Nearly four decades ago, when the personal computer boom was in full swing, a phenomenon known as the “productivity paradox” emerged.
It was a reference to how, despite companies’ huge investments in new technology, there was scant evidence of a corresponding gain in workers’ efficiency.
Today, the same paradox is appearing, but with generative artificial intelligence (AI). According to recent research from McKinsey & Co, nearly 8 in 10 companies have reported using generative AI, but just as many have reported “no significant bottom-line impact.”
AI technology has been racing ahead with chatbots such as ChatGPT, fueled by a high-stakes arms race among tech giants and super-rich start-ups and prompting an expectation that everything from back-office accounting to customer service will be revolutionised. But the payoff for businesses outside the tech sector is lagging behind.
That means that businesses will have to continue to invest billions to avoid falling behind — but it could be years before the technology delivers an economy-wide payoff, as companies gradually figure out what works best.
Call it the “gen AI paradox”, as McKinsey did in its research report. Investments in generative AI by businesses are expected to increase 94 per cent this year to $61.9 billion, according to IDC, a technology research firm.
But the percentage of companies abandoning most of their AI pilot projects soared to 42 per cent by the end of 2024, up from 17 per cent the previous year, according to a survey of more than 1,000 technology and business managers by S&P Global, a data and analytics firm.
Projects failed not only because of technical hurdles, but often because of “human factors” like employee and customer resistance or lack of skills, said an analyst at S&P Global.
Gartner, a research and advisory firm that charts technological “hype cycles”, predicts that AI is sliding toward a stage it calls “the trough of disillusionment”. The low point is expected next year, before the technology eventually becomes a proven productivity tool, said John-David Lovelock, the chief forecaster at Gartner.
That was the pattern with past technologies such as PCs and the internet — early exuberance, the hard slog of mastering a technology, followed by a transformation of industries.
The winners so far have been the suppliers of AI technology and advice. They include Microsoft, Amazon and Google, which offer AI software, while Nvidia is the runaway leader in AI chips. Executives at those companies have bragged about how AI is reshaping their own workforces, eliminating the need for some entry-level coding work and making other workers more efficient.
AI will eventually replace entire swaths of human employees, many predict, a perspective that is being widely embraced and echoed in the corporate mainstream. At the Aspen Ideas Festival in June, Jim Farley, the CEO of Ford Motor Co, said, “Artificial intelligence is going to replace literally half of all white-collar workers in the US”.
Whether that type of revolutionary change occurs, and how soon, depends on the real-world testing ground of many businesses.
New York Times News Service