The Economic Impact of Generative AI

[The image above is generated by Midjourney. The prompt I used to create the image is listed at the end of this email.]

In the early 1800s, the United States was primarily agrarian, with most of the population engaged in farming and related activities. However, the country underwent a significant transformation as the century progressed, moving from an agricultural to an industrial society. This shift, while disruptive, brought about immense benefits, creating new industries, jobs, and economic opportunities. Today, as we stand on the brink of another transformative era - the age of Artificial Intelligence (AI) - it's worth looking back at this historical shift for insights and lessons.

The transition from an agricultural to an industrial society was challenging. Many feared the loss of traditional farming jobs and their accustomed lifestyle. However, the advent of new technologies and industries created a wealth of new jobs that were previously unimaginable. The manufacturing, transportation, and service sectors expanded, leading to an overall increase in economic prosperity and living standards.

Fast forward to today, and we find ourselves in a similar situation with the advent of AI. Just as the steam engine and the cotton gin revolutionized the 19th-century economy, AI and machine learning are set to redefine the 21st-century job market. There are concerns about job displacement due to automation, and these fears are not unfounded. However, history has shown us that while technology can render specific jobs obsolete, it also creates new ones in its wake.

When ChatGPT was launched, I quickly realized that the world would change dramatically. I was looking to jump into the next stage of my career, and I thought I might take my experience to a large company where my employment was pretty stable. As I went through that process, I realized that taking a job the last 25 years had prepared me for was probably a mistake. Seems counterintuitive, huh?

There’s a shelf-life for many of those careers should we rely on our laurels and not gain new expertise. With recent advances in AI, I feel like this is particularly true. It makes one of my favorite quotes.

Drucker is often considered the father of modern management due to his extensive contributions to the field. Drucker's philosophy and thoughts on management focused on people and human relationships. He believed that employees are assets and not liabilities. He taught that knowledgeable workers are the essential ingredients of the modern economy. Central to this philosophy is the view that people are an organization's most valuable resource and that a manager's job is preparing and freeing people to perform. This is not the same narrative we are hearing, as many people fear that artificial intelligence may take over their jobs. However, I believe our most talented people leveraging this technology will do amazing things, like cure cancer or slow climate change.

This month, McKinsey and Company released a report, The Economic Potential of Generative AI: The next productivity frontier, with some astounding predictions.

• Generative AI’s impact on productivity could add trillions of dollars to the global economy.McKinsey’s latest research estimates that generative AI could add the equivalent of $2.6 trillion to $4.4 trillion annually across the 63 use cases —by comparison, the United Kingdom’s entire GDP in 2021 was $3.1 trillion. This would increase the impact of all artificial intelligence by 15 to 40 percent. This estimate will roughly double if we include the effect of embedding generative AI into software currently used for tasks beyond those use cases.

• About 75 percent of the value that generative AI use cases could deliver falls across four areas: Customer operations, marketing and sales, software engineering, and R&D. Using generative AI in just a few functions could drive most of the technology’s impact across potential corporate use cases.

I agree with the findings; if you are a marketer, software developer, or R&D professional and aren’t leveraging AI, you will probably not be competitive in the employment market and probably much sooner than one might think. I also believe it’s not a death sentence but an opportunity for those willing to update their skills. That’s one of the reasons why I wrote my post on prompt engineering earlier this month. Adding these skills to your experience will set you up for success.

In reality, generative AI can substantially increase labor productivity across the economy, but that will require investments to support workers as they shift work activities or change jobs. If worker transitions and other risks can be managed, generative AI could contribute substantively to economic growth and provide immense benefits, not unlike the way the tractor, the cotton gin, and so many other technological advances have for our society.

Tip of the Week: Free Courses on AI

To my previous point about skills development in the 21st century, I think it behooves us all to learn as much as we can to ensure future employment and improve our prospects around that employment. Here are some free courses from outstanding institutions on how to do that. Artificial Intelligence in Marketing - In this course, developed at the Darden School of Business at the University of Virginia and delivered by Professor of Business Administration Raj Venkatesan, you will explore an important frontier of digital transformation in marketing. You will examine three fundamental forces that enable AI in marketing strategies - Algorithms, Networks, and Data - and gain a deeper understanding of how businesses in various industries can get the most out of this exciting technology.

AI For Business Specialization - Learn the Fundamentals of AI and Machine Learning. Develop a deployment strategy for incorporating AI, ML, and Big Data into your organization that will take advantage of cutting-edge technologies from Penn’s Wharton Business School.

AI for Everyone - AI is not only for engineers. If you want your organization to improve at using AI, this is the course to take everyone- especially your non-technical colleagues- to take. Taught by Andrew Ng, a leading Standford researcher on AI and thought l artificial intelligence.

What I Read this Week

• The Economic Potential of Generative AI - McKinsey and Company

• Meta Wants Companies to Make Money Off Its Open-Source AI, in Challenge to GoogleWhat I Listened to this Week - The Information

• GPT-4 Outperforms Humans in Pitch Deck Effectiveness Among Investors and Business Owners - Clarify Capital

• The Falcon has landed in the Hugging Face ecosystem - Hugging Face

• OpenAI’s CEO Calls on China to Help Shape AI Safety Guidelines - Bloomberg

• Transforming Reddit Summarization With Claude 100k and GPT 16k - Better Programming, Sean Dearnaley

• The Law Is Coming for AI—But Maybe Not the Law You Think - The Information

• 5 Contrarian AI Theses For Early Stage Investors - , Investing In AI

What I Listened to this Week

AI Tools I am Evaluating

Perplexity AI - Perplexity gives instant answers and information on any topic with up-to-date sources. It's like having a superpower on your phone that allows you to search, discover, research, and learn faster.

Faraday.dev - Run open-source LLMs on your computer.Works offline. Zero configuration.

StoryLab - StoryLab.ai solves common problems marketers face, such as time constraints, inconsistency in quality, lack of collaboration, and difficulty in capturing attention.

QR Code AI Art Generator - Use the QR code image as the initial image and a control image, which allows you to generate QR Codes that blend in very naturally with your provided prompt—a very excellent way to merge your brand and a QR code into something aesthetically pleasing.

Midjourney Prompt for Newsletter Header Image

For every issue of the Artificially Intelligent Enterprise, I include the MIdjourney prompt I used to create this edition.