How AI Turbocharged the Economy (For Now)

How AI Turbocharged the Economy (For Now)

Introduction

Hi, I'm Taylor Owen from the Globe and Mail. This is "Machines Like Us."

The AI Boom

If you listened to the last two interviews I did on the show, you might have noticed a significant amount of skepticism around AI. However, the stock market seems to be missing that uncertainty. Since the launch of ChatGPT in late 2022, Nvidia, a chip company heavily involved in AI systems, has seen its stock soar by 700%, briefly making it the most valuable company in the world. The S&P 500 has also hit an all-time high this year, in no small part because of AI.

Economic Impact

A new report from Microsoft suggests that generative AI will add $ 187 billion to the Canadian economy over the next six years. As wild as these numbers seem, some researchers are even more optimistic. They project that our per capita economic growth rate could hit 30% by 2100, potentially making us 1,000 times richer in 25 years. It's hard to imagine what such a world would look like and how the average person would fit into it.

Expert Insight

To help elucidate these projections and whether they will actually come to fruition, I spoke with Rana Foroohar, a global business columnist and Associate Editor at the Financial Times. She is one of the best people to help us understand big shifts in the global economy.

The Nature of Projections

Foroohar describes the bullish projections around AI as somewhat naive. She emphasizes that while the technology is promising, it's speculative to predict its economic impact accurately. Most of these projections come from the companies developing AI technologies, and there’s little rigorous validation of these business models.

Potential Productivity Gains

So what are these projections based on? Generative AI is touted for its potential to replace labor, enhance productivity, and tackle tasks that humans find laborious or too complex. However, these claims often overlook significant factors like regulation, energy consumption, and potential bottlenecks.

The Economic Models

Economists often use outdated models that equate robots with humans, particularly in the context of productivity. Foroohar and I discussed how these models might fail to capture the nuanced relationship between technology, labor, and economic well-being. For instance, economic models frequently see humans as cost inputs, a view that might stretch inequality and have political implications.

Labor and Well-Being

Foroohar refers to Darren Acemoglu and Simon Johnson's "Power and Progress" to highlight that new technology has historically harmed labor when it's not accompanied by measures like retraining. She notes that AI could exacerbate this issue.

Who Gets Hit?

Disruptions won't just affect older, white male workers as industrial shifts have in the past. Women, minorities, and even higher-level professionals could see significant job losses due to AI. She uses an example from her own workplace, the Financial Times, where OpenAI is training on their content, raising concerns about the future of journalism.

Bubble and Market Correction

Foroohar warns that the current AI-driven market boom might be unsustainable. Comparing it to the dot-com bubble, she suggests that a market correction is inevitable, quoting historical precedents.

Geopolitical Risks

Geopolitical tensions, particularly US-China tech decoupling, add another layer of complexity. Regulation and natural resource bottlenecks like energy consumption could also hinder AI's promised productivity gains.

Political Implications

Reflecting on how deindustrialization led to political polarizations like the rise of Trump and Bernie Sanders, Foroohar speculates that AI could lead to even greater disruptions. Labor unions and other stakeholders will have to address these challenges.

Conclusion: Hope for Creativity

Foroohar is skeptical yet hopeful. She wonders if AI will bring something truly new and delightful, something beyond faster and cheaper iterations of existing processes. She calls for a more transparent narrative to better understand AI's capabilities and risks.

Credits

"Machines Like Us" is produced by Paradigms in collaboration with the Globe and Mail. The show is produced by Mitchell Stewart with associate producer SEoa Kim and executive producers Kathleen Goldhar and James Mward. Our theme song is by Chris Kelly. Special thanks to Matt Frer and the team at the Globe in Mail.

If you enjoyed this interview, please subscribe, rate, or leave a comment to help us reach a broader audience.

Keywords

• AI Boom
• Stock Market
• Nvidia
• Economic Impact
• Generative AI
• Microsoft Report
• Economic Projections
• Rana Foroohar
• Financial Times
• Productivity Gains
• Economic Models
• Labor and Well-Being
• Job Displacement
• Market Correction
• Geopolitical Risks
• Political Implications
• Transparency

FAQ

1. What has driven Nvidia's stock price up by 700%?

   • The launch of ChatGPT in late 2022 has significantly boosted Nvidia's stock price due to its involvement in AI systems.

2. How much is generative AI projected to add to the Canadian economy?

   • A new report from Microsoft suggests that generative AI will add $ 187 billion to the Canadian economy over the next six years.

3. What are some potential limitations to AI's economic impact?

   • Potential bottlenecks include regulatory measures, energy consumption, and natural resource constraints.

4. Who will be most affected by AI-driven job displacement?

   • Women, minorities, and even higher-level professionals are likely to be the most affected by AI-driven job displacement.

5. What are the risks of the current AI-driven market boom?

   • The current AI-driven market boom could lead to a market correction, similar to the dot-com bubble, causing significant economic disruption.

6. What political implications could arise from AI-induced job losses?

   • AI-induced job losses could exacerbate political polarization and lead to the rise of far-right movements and increased nationalism.

7. How can we ensure AI benefits society as a whole?

   • Ensuring AI benefits society involves asking critical questions, promoting transparency, and ensuring that labor protections are in place. Labor unions are expected to play a significant role in this conversation.