{"id":1913,"date":"2019-08-28T03:05:35","date_gmt":"2019-08-28T03:05:35","guid":{"rendered":"http:\/\/kusuaks7\/?p=1518"},"modified":"2024-04-24T15:38:48","modified_gmt":"2024-04-24T15:38:48","slug":"is-artificial-intelligence-the-new-productivity-paradox","status":"publish","type":"post","link":"https:\/\/www.experfy.com\/blog\/ai-ml\/is-artificial-intelligence-the-new-productivity-paradox\/","title":{"rendered":"Is Artificial Intelligence The New Productivity Paradox?"},"content":{"rendered":"\t\t
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\n\t\t\t\t\t\t\t\t\tIn the 1970s and 80s, business investment in computer technology were increasing by more than 20% per year. Strangely though, productivity growth had decreased during the same period. Economists found this turn of events so strange that they called it the\u00a0productivity paradox<\/a>\u00a0to underline their confusion.\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t\nProductivity growth would take off in the late 1990s, but then mysteriously drop again during the mid-aughts. At each juncture, experts would debate whether digital technology produced real value or if it was all merely a mirage. The debate would continue even as industry after industry was disrupted.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t\nToday, that debate is over, but a new one is likely to begin over artificial intelligence. Much like in the early\u00a01970s, we have increasing investment in a new technology, diminished productivity growth and \u201cexperts\u201d predicting massive worker displacement . Yet now we have history and experience to guide us and can avoid making the same mistakes.\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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You Can\u2019t Manage (Or Evaluate) What You Can\u2019t Measure<\/u><\/strong><\/h3>\n<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThe productivity paradox dumbfounded economists because it violated a basic principle of how a free market economy is supposed to work. If profit seeking businesses continue to make substantial investments, you expect to see a return. Yet with IT investment in the 70s and 80s, firms continued to increase their investment with negligible measurable benefit.\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tA\u00a0paper<\/a>\u00a0by researchers at the University of Sheffield sheds some light on what happened. First, productivity measures were largely developed for an industrial economy, not an information economy. Second, the value of those investments, while substantial, were a small portion of total capital investment. Third, the aggregate productivity numbers didn\u2019t reflect differences in management performance.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tConsider a widget company in the 1970s that invested in IT to improve service so that it could ship out products in less time. That would improve its competitive position and increase customer satisfaction, but it wouldn\u2019t produce any more widgets. So, from an economic point of view, it wouldn\u2019t be a productive investment. Rival firms might then invest in similar systems to stay competitive but, again, widget production would stay flat.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tSo firms weren\u2019t investing in IT to increase productivity, but to stay competitive. Perhaps even more importantly, investment in digital technology in the 70s and 80s was focused on supporting existing business models. It wasn\u2019t until the late 90s that we began to see significant new business models being created.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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The Greatest Value Comes From New Business Models\u2014Not Cost Savings<\/u><\/strong><\/h3><\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThings began to change when firms began to see the possibilities to shift their approach. As Josh Sutton, CEO of\u00a0Agorai<\/a>, an AI marketplace, explained to me, \u00a0\u201cThe businesses that won in the digital age weren\u2019t necessarily the ones who implemented systems the best, but those who took a \u2018digital first\u2019 mindset to imagine completely new business models.\u201d\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tHe gives the example of the entertainment industry. Sure, digital technology revolutionized distribution, but merely putting your programming online is of limited value. The ones who are winning are\u00a0reimagining storytelling<\/a>\u00a0and optimizing the experience for binge watching. That\u2019s the real paradigm shift.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t\u201cOne of the things that digital technology did was to focus companies on their customers,\u201d Sutton continues. \u201cWhen switching costs are greatly reduced, you have to make sure your customers are being really well served. Because so much friction was taken out of the system, value shifted to who could create the best experience.\u201d\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tSo while many companies today are attempting to leverage AI to provide similar service more cheaply, the really smart players are exploring how AI can empower employees to provide a much better service or even to imagine something that never existed before. \u201cAI will make it possible to put powerful intelligence tools in the hands of consumers, so that businesses can become collaborators and trusted advisors, rather than mere service providers,\u201d Sutton says.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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It Takes An Ecosystem To Drive Impact<\/u><\/strong><\/h3><\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tAnother aspect of digital technology in the 1970s and 80s was that it was largely made up of standalone systems. You could buy, say, a mainframe from IBM to automate back office systems or, later, Macintoshes or a PCs with some basic software to sit on employees desks, but that did little more than automate basic clerical tasks.\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tHowever, value creation began to explode in the mid-90s when\u00a0the industry shifted from systems to ecosystems<\/a>. Open source software, such as Apache and Linux, helped democratize development. Application developers began offering industry and process specific software and a whole cadre of systems integrators arose to design integrated systems for their customers.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tWe can see a similar process unfolding today in AI, as the industry shifts from one-size-fits-all systems like IBM\u2019s Watson to a\u00a0modular ecosystem of firms<\/a>\u00a0that provide data, hardware, software and applications. As the quality and specificity of the tools continues to increase, we can expect the impact of AI to increase as well.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t\nIn 1987, Robert Solow quipped that, \u201c You can see the computer age everywhere but in the productivity statistics,\u201d and we\u2019re at a similar point today. AI permeates our phones, smart speakers in our homes and, increasingly, the systems we use at work. However, we\u2019ve yet to see a measurable economic impact from the technology. Much like in the 70s and 80s,\u00a0productivity growth remains depressed<\/a>. But the technology is still in its infancy.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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We\u2019re Just Getting Started<\/u><\/strong><\/h3><\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tOne of the most salient, but least discussed aspects of artificial intelligence is that it\u2019s not an inherently digital technology. Applications like voice recognition and machine vision are, in fact, inherently analog. The fact that we use digital technology to execute machine learning algorithms is actually often a bottleneck.\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tYet we can expect that to change over the next decade as new computing architectures, such as\u00a0quantum computers<\/a>\u00a0and\u00a0neuromorphic chips<\/a>, rise to the fore. As these more powerful technologies replace silicon chips computing in ones and zeroes,\u00a0value will shift from bits to atoms<\/a>\u00a0and artificial intelligence will be applied to the physical world.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t\u201cThe digital technology revolutionized business processes, so it shouldn\u2019t be a surprise that cognitive technologies are starting from the same place, but that\u2019s not where they will end up. The real potential is driving processes that we can\u2019t manage well today, such as in\u00a0synthetic biology<\/a>,\u00a0materials science<\/a>\u00a0and other things in the physical world,\u201d Agorai\u2019s Sutton told me.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tIn 1987, when Solow made his famous quip, there was no consumer Internet, no World Wide Web and no social media. Artificial intelligence was largely science fiction. We\u2019re at a similar point today, at the beginning of a new era. There\u2019s still so much we don\u2019t yet see, for the simple reason that so much has yet to happen.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

Today, a new debate is likely to begin over artificial intelligence. Much like in the early 1970s, we have increasing investment in a new technology, diminished productivity growth and “experts” predicting massive worker displacement. Yet now we have history and experience to guide us and can avoid making the same mistakes. Investment in digital technology in the 70s and 80s was focused on supporting existing business models. It wasn’t until the late 90s that we began to see significant new business models being created.<\/p>\n","protected":false},"author":622,"featured_media":3758,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[183],"tags":[97],"ppma_author":[3337],"class_list":["post-1913","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ai-ml","tag-artificial-intelligence"],"authors":[{"term_id":3337,"user_id":622,"is_guest":0,"slug":"greg-satell","display_name":"Greg Satell","avatar_url":"https:\/\/www.experfy.com\/blog\/wp-content\/uploads\/2020\/04\/medium_09100e21-0736-4ca7-ac55-7140c8c4d9d2-150x150.jpg","user_url":"https:\/\/www.gregsatell.com\/%20","last_name":"Satell","first_name":"Greg","job_title":"","description":"Greg Satell is an international keynote speaker, adviser and bestselling author of Cascades: How to Create a Movement that Drives Transformational Change. His previous effort, Mapping Innovation, was selected as one of the best business books of 2017. You can learn more about Greg on his website, GregSatell.com<\/a> and follow him on Twitter<\/a>.\u00a0\u00a0\u00a0 \u00a0"}],"_links":{"self":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/1913","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/users\/622"}],"replies":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/comments?post=1913"}],"version-history":[{"count":6,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/1913\/revisions"}],"predecessor-version":[{"id":36732,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/1913\/revisions\/36732"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/media\/3758"}],"wp:attachment":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/media?parent=1913"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/categories?post=1913"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/tags?post=1913"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/ppma_author?post=1913"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}