’s the thing people forget about Excel. When spreadsheet software arrived in the early 1980s, the prevailing fear was that it would eliminate accounting and finance jobs. VisiCalc and then Lotus 1-2-3 could do in seconds what used to take a room full of analysts with adding machines an entire week to produce. The math was obvious: fewer people needed, fewer jobs.
That’s not what happened. Not even close.
Excel didn’t eliminate finance jobs. It created millions of them. By making financial analysis fast, cheap, and accessible, spreadsheets unleashed a tidal wave of demand for financial modeling that simply didn’t exist before. Suddenly every manager wanted a budget model. Every deal needed a sensitivity analysis. Every board meeting required a pro forma. The tool that was supposed to kill the analyst created an entire industry of analysts.
Slok’s point is that AI is doing the same thing right now, at a much larger scale.
What This Looks Like Inside LoanBoss
I can tell you exactly what Jevons Paradox looks like in CRE debt management, because I’m watching it happen in real time with our clients. When LoanBoss automates loan abstraction, the initial assumption from the outside is always the same: now you need fewer people to abstract loans. Fewer analysts, smaller teams, lower headcount.
That assumption is wrong every single time.
What actually happens is this: a team that used to abstract 50 loans a quarter because that’s all their analysts had bandwidth for suddenly realizes they can abstract 200. And once they can abstract 200, they start asking questions they never had time to ask before. What does the covenant compliance picture look like across the entire portfolio? Where are the prepayment windows in the next 18 months? Which loans have rate cap expirations that overlap with refinancing timelines?
These aren’t new questions. Every sophisticated borrower and lender has wanted to answer them for years. They just couldn’t — because the underlying data work was too expensive and too slow. AI removed the bottleneck, and demand for the analysis flooded in.
Not a single LoanBoss client who has adopted our AI tools has reduced their team size. Not one. What they’ve done is take on bigger portfolios, run deeper analysis, and deliver better reporting to their stakeholders. The work expanded to fill the new capacity, and then some.
The Startup Boom Confirms It
The day after his Jevons Paradox piece, Slok published a follow-up: “AI Is Fueling a New American Startup Boom.” The two pieces read as companion arguments, and they should. If AI were simply eliminating work, you’d expect fewer companies, not more. Instead, new business formation is accelerating precisely because AI lowers the barrier to starting something.
This is Jevons Paradox at the macro level. AI makes it cheaper to build a product, so more people build products. More products create more complexity. More complexity creates more demand for the tools and services that manage that complexity. The cycle feeds itself.
In CRE specifically, I’m watching this play out with smaller operators who couldn’t previously afford sophisticated debt management. A shop managing 15 properties used to just keep a spreadsheet and hope for the best. Now they can afford real loan analytics. That’s not a smaller market — it’s a bigger one.
Beware the “AI Will Replace Your Team” Pitch
This is where I want to connect Slok’s insight to something our friends at Pensford have been saying: beware the AI sales pitch. Anyone who walks into your office and promises that AI will “replace” your team is selling you something, and it’s probably not the truth.
The replacement narrative is seductive because it sounds like pure cost savings. Who doesn’t want to do more with less? But the companies actually deploying AI in CRE — the ones I talk to every day — aren’t experiencing replacement. They’re experiencing expansion. Their teams are doing higher-value work. Their portfolios are growing. Their analysis is deeper. Their clients are happier.
The vendors promising headcount reduction are optimizing for a pitch deck, not for reality. The reality, as Slok’s analysis makes clear, is that efficiency gains from transformative technology create demand, not unemployment.
What I Think This Means
I’ve been building LoanBoss through this AI transition, and here’s my honest read on where this goes:
The teams that adopt AI tools will manage larger portfolios and deliver better work. They won’t shrink — they’ll grow, because their capacity will attract more business. The teams that resist adoption won’t necessarily lose their jobs to AI, but they’ll lose market share to competitors who use AI to do more, faster, and better.
Excel didn’t kill the financial analyst. It made the financial analyst indispensable to every business on earth. AI is about to do the same thing to every knowledge worker in commercial real estate.
Slok nailed it. Jevons was right 160 years ago, and he’s right today.
Frequently Asked Questions
What is Jevons Paradox and how does it apply to AI in commercial real estate? Jevons Paradox is the principle that efficiency gains in using a resource lead to increased total consumption of that resource, not decreased. Applied to AI in CRE, this means automating tasks like loan abstraction doesn’t reduce the need for analysts — it makes analysis so much faster and cheaper that teams do dramatically more of it, expanding portfolios and deepening their reporting instead of cutting staff.
Did Excel eliminate finance jobs when it was introduced? No. Despite early fears that spreadsheet software would replace accountants and analysts, Excel created millions of new finance jobs by making financial modeling fast and accessible. Previously impractical analysis — sensitivity models, pro formas, scenario planning — became standard expectations, generating massive new demand for people who could build and interpret those models.
Will AI replace CRE debt management teams? Based on what we’re seeing at LoanBoss, no. Clients who adopt AI-powered loan abstraction and portfolio analytics consistently maintain or grow their teams. The efficiency gains allow them to manage larger portfolios, run deeper analysis, and deliver better reporting — all of which requires skilled professionals. Vendors promising AI will replace your team are misunderstanding how this technology actually changes workflows.
This is issue #3 of JP’s AI Notes. Catch up on earlier issues at loanboss.com/newsletter.