Tuesday's Talking Points
Proliferation of Artificial Intelligence Tools: Gains in Productivity imminent!
What’s the Point? (A Brief Summary)
Since the launch of ChatGPT, a tool based on a Large Language Model (LLM) by OpenAI around the end of 2022, the flurry in activity around Artificial Intelligence has accelerated exponentially. Globally, significant investments are being made across the system. India has also seen activity on this front, with multiple entities involved. While there are multiple applications already in place, emergent applications of this technology continue to surprise. The space is evolving at a rapid pace, and the risk of being outdated in no time is likely to be very high. At this juncture, the capabilities of the tools appear to be that of an assistant – and not an agent in itself. Therefore, it is likely that AI could lead to significant productivity gains, and lead to growth surprises in early adopters.
Source: Stanford Institute for Human-Centered Artificial Intelligence, Goldman Sachs Research, Niti Aayog
Long History of AI – Is this just another phase, or has the technology truly taken off?
The concept of AI has contributions made from scientists from over 70 years in the history. Multiple breakthroughs in the past have led to a bout of increased interest, which have been followed by periods of low activity and interest. In this latest episode too, we have seen a sharp increase in investments in activity in the past year. This wave of high AI interest could be more sustainable; given that it is evolving into a General Purpose Technology (read more below).
Source: Our World In Data
AI evolving as a General Purpose Technology
General Purpose Technologies (GPTs$) are technologies that have widespread and transformative effects on the economy and society. It is currently being theorized that Artificial Intelligence could mean the introduction of a General Purpose Technology. The evidence for this lies in its current applications across industries and functions – in healthcare (better diagnostics), mobility (autonomous driving), Agriculture (demand forecasting, Retail and Digital sales, Manufacturing, Energy, Education and skilling, financial services, legal services, among others.
$ Not to be confused with Generative Pre-trained Transformer, the technology behind ChatGPT.
General Purpose Technologies have led to significant productivity gains in the past
Factor productivity growth saw a sharp increase in different instances of introduction of GPTs – think of introduction of steam engines (which allowed industrialisation). The use of electricity and adoption of Information and Communication Technology have triggered large changes in the way we operate. They have also enabled us to produce more goods and services with lesser capital and labour requirements. The rise of connected equipment, smarter systems with the element of AI could lead to large increases in automation, and therefore higher productivity.
Indian Companies are also using Artificial intelligence
While the space is evolving, several companies have taken cognizance of capabilities of this technology, and are using it in various forms, such as to improve utilization of equipment, better demand forecasting, risk management, and servicing customers. While companies across sectors will see an impact, Indian IT companies in particular could also see large impact (both positive and negative), but writing anything in this regard could be very speculative.
Source: Bloomberg
Conclusion
Introduction of such transformative technology have largely led to the benefit of mankind. The pace and width of the evolution of this technology is quick and bordering on the unimaginable. Given the current state and direction of the technology, it is possible that AI brings about an improvement in productivity for humans, and should benefit India in terms of growth and quality of life. It is important for all parties involved, including policy makers and corporates to take a long term humanity point of view while steering this new technology.
Niti Aayog put out a document that focuses on ensuring #AIforAll, and reflects the governments key considerations. There are multiple considerations at stake – how do we ensure equitable distribution of benefits, capacity constraints such as chip manufacturing, energy requirements for creating and maintaining large models, environmental and climate related impact, and a very large range of ethical dilemmas. While Indian corporates are clearly aware of the concept and are in varying stages of their attempts to integrate, these could also lead to disruptions. These are very early times, and one needs to watch out for changes in this space.
Sources: Stanford Institute for Human-Centered Artificial Intelligence, Goldman Sachs Research, Niti Aayog, Bloomberg, and other publicly available information
About Tuesday’s Talking Points (TTP): TTP is an effort by HDFC AMC to guide key conversations in the Indian financial markets and investing ecosystem. We aspire to do this by providing relevant facts, along with our perspective on the issue at hand. If you have a topic that you would like to be featured here please write to us at [email protected]
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