Everyone knows that Gen X -ers are a grumpy lot, but for a number of years I have been particularly cantankerous because I was concerned about the future pressures that the demographics of an ageing population held for the world.
In particular, an ageing population means a higher dependency ratio which would undermine the benefits of productivity growth, and mean that we all retire poorer.
I’m pleased to say I believe the world will avoid this Malthusian outcome, by virtue of tech-driven GDP growth.
Popular views on AI vary from “it’s interesting but only moderately useful” to “this stuff will take over the world”. I will present economic arguments from both sides of the coin toss, but will use an anecdotal example for my first point.
In 1997 IBM’s Deep Blue computer first beat world champion Garry Kasparov in chess. Fast forward to today and at chess tourneys humans combined with machines will persistently beat machines playing on a standalone basis. The point is that AI is just a tool like anything else and may be used or abused.
People who know me well know I get testy with a lot of tech, though they never seem to get my point that tech needs to be filtered.
AI can be clever but it’s not infallible. Defective training data or processing errors lead to mistakes. AI can’t detect nuance or context very well, so biases creep in. Humans better understand the accountability pertinent to sensitive areas such as health care, legal judgments and financial advice. AI lacks human intuition, common sense, creativity and humans are better at handling real-world dynamics. Combining AI with human judgment leads to more robust outcomes.
The open debate between Daron Acemoglu of MIT and Goldman Sachs’s James Pethokoukis offers a wide range of perspectives. Acemoglu has Total Factor Productivity (TFP) rising only 0.7% over 10 years, and Pethokoukis has it rising 15% in that period, leading to boosts in annual GDP (simplistically) of 0.07% for the former and 1.5% for the latter. Interestingly, both McKinsey and the BIS have even higher TFP growth (in the 20s) over the next decade.
I must admit I have been extremely sceptical about the ability of economists to model structural societal changes, ever since I listened to a number of clever South African economists in the late 1990s and 2000s opine that the effect of HIV would be macroeconomically net neutral. Yeah right.
McKinsey noted the TFP annual boosts that came from steam, robotics and the internet as 0.3%, 0.4% and 0.6% respectively. However, these game changers took a long time to implement. AI should be scalable at speed, and I think there is a failure of imagination when it comes to the application of AI to business problems.
The key implication of AI is that you will no longer have to be a programmer to get useful answers from a computer. Additionally, this will not throw programmers out of jobs. Rather, they will become better at what they do. Of course, ask a stupid question and you’ll get a stupid answer.
Without giving away any secret sauce, I am aware of a number of small businesses using AI for some rather smart modelling. For the first time, a computer can understand what you actually want. A dummkopf Luddite can easily get really erudite help out of a computer. This kind of smarts combined with the huge acceleration that will be provided by the development of quantum computing will see AI go seriously parabolic by 2030 (especially for companies).
I note the development of some police units in the US which process camera and radio feed through AI-powered software from Axon, and a near-perfect report awaits the returning patrol person back at the station. Because report writing consumes more than an hour a day for the average American cop, this is a huge productivity booster.
However, to my mind the huge potential kicker for AI will be to potentially smash normal, everyday crime. Ordinary criminal activity is the biggest single hurdle to growth in just about every economy in the world. Ask any business person how many good ideas get put to one side because of distrust issues.
In the near future, your security system will be able to tell the difference between a cat and a burglar. The benefits of AI won’t just accrue to the “Mag 7”.
The author works at Vunani Securities. Opinions are strictly personal
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