The economics of AI
Complements and substitutes
Economists are good at taking the fun and wizardry out of technology and leaving us with this dry but illuminating question. The answer reveals why AI is so important relative to many other exciting technologies. AI can be recast as causing a drop in the cost of a first-order input into many activities in business and our lives — prediction.
Three main AI (and prediction) complements that will become more valuable:
As the value of human prediction goes down, the value of data, human judgement and human action goes up. Without any of these three, the predictions that AI make are worth zero.
Measure the impact of AI on your business
At Caliber Data Labs, we value precise and efficient work. Therefore, in order to lower the cost of predicting how AI-ready your business is, we’ve created a simple scoring system called “Caliber Score”. By taking a few inputs on why and how you’d like to use AI and what your business does, we’ll judge how effective AI can be for you. Complementing this with a short questionnaire, we can come up with your Caliber AI-readiness score. If your score is higher than 70, we’ll take action and work with you to list organizational workflows and break them down into tasks. Finally, looking for tasks that have a significant prediction component that would benefit from a prediction machine and combining them with your return on investment data we simply rank those tasks in order from top to bottom.
At this point, our machine learning team will gauge the investment required to build a positive-ROI and high-impact production-ready AI.
McKinsey predicts that many of the AIs created out of this exercise will be efficiency-enhancing tools that will give the company a 1%-10% increase in EBITDA or some other measure of productivity.
For AI pioneers who’d like to be more adventurous, we have another tool called “Caliber Prediction Dial”. Here there are potential opportunities for business model transformations with much deeper impact (and investment requirements).
Last but not least, the value of AI is not to be found in the models themselves, but in companies’ abilities and culture to harness them.
Get your Caliber Score HERE and start your AI journey.
Find out how AI-ready you are by answering a few questions.
This is the first in a series of posts about applied AI’s impact on economy and society. This post is inspired by the book Prediction Machines. It was also posted on LinkedIn. Caliber is a design and deployment partner for AI Pioneers. We’d love to discuss how we can help you execute a scalable AI strategy. Get your Caliber Score HERE and start your AI journey.