Artificial Intelligence and the Future of Productivity

For many of us, the phrase “Artificial Intelligence” brings to mind sci-fi films about robots that muddle the line between man and machine. If you think Artificial Intelligence (AI) belongs in the realm of science fiction, you might be surprised to find out you’re already using it. While AI is definitely science, it’s definitely not fiction; it’s real, it is already here, and we are seeing rapid improvements in various AI technologies.

What is Artificial Intelligence? What are the most recent developments? And, what are the implications to our economy?

Artificial intelligence is a computer system that is able to perform tasks that normally require human intelligence. One notable branch of AI is machine learning, or algorithms that are trained from examples and experience rather than hard-coded, pre-defined rules. A sub-set of machine learning is deep-learning, where the important features are not pre-defined by humans, but learned and created by the algorithm.

Recent advances in deep-learning have been boosting the AI field forward. If you have a smartphone, you probably have access to a Virtual Personal Assistant that can take verbal requests ranging from “Where’s the nearest gas station?” to “Read my new e-mail messages.”.

In addition to fulfilling basic requests, AI algorithms like these continually learn about its user, adapt to better understand what the user is saying, and eventually develop the ability to anticipate users’ needs and understand their preferences. Other consumer-facing AI includes: online customer support robots, music and movie recommendation services, news generation, and smart home devices.

While it is impressive that features not predefined by humans can be learned and created, this only scrapes the surface of AI’s potential economic utility. In healthcare, there is a huge potential for AI to improve medical diagnosis. For example, doctors and computer scientists are teaming to train computers to aid pathologists in differentiating cells that are cancerous from those that aren’t.

In the automotive industry, AI stands ready to take a leading role in shaping tomorrow’s industry with driverless technology. In energy, AI could adapt itself to power grids and allocate power according to power demand. In agriculture, farmers and ranchers are exploring using AI to monitor their farmland and cattle herds.

What are the economic implications of Artificial Intelligence? To be sure, we are a long ways away from the kind of AI that can replicate human intelligence, the type most often portrayed by Hollywood. While there have been limited potential breakthroughs, such as Google DeepMind’s AlphaGo system that became the first computer to beat a human professional at the board game Go, this type of AI has a long road ahead of it in terms of development.

A recent Goldman Sachs investment report concludes that AI is “a needle-moving technology for the global economy and a drive behind improving productivity and ending the period of stagnant productivity growth in the US.”

In our view, the potential significance of AI is not overstated. As AI continues to develop, we expect to see improvements in productivity, continued hardware investment to support better AI, and new companies that will drive innovation in the field.

As investment fiduciaries, we focus on the more immediately economically tangible areas of technology. Several of our investments involve companies developing or utilizing this technology. Whether advances in AI create a surge in the global economy or not, it is clear that it is something to be explored.