AI and You
If you have doubts that AI will fundamentally change the world as we know it, I googled a few sound bites from the who’s who in industry to motivate this article -
“Software is eating the world, but AI is going to eat software” — Jensen Huang, Nvidia CEO
“Yet the biggest harm that AI is likely to do to individuals in the short term is job displacement, as the amount of work we can automate with AI is vastly bigger than before. As leaders, it is incumbent on all of us to make sure we are building a world in which every individual has an opportunity to thrive.” — Andrew Ng, Landing AI CEO
“By far, the greatest danger of Artificial Intelligence is that people conclude too early that they understand it.” — Eliezer Yudkowsky, Research Fellow, Machine Intelligence Research Institute
In this article, I will attempt to answer the following questions
- What does AI mean from a global economic perspective?
- What will it mean to you and me as business leaders?
- What will it mean to you and me in terms of jobs, wages, inflation?
- What will it mean to you and me as consumers of AI?
If you are curious to learn the answers, read on.
Today to tomorrow …
I will start with an economic mystery in the U.S. today: how is the economy growing with historically low unemployment and low inflation?
Unemployment rate is near historic lows, averaging just 3.75% in the first half of 2019. Job openings are outpacing the number of people seeking work. I plotted a graph showing real Gross Domestic Product (GDP), Core Personal Consumption Expenditure (PCE) and unemployment rate using data from the Federal Reserve.
The grey bar indicates the Great Recession of 2007–2009. Inflation, measured by core PCE in green, has averaged only 1.5% annually since 2010 whereas unemployment, shown in red, has steadily dropped from 10% in 2010 to 3.8% in 2019. Annual real GDP growth rate has averaged 2.5% since 2010. According to economic theory, when labor markets are tight and demand is strong, wages and prices should go up. Yet inflation has not risen.
What could be the reason?
As my Macroeconomics Professor at the Gies College of Business, Hadi Esfahani explained, there are 3 pillars to sustained GDP growth — resources, technology, and institutional capabilities.
- Resources include capital stock, labor and natural endowments. These traditional levers alone cannot propel economic growth
- Technology is the knowledge about ways of combining resources to produce more with the same resources and, therefore, enhance production capacity
- Institutions in a country incentivize broad segments of the population to put resources and technology to best use, the economy’s production capacity will be larger
I believe this unusual situation is revealing that advances in digital technology — cloud computing, increased computation capacity, and advanced AI/ML algorithms are a major reason for growth in the face of strained resource capacity. The only way to sustain this growth long term is continued investment in technology advances and institutional capacity.
Research from Accenture on the impact of AI in 12 developed economies backs this theory. AI can not only sustain but it can double annual economic growth rates in 2035.
In other words, Artificial intelligence (AI) technology is a new factor of production and has the potential to introduce new sources of growth. The impact of AI technologies on business is projected to increase labor productivity by up to 40 percent. As professionals and business leaders, deploying AI will be key to driving successful businesses.
We have now answered our first two questions :
- What does AI mean from a global economic perspective
- What will it mean to you and me as business leaders
AI is ushering in a world of intelligent automation…
Automation is making a hardware or software capable of doing repetitive things without human intervention. Intelligent automation is to give hardware and software the ability to learn and discern meaning without being explicitly programmed, to the extent of being able to predict events in the future.
As intelligent automation becomes more prevalent, there will be changes in the workforce. Some workers will be displaced. McKinsey has found that around 15% of the global workforce or about or about 400 million workers, could be displaced by automation in the period 2016–2030. However, even as workers are displaced, there will be an increase in demand for work and consequently jobs. There will be additional labor demand of between 21 percent to 33 percent of the global workforce (555 million and 890 million jobs) to 2030, more than offsetting the numbers of jobs lost.
What this means for you and me is that we need to align our skill sets for the workforce of the future. This does not mean that all of us need to become data scientists. In order to design good AI products, a cross-functional team of domain experts, business translators, product managers, project managers, data scientists, data engineers, lawyers, ethicists and more is needed. Without a skilled workforce, the promise of AI-led growth cannot be realized, growth will stagnate and inflation will rise.
That is the answer to our third question :
- What will it mean to you and me in terms of jobs, wages, inflation
AI in your everyday life…
If you have experienced smart replies in Gmail, friend suggestions in FB, predictive searches in Google, ride-sharing through Uber, purchasing recommendations on Amazon or Netflix, fraud alerts from your credit card company, conversations with chatbots or Alexa or Google Home, then you have experienced AI in everyday life. It may surprise you to know that most of us have been using AI on a daily basis for many years. So, why be concerned now?
Unlike any previous software algorithm, AI learns from the data it is trained on and can continue to reinforce its learning in deployment. Before placing blind trust in AI driven products, we need to be able to objectively determine whether the product is safe, trustworthy and ethical. As an obvious example of what could go wrong, consider how confused Microsoft’s AI chatbot Tay became after being exposed to a day of twitter.
“In the span of 15 hours Tay referred to feminism as a “cult” and a “cancer,” as well as noting “gender equality = feminism” and “i love feminism now.”
This answers the fourth question:
- What will it mean to you and me as consumers of AI
How do you see your role in an AI-driven future? Are you concerned, excited, unperturbed?
In future articles I will explore how enterprises and society can be ready for AI along four axes — technology, regulatory, ethics, and social.
