Gates argues that technological progress can reduce the cost of a product or service without shrinking the market around it. In computing, cheaper hardware and software made digital tools accessible to more people and organisations, increasing overall demand even as the cost of individual units fell. The result was a larger market rather than simply lower spending on the same amount of computing.

In the fuller passage, Gates uses this history to consider the possible economic effects of artificial intelligence. If AI makes software development substantially more productive, the cost of producing code may fall, but cheaper software could also encourage businesses and individuals to demand much more of it. The quote therefore highlights demand elasticity and the possibility that efficiency gains can stimulate new uses rather than merely reduce employment or expenditure. It can be applied when analysing productivity, automation and the economic consequences of rapidly falling technology costs.

Full quotation

“The effects of this disruption [Artificial Intelligence] are hard to model. Sometimes, when a game-changing technology improves rapidly, it drives more demand at lower cost and, by making the world richer, increases demand in other areas. For example, AI makes software developers at least twice as efficient, which makes coding cheaper while also creating demand elasticity for code. (Computing is a good historical example where lower costs actually caused the overall market to grow.)”