How close are we to seeing a major productivity boom due to AI and automation?
This, naturally, requires a forecast which is guesswork at best. The question is whether we are starting to see some green sprouts in this area.
Even with the rapid pace of AI advancement, the impact tends to take a while to be felt. The global economy is north of $150 trillion. Of course, all parts of the world do not move in lockstep. Economies such as the US and China could see a boost before everyone else.
This is a positive with regards to the overall numbers since these are the two largest economies.
Often discussed is the potential impact on labor. We have covered that so we will not look at that as a metric.
What I will focus upon is the US economy and what might be happening.
How close are we to seeing an impact from AI?
So far, I would say the overall numbers are minimal. Most of the economic benefit went to Nvidia, who is seeing a steady increase in its GPU sales. Outside of that, billions are being invested without much return.
Will this always be the case?
Many who believe this is nothing more than a bubble could have that conclusion. Personally, I believe there will be a ROI to these firms at some point. That is when things will really change.
The projections on the growth of the US economy for 2026 is over 5%. That is an enormous number, if hit, due to the fact we are talking about a $30 trillion economy. It is a number we have not seen in a long time.
We have to be clear: this is a projection. It will be another 11 months before we know.
If this is achieved, how much will be related to AI?
It could be a situation where other factors are in play. The political class and media will offer differing reasons for it. While they could be part of the story, my guess is massive productivity gains in a short period of time will be due to AI.
This is something that was brewing for a number of years. It is leading to some forecasts of growth rates that even dwarf my projected 30%.
According to Rafiki:
Anthropic CEO predicts possible 50% GDP growth from AI boom.
Dario predicting a 50% annual increase in GDP is a major jump from the 5% projected for the US. We have to keep in mind that he is talking about global GDP, hence more than $50 trillion growth each year.
As stated in the past, I feel that GDP is an obsolete metric. The reason for this is the fact that technology is deflationary.
If we look at the digitization process, we see how revenues in certain industries dropped. For example, the amount of recorded music sold each year is less than 40years ago. In spite of that, we have access to more music than ever before.
Now consider what things will look like as AI music generation takes over.
Digitization has taught us one thing: output increases significantly while costs drop. Look at the cost of sending an email as compared to a written letter. The difference is stark.
With AI, we are looking at units of cognition being created. In other words, this is "brainpower". Total up the cognitive output by humans then put an near unlimited cap on the AI capabilities. Even if there are areas it is lacking versus humans, we are seeing more compute going online each month. Couple this with better algorithms and faster processing and we see how the equation is changing completely.
This creates a massive feedback loop (or flywheel). From an economic standpoint, it is only a matter of time before we see this equating to dollars. The enterprise world is still trying to figure out how to monetize this. Nevertheless, once the code is broken, things will accelerate.
Automation is starting to enter the automotive industry. With the concept of robotaxis taking hold, this could be one of the first mass market, real world forms of automation we see. Another year could see this technology becoming the norm (although it will take years to fully penetrate the marketplace).
As these systems grow, they end up improving. This is the flywheel effect. Each day, more compute and data is added to the total AI system. It just keeps growing. This is then used to improve the system (or create new ones), that end up being used in a host of applications.
The economic impact is going to be huge. My conclusion is that we are starting to see some impact from AI in this area. From here, it will only get larger.
