AI's Impact On Our Everyday Lives

By Brad Heidemann

People have been asking me about what the impact of AI on our everyday lives will be. Depending on the audience I have a few perspectives that I share, and I thought I would give you a brief overview of my thinking about its ties to economics.

Capitalism is based on a risk reward relationship; over time the allocation and expense of capital is moderated by the amount of risk associated with a particular investment. For example, when you buy a home, you expect that home to go up in value and have the benefit of a place to live. For this purchase the bank lends you money over thirty years at a fixed interest rate. The assumption that everyone makes is that eventually you’ll pay off your home, you will be the beneficiary, the home will have increased in value, and the bank will have earned revenue/profit money on the interest accrued. What happens when AI and Machine learning tools become so effective at predicting outcomes, that the risk reward equation collapses to zero? When you buy your home or are thinking about buying a home in a particular city or neighborhood, you’ll know almost to the penny what the value of your home will be in 30 years.

If you follow this idea and extend it to major corporations, strategic decisions around inventory, supply chain expansion, labor expense and capital allocation will be based on AI solutions that will have known outcomes. The CEOs and Board of Directors will compete for a few years based on quality of their AI implementations but eventually we will see massive consolidation in the global 5000. I have a friend who is a CEO at a major Wall Street firm who predicts that eventually there will only be 100 companies. A concentration of capital and resources will be required to create profit in an AI driven world because the risk reward relationship is going to be fixed before the investment is made. I am not saying the stock market will go away in the next few years but eventually it just won’t make sense anymore.   

 AI will increase productivity and our GDP for the forecastable future, however the increases in productivity cannot extend indefinitely. Eventually there will simply be less work for humans to do. Our work weeks will become 32-hour weeks, then 24-hour weeks and continue to wane, not to zero, but the decline will be precipitous in some classes of jobs and less so in others. Knowledge workers will see most of their work automated relatively quickly, they will go the way of travel agents. If you’re a plumber you’re still going to have long weeks. With the profit windfalls, increased productivity and GDP, there will need to be a universal income for all citizens. This won’t be a substitute for having a high value job or pursuing your career, it just means that there will be a minimum economic standard for all. Companies will still need bright minded, thoughtful problem solvers and innovators but many of the white-collar jobs will be eliminated, no differently than when machines began to take over manufacturing.

 I liken this to what happened with the Mayans when they began to cultivate corn. They were able to produce enough calories to expand and grow their population.  With this abundance of available calories, less people were required to hunt and work on the farms. This sponsored the growth of artists, mathematicians, astronomers, a bureaucratic class, engineers, builders, and priests, dramatically reshaping the Mayan civilization. Our society will change in the same way, we will have more time to pursue art, culture, philosophy, innovation, and personal relationships.

There was a time when owning a castle, taxing trade routes and serfdom was the dominate economic model. If we were a nobleperson or a farmer, it would have been hard to conceive of capitalism and how it would change society, but it did. Ironically, now we go visit castles on vacation. Change is inevitable and necessary for our civilization. AI will not change the human condition or our fundamental natures, it’s just going to give us more time. What we do with that time as individuals and as a culture will be largely predicated on our ambition and intelligence.

I see a very bright future for mankind. To quote the band The Verve … “Cause it’s a bittersweet symphony, that’s life. Trying to make ends meet, you’re a slave to money then you die.”  Maybe just maybe, that refrain will go the way of castles and as Lincoln said we will have time to pursue our “better angels”.