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What Will It Take for AI to Really Affect the US Economy? Patience, for Starters.
It’s been a bad stretch for techno-optimists, with new doubts being raised about our social media giants and the progress of autonomous driving. And of course there isn’t much sign yet in the broad economic data that we are on the verge of a new productivity and growth boom.
But researchers Erik Brynjolfsson, Daniel Rock, and Chad Syverson offer some good news in “Unpacking the AI-Productivity Paradox,” an article in the MIT Sloan Management Review. They think there’s good reason to believe artificial intelligence could be an important general-purpose technology like electricity and the internal combustion engine. Moreover, they find no “inherent inconsistency” between that optimism and the current statistical sluggishness, which some have labeled the “Great Stagnation.” In fact, BRS think they have a pretty good explanation for it:
Published in Culture, Economics, TechnologyIt takes considerable time — more than is commonly appreciated — to sufficiently harness new technologies. There are numerous cases where we see a lag between tech achievements and economic impact. Retailers’ recent experience with e-commerce is a good example. The e-commerce excitement of the 1990s was prophetic, but it took nearly two decades — until 2017 — for online business models to approach 10% of total retail sales. The sector as a whole required the build-out of an entire distribution infrastructure. Customers had to be “retrained” to buy online. Organizational inertia held back innovation in business processes, supply chains, and product selection. None of the needed changes happened overnight, even though the potential of e-commerce to revolutionize retailing was widely recognized, and even hyped. The actual share of online commerce was a miniscule 0.2% of all retail sales in 1999. Only now are companies like Amazon.com Inc. having a first-order effect on more traditional retailers’ sales and stock market valuations.
Self-driving cars, medical applications of machine learning, and many other AI breakthroughs will likely follow a similar trajectory. As a GPT, AI will ultimately have an important effect on the economy and public welfare. At the same time, profound and far-reaching restructuring requirements will continue to prolong how long it takes to see the full impact on the economy and society.
What’s more, and what business leaders may find most relevant, is that the required adjustment costs, organizational changes, and new skills can be modeled as intangible capital. A portion of it is already reflected in the market value of companies. However, going forward, national statistics will need to be reinvented to measure the full benefits of the new technologies and their true value. Realizing the payoffs of AI is far from automatic and will require more fundamental changes than many executives typically imagine.
Many of us pessimists know who the winner will be. The self driving car, which already failed and killed someone after a massive 15 miles were put on the odometer, will be pushed through, shoved down our throats and unemploy some 250 million people across the globe.
Even if legislators don’t respond to the ramped-up energy of thousands of Uber, Fed Ex, UPS, and other AI lobbyists, the Big Insurers will come through and see to it that only self driving cars will be insured.
But on the governmental and investment level, this is all a Big Win Win. We saw how little response the government made to the Rust Belt. The investment crowd cares not one whit that people are employed here in the USA. So far, only Ford Motor company has executives noticing that if an entire generation is locked out of the new car and new home purchases, due to lack of jobs that pay well, the economy as a whole suffers. Most investors could care less about the US economy.
After decades of abuse by the governmental and Big Investment forces, the Rust Belt crowd saw a small improvement with D Trump’s win of the Oval Office. But now the Spending Bill was passed, with nary a mention of an infra structure deal.
As far as AI and medical technology, by 2017, I was already in trouble with a local clinic for failing to go to an appointment. It turned out that the appointment I had missed was actually an appointment set up and fulfilled some two years prior. But the AI of the computer world somehow bled that past fulfilled appointment through to the present moment.
I am quite thankful this is all the AI forces did to me. Pity the person who is scheduled for a tonsilectomy who finds their leg removed instead.