N

o company in the world arouses the fear among competitors that Amazon does when it enters a market or a line of business. From a humble beginning when its founder Jeff Bezos raised US$1 million in 1995, the company today is worth over $700 billion.

Along the way it has successfully disrupted almost every sphere of business it entered. It’s most prominent, if understated, impact has been the manner in which it allowed start-ups to dump the expensive server racks, which were cost prohibitive and move toward cloud services wherein costs were variable based on usage. That allowed start-ups to work on low budgets and led to the revolution that redefined Silicon Valley.

Its big gamble for the coming decade is undoubtedly in Artificial Intelligence (AI) — basically intelligence displayed by machines with little or no human intervention. (I’ll leave concepts like machine learning, deep learning out of this for the sake of simplicity) Think Jarvis in the blockbuster Iron Man.

No major technology company in the world is underestimating the scope of AI. Google’s CEO has labeled it as more important than electricity or fire. Elon Musk of Tesla sees it as so important and life-changing that he wants it to be regulated before machines get more powerful than humans.

Given the focus by all the giants, it seems inconceivable that any strong vested interest exists to block the risk of AI. No one seems to be constrained for funds as well.

The most valuable AI firm today is SenseTime from China which has a powerful facial recognition tool and offers that software to city police and administration for nabbing criminals.

Crime isn’t the same again when cameras are everywhere and the government has data on each and every citizen with SenseTime identifying every citizen at real-time.

While the word “artificial intelligence” was coined in 1956, it is only in the last decade where substantial progress has been made in this.

Two factors have driven this: supercomputers with their increased computing ability and the emergence of big data through humongous amounts of information sourced from social networking and e-commerce platforms.

Autonomous cars and staff-less grocery stores (AmazonGo) are a much highlighted example of AI but there are several others that are entering the mainstream.

The early examples of success for business include retail wherein a German retailer Otto has an AI system that predicts the goods that will be sold quickly with such accuracy that Otto permits it to automatically purchase items from third-party brands with no human intervention.

In Japan, an AI robot has been appointed Creative Director in an advertising agency. Deloitte’s Innovation report highlights companies who use algorithms to replicate the taste and texture of animal meat with plants, AI glasses that help autistic children read facial expressions, software to turn spreadsheets into personalized reports, predicting diseases and weather patterns etc.

China and the United States are leading the way. Within the two, China is currently ahead of the US due to the abundance of citizen data being available that allows AI to be optimally utilized. Given the free flow of technology and globalization, companies in these two geographies will set the platform for AI to be adopted in other geographies.

The key question is — how will it change the world? In terms of productivity, the impact can be vast. AI has the potential to even enhance productivity by reducing the fallout of factors like climate change and human healthcare through its predictive capabilities in identifying a catastrophe or disease.

In 2021, AI augmentation will generate $2.9 trillion (higher than the GDP of India) in business value and recover 6.2 billion hours of worker productivity according to research firm Gartner. But what about the jobs?

Given its capacity and consistency, it is foolhardy to believe that humans will not be threatened by machines doing their job.

If outsourcing at the start of the millennium meant transfer of jobs from developed markets to developing markets, this is Outsourcing 2.0.

In this, jobs will be transferred — from humans in a country to a machine, most likely in the same geography. Why take the effort to move a machine to a different location and incur the administrative, regulatory and compliance costs associated with it?

This doesn’t mean doomsday for employment in the near-term. For starters, there is yet no evidence of a business case with most AI solutions on a return on investment basis. McKinsey in its survey results reports that of the 160 use cases, AI was deployed commercially in only 12 percent of the cases.

Secondly, adoption outside of the technology sector is at a very nascent stage. That can change but for that AI technology needs to become full-proof for getting into the mainstream. Example: Only when autonomous cars are free of incidents will consumption of such vehicles commence.

Thirdly — AI needs access to sufficient and structured data which only the large companies are likely to have. Once benefits of AI are visible, only then will these three factors get altered.

Fourthly and most importantly, every new industry disrupts and also creates new jobs. Gartner says AI will create more jobs than it will eliminate by 2020. It expects 10 percent of IT hires in customer service will mostly be writing scripts for robot interactions.

Chatbots perform best when supported by well-scripted decision trees written by staff. Such a job does not exist today.

Additionally R&D jobs have made a comeback with McKinsey estimating that tech giants spent $20-30 billion on AI in 2016 with 90 percent of it allocated to R&D.

The challenge for governments and society is to acknowledge that several skills will get redundant sooner than earlier and newer skills need to be learnt regularly. This will generate enormous opportunities for training and skill development firms globally.

Amazon has killed many industries with his aggression. Now it has the entire tech industry looking to do the same with AI. The world must get ready to handle this revolution.
______________________________

The writer is vice president – strategy at Cogencis Information Services Ltd., Mumbai.