Prediction Machines: The Economics of Artificial Intelligence

Birth Of Artificial Intelligence

Artificial intelligence.

It is ushering in a new age, redefining what’s possible, bringing machines to life. What should organizations do? What about government policy? How do we plan in the midst of the changes?

In Prediction Machines: The Simple Economics of Artificial Intelligence, three esteemed economists tackle these questions and more. The authors discuss AI in the context of prediction. One of the authors, Joshua Gans, recently shared his view of AI from this research.

 

“Some people worry that artificial intelligence will make us feel inferior, but then, anybody in his right mind should have an inferiority complex every time he looks at a flower.” -Alan Kay

 

Many people are only now beginning to see AI in the form of Alexa or Google Home. What do you expect over the next few years in terms of growth and how it will be prevalent in our lives?

While it is hard to forecast these things, I suspect AI will be largely invisible to most consumers. Businesses will use it to plan inventory and make logistics more efficient. That may show up in high quality products for a lower price, but it is unlikely anyone will say ‘ah ha! AI.’ In other words, I don’t expect to see Jetsons-like robots walking around any time soon.

 

Misconceptions about AI

What are some of the most common misconceptions about the technology?

The big misconception is that technologists are often too optimistic about progress in the near term and too blinded by the speed of progress later on. We are still in the near term on AI, so there is lots of optimism. But there is much to be worked out in terms of how to make the technology work for us. Once we do that, the optimism will be justified. It is just likely to be a few years later than people expect.

 

What is prediction? And, as its cost drops, what should we expect?

Put simply, prediction is when you take the data you have to generate information you do not have — e.g., past weather observations tell you about the weather tomorrow. When the cost of prediction drops, that means (a) our data is more valuable as it can create more useful information and (b) that we have more useful information and so can make better decisions.

 

“The development of full artificial intelligence could spell the end of the human race.” -Stephen Hawking

 

Decision-Making Will Change

Warning: Your Job is At Risk

Rethinking Excellence in the Smart Machine Age

 

Artificial intelligence will change everything. It’s coming. In some areas, it has already arrived.

Take Amazon. Its new grocery store has no cashiers and no baggers.

How about water meter readers? Just yesterday someone appeared at our door explaining that those days are over for our neighborhood.

And it’s not only these jobs that are changing. Millions of jobs will be affected from manufacturing to services.

Machines have access to more data than we do. They can analyze it faster than we can.

 

“We can be humble and live a good life with the aid of the machines or we can be arrogant and die.” -Norbert Wiener

 

Edward D. Hess is a professor of business administration at the University of Virginia Darden School of Business. In addition to fifteen years in academia, he also spent twenty years as a business executive. His research is in high performance in the midst of change.

He argues that we need to change our definition of smart. We need a new smart. We need to be good at what machines can’t do well. His new book, co-authored with Katherine Ludwig, is Humility is the New Smart: Rethinking Human Excellence in the Smart Machine Age.

I recently spoke with him about the changes ahead.

 

“A good listener is totally focused on the speaker with an open mind.” -Hess, Ludwig

 

Millions of Jobs Will be Automated

What jobs will be automated?

Over the next decade or so, tens of millions of service and professional jobs will be automated along with more manufacturing jobs. Service jobs that are at risk include retail, fast-food, manual laborers and construction workers, truck drivers, accountants, administrative people, paralegals, customer service reps, and security guards. Increasingly, professional jobs will be automated reducing the number of professional workers needed in the fields of accounting, law, finance, consulting, marketing, strategy, management, journalism, medicine and architecture.  The Chief Economist of the Bank of England in November of 2015 predicted that over the next decade or two 80,000,000 jobs in the United States could be automated.

 

How to Prepare for the Smart Age