Artificial intelligence is the ability of computer systems to perform tasks that normally require human intelligence, and the hype has created what JPMorgan’s Jamie Dimon calls an arms race with an uncertain ending – but worth joining.
Around 26 years ago all the talk was about Y2K and how the world’s computer systems would trip when the new century began, and with massive ramifications. They didn’t.
Daily business headlines centre on AI as being the arbiter of which company will succeed based on its adoption of the revolution and the saviour of the productivity-short Australian economy.
Productivity Commission chief Danielle Wood is one of many spruiking AI’s benefits while placating fears it will result in massive job losses.
In short, AI will cause significant job losses but also create jobs in other areas, which underlines the point – it is not AI that helps productivity but how it is used which counts.
Henry Ford last century revolutionised car manufacturing by using a moving production line and standard parts to make cars cheaper.
AI these days, it seems, is the answer to everything. Victorian Treasurer Jaclyn Symes says it is the way to cut $3.3bn of her state’s debt and federal Treasurer Jim Chalmers figures it will help revive the Australian economy.
Maybe, but question is at what cost and when?
At least the AI spruikers have answered one of the big issues which is what, if any regulation, is necessary.
Regulation should not impede innovation but transparency, like mother’s milk, is good so when AI is being used it should be disclosed, and as computers are so good at sorting through data they can be applied internally to document just where the data comes from and what processes are used.
That way we can compensate the owners of the data and, at the very least, just know where this stuff is coming from.
AI supporter and academic Joshua Gans says it is being used by myriad companies enjoying the real-world benefits without the hype.
In a recent note he said Apple was using AI for, among many purposes, live language translations, call screening, call assistance which calls you back when you are off hold, and contextually aware Apple watches.
But the fact it doesn’t hype the input is marked down as a negative by investors.
Dutifully, corporate bosses like Commonwealth Bank’s Matt Comyn, NAB’s Andy Irvine and Telstra’s Vicki Brady, returned from the May Microsoft conference in the US regaling the market with inside news about how AI would change everything.
Their wonderment was also happily transcribed almost unquestioned in the media.
When you ask when we all see the benefits or the impacts, the pat response is it will take two or three years – which luckily for the bosses and the politicians who parrot the reports takes it outside the terms of the wide-eyed incumbents.
Microsoft boss Satya Nadella is a super-smart salesman but just maybe members of his audience could have suspended reality for a second to understand they were at a sales conference for a company which last year spent $US13bn for 49 per cent of OpenAI.
It was not about to talk down its potential.
When you make the pilgrimage to Chateau Petrus in Bordeaux wine maker Jean-Claude Berrouet is not going to tell you his merlot is rubbish.
Having also realised the revolution dates back to 1956 is not to dismiss its impact today or its potential benefits or its costs.
A recent book, The AI Con by Emily Bender and Alex Hanna, describes its aim as “how to fight big tech’s hype and create the future we want”.
Big tech is one issue when you consider the Google spends an estimated $US12bn a quarter on AI.
Who stands to benefit?
Oracle, SoftBank and the Microsoft-controlled OpenAI recently formed a $US500bn data centre joint venture and Meta is spending $US14bn buying Scale AI, a company which labels data to make it more user friendly.
Big tech is getting bigger, but relax; the federal government has consulted widely on the ACCC’s preferred tech platform regulation. It agrees with the ACCC but hasn’t got around to implementing it over three years after accepting the recommendations.
That’s not exactly productive government.
Technology does increase competition as shown by the increase in chatbot-delivered searches and Google now says it has changed from being a search engine to an answer-led engine.
Unsaid is just where it gets those answers.
Nuclear energy proponents note Google et al want nuclear plants built to help power the goliath’s energy-hungry data centres.
Another way of looking at it is maybe too much power is not cost effective or climate friendly, which highlights another cost-benefit issue.
Big tech platforms are hoovering up every bit of data they can to lead the AI revolution, based on extracting value from other people’s creative work, personal data and labour, and replacing them with artificial services.
The big tech platforms are getting bigger but AI can also help small companies, as noted recently by Airwallex founder Lucy Liu at the Melbourne Uni economics dinner.
After NAB’s Andy Irvine regaled how his bank uses AI she asked him how many people he employed (38,000) and pointed out that her staff of 1700 could do all the same things.
AI amplifies benefits
Agentic AI in which machines make decisions and perform tasks without direct human intervention is the latest wunderkind, if you are happy with unaccountable machines setting the agenda.
Intelligence is defined as the ability to reason, plan, solve problems, think abstractly, learn from experience and learn quickly.
AI has the last two items covered in spades but not yet the first four.
A machine has also yet to learn to perceive or feel things.
Question also if we want unaccountable machines to make management decisions.
Given the present proponents are sometimes yet to show how AI has helped the business, the impact on jobs is also unclear.
Two years ago in a report, Goldman Sachs declared 25 per cent of all jobs could be replaced by AI and two thirds of all jobs would be affected in some way.
This was wound back somewhat last year, and the point is we don’t yet know, but hope AI does not just equal job losses – and in fact if used well increases workers in other areas.
Irvine argues that bank jobs will go but frontline sales staff will increase, which suggests AI will boost NAB’s returns without slashing jobs.
CBA technology boss Terri Sutherland says AI can help on 55 million decisions now made by the bank and would benefit both staff and customers.
Just how and when remains to be seen but, to be fair, digital technology has clearly made banks more user friendly without hitting bank charges.
The service sector accounts for 80 per cent of productivity and 90 per cent of jobs so it is where the change will happen and hopefully benefits ensue.
The Productivity Commission has estimated generative AI could add up to $115bn in productivity gains by 2030 or 5 per cent of GDP.
More productive growth would be great the unknown question is just who gains the benefits, workers, customers or big tech and at what cost.
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AI is a marketing term which has created such hype that the big question is whether reality will match expectations for what is billed as a once-in-a-generation technology shift.