Daron Acemoglu, a distinguished professor at the Massachusetts Institute of Technology (MIT), has been vocal about his concerns regarding the escalating hype surrounding artificial intelligence (AI).
Despite acknowledging the potential of AI, Acemoglu warns of the economic and financial risks that may arise from the overzealous investment and tech stock rally currently being driven by this technology.
Acemoglu's skepticism stems from his belief that the expectations surrounding AI are inflated. He estimates that only a meager 5% of all jobs are likely to be significantly impacted by AI in the next decade. While this may be a relief for the workforce, it poses a significant risk for companies investing billions in AI, anticipating a productivity boom. "A lot of money is going to get wasted," Acemoglu cautions, adding, "You're not going to get an economic revolution out of that 5%."
According to American Military News, Acemoglu, an Institute Professor at MIT, has been a prominent figure in the academic world for years. His reputation extends beyond academia, thanks to his co-authored New York Times bestseller, "Why Nations Fail." His work in economics has consistently highlighted the impact of new technologies, including AI.
Proponents of AI argue that it will enable businesses to automate a significant portion of work tasks, leading to medical and scientific breakthroughs as the technology continues to evolve. Jensen Huang, CEO of Nvidia, a company synonymous with the AI boom, predicts that the increasing demand for AI services will necessitate up to $1 trillion in spending to upgrade data center equipment in the coming years.
However, skepticism is growing, partly due to the fact that AI investments have escalated costs much faster than revenue for companies like Microsoft and Amazon. Despite this, many investors are still willing to pay high premiums for stocks expected to benefit from the AI wave.
Acemoglu proposes three potential scenarios for the future of AI. The most benign scenario suggests a gradual cooling of the hype, with investments focusing on "modest" uses of the technology. The second scenario predicts a tech stock crash following a year or so of escalating frenzy, leading to widespread disillusionment with AI. The third, and most alarming scenario, envisions unchecked mania leading companies to eliminate numerous jobs and invest billions in AI without a clear plan, resulting in a scramble to rehire workers when the technology fails to deliver. Acemoglu believes a combination of the second and third scenarios is most likely, given the prevailing fear of missing out on the AI boom.
Recent figures underscore the extent of the spending frenzy. Four companies alone - Microsoft, Alphabet, Amazon, and Meta Platforms - invested over $50 billion in capital spending in the second quarter, with a significant portion allocated to AI.
Acemoglu acknowledges the impressive capabilities of today's large language models like OpenAI's ChatGPT. However, he argues that they cannot replace humans or significantly aid them in many jobs due to reliability issues and a lack of human-level wisdom or judgment. He asserts that AI is unlikely to automate many white-collar jobs or physical jobs like construction or janitorial work anytime soon. "You need highly reliable information or the ability of these models to faithfully implement certain steps that previously workers were doing," he explains, adding that while this is possible in a few areas with human supervision, it is not feasible in most cases.
Acemoglu's perspective serves as a sobering reality check amidst the current AI hype, reminding us of the importance of measured expectations and prudent investment strategies.
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