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Musings Report 2024-1 1-6-24 AI Boosts Productivity: Hype, Reality or Mirage?
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AI Boosts Productivity: Hype, Reality or Mirage?
The consensus that AI will dramatically boost productivity and thus global prosperity in the coming decades has many enthusiastic analysts and few skeptics. For example:
The Coming AI Economic Revolution: Can Artificial Intelligence Reverse the Productivity Slowdown? (James Manyika and Michael Spence)
"In June 2023, a study of the economic potential of generative artificial intelligence estimated that the technology could add more than $4 trillion dollars annually to the global economy. This would be on top of the $11 trillion that nongenerative AI and other forms of automation could contribute. These are enormous numbers: by comparison, the entire German economy—the world’s fourth largest—is worth about $4 trillion. According to the study, produced by the McKinsey Global Institute, this astonishing impact will come largely from gains in productivity.
At least in the near term, such exuberant projections will likely outstrip reality. Numerous technological, process-related, and organizational hurdles, as well as industry dynamics, stand in the way of an AI-driven global economy. But just because the transformation may not be immediate does not mean the eventual effect will be small.
By the beginning of the next decade, the shift to AI could become a leading driver of global prosperity. The prospective gains to the world economy derive from the rapid advances in AI—now further expanded by generative AI, or AI that can create new content, and its potential applications in just about every aspect of human and economic activity. If these innovations can be harnessed, AI could reverse the long-term declines in productivity growth that many advanced economies now face."
Dave Friedman offered up some caveats about projecting trends based "pseudo-quantitative" analysis and reasoning:
AI & productivity: the economic effects.
"What I quickly realized was that forecasting is more art than science. Sure, there are trends, and these trends can be extrapolated. You can extrapolate linearly or non-linearly. You can tart up your extrapolations with things like moving averages and other pseudo-quantitative reasoning, but at the end of the day, forecasts are only as good as their comparison to actual results.
One of the more common AI-related forecasts being bruited about is that AI will usher in an era of sustained higher economic productivity. Higher economic productivity is good! It would solve many of our fiscal issues. So let’s think a bit about what this means. We may well be a few years away from a period of much higher economic productivity, and the second-order effects of that could be fairly profound."
Here’s a report from Goldman Sachs, titled Generative AI could raise global GDP by 7%:
"Breakthroughs in generative artificial intelligence have the potential to bring about sweeping changes to the global economy, according to Goldman Sachs Research. As tools using advances in natural language processing work their way into businesses and society, they could drive a 7% (or almost $7 trillion) increase in global GDP and lift productivity growth by 1.5 percentage points over a 10-year period.
“Despite significant uncertainty around the potential for generative AI, its ability to generate content that is indistinguishable from human-created output and to break down communication barriers between humans and machines reflects a major advancement with potentially large macroeconomic effects,” Goldman Sachs economists Joseph Briggs and Devesh Kodnani write in a report."
So Goldman has to tout the economic benefits of AI: there will be a boon in wealth creation over the coming decade so you (and your board) had better get on board with the AI hype train! And, of course, let our bankers lead the way.
Yes, I’m being cynical here. There is something to the claim that AI increases productivity. Just look at all the programmers who tell us how amazing Github Copilot is."
The consensus that AI will boost productivity is based on extrapolations of superficial abstractions that boil down to belief statements: AI will necessarily boost productivity because that's what it does, boost productivity. Well, yes, but exactly how, and by how much? How do we measure productivity? And what about the potential for AI to reduce productivity?
Let's take some real-world examples.
Large Language Model (LLM) AI, a.k.a. generative AI, that can create new content based on natural language processing machine learning, is ultimately a natural language interface with rather impressive limits on accuracy and what we might call self-awareness. That said, it's good at specific tasks such as composing a news report on a sports event, or generating a text summary of a podcast.
But in a world already awash in essentially free content, precisely how much productivity can be gained by generating limitless quantities of copycat content? If the value proposition is attracting and keeping the attention of human consumers to collect data for target marketing, the super-abundance of content was never the value proposition, and therefore boosting the generation of more content to near-infinity isn't going to boost productivity in real-world terms.
Just creating near-infinite quantities of copycat content doesn't translate into producing more valuable output and productivity of either human workers or capital.
(Recall that LLMs are not free; they're voracious consumers of computer processing and memory, and electricity.)
As someone who creates, processes and works with content, it seems to me that generating an over-abundance of copycat content, in all media, will actually make the task of curating this near-infinity of near-zero-value content much more difficult. The enthusiasts will quickly say that AI will be tasked with curating the over-abundance of near-zero-value content, which is a massive drag on productivity created by AI itself.
This strikes me as an example of a metastasizing cancer being tasked with curing metastasizing cancer, or a diseased dragon eating its own tail. If we measure "productivity" as increasing sales and profits with less labor and capital, where is the productivity gain in overwhelming all media with a near-infinite spew of copycat content, the only purpose of which is to attract and lock in the attention of human consumers?
Another much-touted AI-based source of productivity gains is in customer service. I just spent--or shall we be honest and say "I wasted"-- significant time navigating AI chatbots and a smartphone app / AI assistant. I won't name the corporate entity, but it's one of the nation's handful of quasi-monopoly Internet-telecom providers.
The AI chatbot is SMS-based, and it works by offering the consumer-customer limited menus of options, often only two but occasionally up to four. If your issue isn't covered by the options, then you must begin a wild-goose chase in which you select whatever option you hope might be a way station to resolving the actual issue.
As for the iPhone app, it certainly excels at looking useful, and in pitching an endless scroll of upselling, but in actually identifying the problem and resolving it, the app was a complete failure, misleading, inaccurate and frustratingly limited--in a word, dumb, the opposite of useful and intelligent.
The situation is I'm responsible for a rarely used Internet-Wi-Fi "gateway" (what we used to call a modem and router), that's 2,500 miles from my home. So all management of the account and hardware/software must be done remotely. Theoretically, AI is tailor-made for remote, automated management.
But then the gateway wasn't working, and the problem required an actual human technician to visit the site, as the problem could have been a cut cable, a loose connection, the modem, or any number of other causes. The technician arrives, our friend meets them, and the tech installs a new gateway: problem solved, and the Wi-Fi works great.
Until the next day, when the Wi-Fi stops working. Turning to the AI app, I test the system, and the app reports that everything is working perfectly: the network connection and the Wi-Fi to our friend's phone and laptop are all strong. Only the Wi-Fi doesn't work, and power-cycling the gateway and restarting Wi-Fi on the phone and laptop accomplishes nothing.
The chatbot suddenly starts generating a series of "gateway verification codes" which don't restore Wi-Fi, they only direct our friend to download the corporate iPhone app, which after she does so, fixes nothing and offers no solutions.
After wasting a frustratingly large amount of time fiddling with the app on my end, I give up and ask to get a callback from the chatbot. A polite rep (based in the Philippines) calls me back, and after hearing my description of the issue, he reports that he sees the source of the problem right away: an update to the gateway's software did not load properly, and so no amount of restarting would get it to work properly.
One would think the AI app's troubleshooting routine would include a check on whether the gateway's software was actually functioning or not, but you would be wrong. The app reported that everything was nominal even when it didn't work.
While he re-installed the software, I heard an infant in the background and chatted with the rep about his working from home--a real boon as it eliminated his arduous commute and enabled him to help with the family's young child.
He said we'd have to restart the gateway and then it should work.
For good measure, I changed the Wi-Fi access password, and to my great relief, our friend once again had Wi-Fi.
Let's consider the productivity gains / losses. All the enthusiast analysts only consider the corporate side's measures of productivity: did more profitable work get done by employees and capital / computers, etc.?
Nobody seems to be looking at the consumer-customer side of the productivity equation, where the AI chatbot and app were nothing more than hugely unproductive, misleading, inaccurate time-sinks that wasted our valuable time and energy.
If we add up the staggering losses of productivity on the customer-consumer side, the entire "AI boosts productivity" claim falls apart: AI reduces systemic productivity once we include the wasted time and energy of the customers-consumers.
The only real boost to productivity was generated by allowing the customer service representative to work from home, saving him up to 4 hours a day in commuting time (the traffic in and around Manila is horrendous), and also boosting his productivity as a parent because he doesn't need to hire someone to watch his infant when he and his wife are working.
AI had essentially no role in his resolving the issue, nor in enabling the massive productivity gains of his being able to work from home. These gains were enabled by very basic technology--a fast Internet connection--and social changes that have led corporations to honor employee requests to work from home.
In the middle of all this I texted our friend "Needless to say I hate XYZ"--the corporation imposing this stupidity on us in the name of "AI-driven customer service." She responded that it certainly qualified as "hateable."
From the perspective of profit-maximizing, the real profit potential in AI-driven customer-service is to further the immiseration of the customer experience so customers will be desperate enough to pay extra for "premium customer service" which turns out to be--oh, the irony--the opportunity to speak with a human representative who might actually be able to resolve problems.
The other corporate goal in AI chatbots and AI-driven customer-service is to upsell customers on additional (highly profitable) services.
So after wasting hours with stupid AI apps that report everything that's broken / non-functioning is working fine, was I in the mood to switch my mobile phone service to XYZ corporation? No.
As for AI boosting productivity: measured by what, and to who's benefit? If it's measured by corporate profits, then the AI-paved pathway is to further the crapification / immiseration of goods and services, forcing customers into higher-profit "premium services," and in upselling higher-profit add-ons.
Since corporate ownership and therefore profits are concentrated in the top 10%, who will benefit from AI boosting productivity by the usual measures? Who benefits from the immiseration / upselling? Certainly not customers-consumers or the economy / public at large.
Enthusiasts will claim all these failures will be resolved by future advances. But this overlooks the source of corporate profits: reducing the quality of goods and services to force consumers to replace defective goods and pay extra for services that were once standard.
AI doesn't just affect productivity, positively and negatively: it also fuels asymmetries of wealth and power driven by the perverse incentives that dominate the global economy.
Highlights of the Blog
What the Fed Accomplished: Distorted the Economy, Enriched the Rich and Crushed the Middle Class 1/4/24
2023: The Fed Declares Victory; 2024: The Year of Hubris and Nemesis 1/2/24
Best Thing That Happened To Me This Week
I'm going bananas! Oops, I mean, I'm growing bananas...
From Left Field
NOTE TO NEW READERS: This list is not comprised of articles I agree with or that I judge to be correct or of the highest quality. It is representative of the content I find interesting as reflections of the current zeitgeist. The list is intended to be perused with an open, critical, occasionally amused mind.
Many links are behind paywalls. Most paywalled sites allow a few free articles per month if you register. It's the New Normal.
6 Reasons the Middle Class Can’t Afford To Dine Out Anymore -- when will this show up in employment and GDP?....
Microsoft’s AI Chatbot Replies to Election Questions With Conspiracies, Fake Scandals, and Lies-- AI boosts something, but perhaps not productivity or accuracy....
McDonald's $18 Big Mac Meal Goes Viral Again As Fast Food Minimum Wage Hike To $20 Triggers Fears Of Skyrocketing Prices And Layoffs, Leaving People Questioning: 'Maybe This Went Up Way Too Fast' -- is it still called a "value meal" at $18?
Seagrass resurgence offers ray of hope for Florida’s hard-hit manatees
Everyone is on their phones. But is it really phone addiction we’re experiencing? -- a very important question....
Boeing’s Mid-Air Emergency Is Very Similar to 2011 Blowout
Federal officials order grounding of Boeing 737 Max 9 jetliners after a plane suffers a blowout
Boeing wants FAA to exempt MAX 7 from safety rules to get it in the air--who is deciding what's safe? What does erring on the side of caution mean nowadays?
Biden Administration Quietly Extended the Unnecessary COVID Bailout for States and Local Governments
US Takes Aim at Toxic Pork After Decades on the Market
What Spotify’s Layoffs Tell Us About the Future of Work
My Unraveling I had my health. I had a job. And then, abruptly, I didn’t.
"If you do not expect the unexpected you will not find it, for it is not to be reached by search or trail." Heraclitus
Thanks for reading--
charles |
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