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How is AI impacting the economy?
Over the last few years, there has been lots of conversation around how AI is going to affect our lives, and the economy. A quick google search returns multiple studies. For example, PWC says that the UK’s economy GDP will increase by at least 5% as the result of AI. A report by McKinsey says that the annual productivity will be increasing by 1.2% each year. There are also some books that have started to come out on that subject. I am also talking about this topic in my upcoming book called Uncertainty. I had also done some of my own predictions in the past.
However, while we hear many opinions about the subject, the truth is that no-one really knows what is going to happen. All data-related and AI technologies are characterised by some interesting features which makes it difficult to understand how they might affect a sector:
- They are general purpose. the same techniques that are used in autonomous vehicles, might be used in radiology for example (here is a good summary on radiology for anyone interesting in this subject).
- They are becoming easier and easier to access. The big tech companies, like Microsoft and Google, are releasing APIs for any possible use case.
- They can become better in doing what humans are already doing (in some cases). For example, autonomous vehicles might completely replace all human drivers in the near future.
- We are still trying to discover things and issues about current models. We don’t know what might come next. A good example of this are adversarial attacks on neural networks.
Example of an adversarial attack and how it works. Image taken from Nature.
The impact of AI can be difficult to predict
When you get all these four features combined, you can get some unpredictable consequences. Most predictions are focused on the third feature: automation. Autonomous vehicles is the most prominent example. Many companies are heavily investing in creating truly autonomous vehicles. Once the technology reaches a certain level of maturity, and society accepts it, then most professional drivers will simply be replaced. This is an obvious example.
However, the when we combine all four features, we can get unpredictable consequences. As technology becomes more accessible, we get higher probability that it will be used in a novel ways and problems. Remember, that the AI algorithms created, are usually general purpose. And they are becoming more and more accessible. This means that any disruptive applications might actually come, not from the creator of the algorithms, but from specialists in different areas, who just realise that they’ve found a new tool to use.
Analysing AI’s impact on the economy
That being said, there are still things that we can do, in order to analyse the impact that AI will have on the economy. A very good article by The Gradient, summarised the work that was done in the economics of AI conference in 2017. In brief, there are 4 main themes (quoting the Gradient):
- Macro View: Impact of AI on aggregate economic variables like productivity, employment or inequality
- Meso View: Impact of AI on individual sectors such as scientific research or regulation
- Micro View: Impact of AI on the behaviors of organizations and individuals
- Meta View: Impact of AI on the data and methods that economists use to study AI
One of the interesting points coming from this article is that AI might actually have a negative effect on productivity in some cases. As jobs are being displaced, alternative jobs need to be found. If the alternative jobs are low productivity jobs, then the net impact could be negative. Also, there is a high risk of AI polarising the market.
It also looks like that the jobs that AI will create will either be highly technical jobs, or low-skilled jobs. An example of a technical job is a data scientist. An example, of a low-skilled job that has been created by AI, is using mechanical Turk to label images.
Another important point that is made, is that whether business will benefit from AI depends on intangibles, like culture and processes. I feel that this really validates my work which has touched upon many of those intangibles: from building a data-driven culture, to understanding data science on the organisational level, to courses and coaching. In order to make sure that many industries can benefit from new technological developments, it is important to ensure that all businesses have access to the knowledge required to adopt these technologies.
So, how will AI affect the economy?
So, now let’s try to answer the question that we set out in the beginning. I said that it is going to be difficult to predict the actual details as to how AI will affect the economy. However, we can map out some of the ways this will take place. We can map out some of our blind spots, and some of the features which this revolution will bring.
My opinion pretty much coincides with the opinion expressed in the Gradient.
The impact of AI on the economy (and society) will look more like the internet, rather than some kind of singularity event.
Think about the point I raised earlier, about AI being now easily accessible, and that soon anyone might be able to come up with ideas for data products. This is exactly what happened with the internet.
Let’s take commerce for example. Some retailers realised that they can sell online. So, they had both brick-and-mortar and online stores. Jeff Bezos realised that he can build a whole enterprise based only on selling online. A few of decades after the invention of the internet, anyone can create an e-shop, and promote it through social media channels, like Instagram. At the same time, these social media channels are also blamed for causing poor mental health and attention deficit disorder.
Who would have predicted the rise of Amazon as an AI-first company that would dominate global commerce, as well as the rise of the solo lifestyle entrepreneur, promoting brands and products on some medium of communication that hadn’t even existed in the 90s? Probably no-one, and this is where we stand with predictions around the way through which AI affect the economy. We can’t make accurate predictions, but there are some pointers about where to look, like the ones suggested in the beginning of this article.
While automation is the obvious case, and most reports (like the one by PWC) are focused on it, I believe that many of us will be surprised by applications of AI which are unforeseen and disruptive business models. It is also important, like explained in the previous section, to understand that many of the changes that will take place, might have counterintuitive effects. Countries that are fast to adopt AI algorithms might witness their GDP growing, but their productivity getting worse, as vast numbers of people end in low-productivity jobs.
One things that’s for certain is that the individuals and the companies that don’t educate themselves about the upcoming changes are going to be left behind. That’s why I keep running my courses and I am so happy to keep providing services in this area. Because I believe that it is something that society really needs.