FORECASTS & TRENDS E-LETTER
by Spencer Wright
February 13, 2024

IN THIS ISSUE:

1. What Is AI? History, Definitions and Buzzwords

2. You Are Using AI Every Day and May Not Even Know It

3. AI is Moving the Market, in More Ways Than You Think

4. Is AI Good or Bad for Us? The Creative Destruction of Progress

5. Conclusions: Our AI Future

What Is AI? History, Definitions and Buzzwords

Before we start a discussion into what seems like science fiction made real, let’s look into the past. Artificial Intelligence (AI) is a term that was coined by John McCarthy, a legendary American computer and cognitive scientist, in the 1950s. He is widely regarded as one of the "founding fathers" of AI. Alongside other luminaries like Alan Turing, Marvin Minsky, Allen Newell, and Herbert A. Simon, McCarthy played a pivotal role in shaping the field.

McCarthy, a Stanford professor and Turing Award recipient, developed the programming languages known as LISP and ALGOL. LISP was pivotal in AI development and research while ALGOL popularized the concept of time-sharing in computing, allowing multiple users to interact with a computer at the same time – a key concept for those that would expand McCarthy’s work in the decades to come.

What is AI? Artificial Intelligence refers to computer systems capable of performing tasks that historically required human intelligence. These tasks include recognizing speech, making decisions and identifying patterns. AI is an umbrella term that encompasses various technologies.

Like all new technologies, AI comes with a host of buzzwords and terms. Here are a few of the more common ones you are likely to hear and a brief definition.

An LLM (Large Language Model) is an artificial neural network built to achieve general-purpose language generation. These models learn statistical relationships from vast amounts of text data during a computationally intensive self-supervised and semi-supervised training process. Chat-GPT is an LLM.

A Neural Network is a computational model inspired by the innerworkings of the human brain. It consists of many ‘nodes’ that can work both independently and together. This is a powerful relationship that, once trained, can recognize images, speech and concepts.

Machine Learning enables machines to perform tasks that would otherwise only be possible for humans. It involves algorithms learning from data to create predictive models. The use cases for machine learning algorithms include recommendation engines, fraud detection and self-driving cars to name only a few.

Generative AI is an umbrella term that embodies advanced LLMs that ‘learn’ patterns and structures from training and user input. Based on training and inputs these models are able generate new content. Char-GPT, Bard and Copilot are examples of Generative AI LLMs.

Whew.

You Are Using AI Everyday and May Not Even Know It

There are many potential use cases for AI. The below infographic illustrates the most common cases:

Almost everyone uses or benefits from AI every day, whether you know it or not. If you are a user of the Microsoft Office suite, you have used AI. That one click response to an email in Outlook? AI. The suggestions made by PowerPoint when you are creating a new presentation? AI. Search the web using Bing or Google? AI. That call from your bank or credit card company about suspicious activity? They were alerted by an AI model. Even Edge, the Microsoft web browser, has Copilot integrated into it, the Microsoft LLM. (By the way, Copilot is powered by Open AI’s Chat-GPT 4. Microsoft owns about 40% of Open AI.)

Not long from now AI models will better refine your ‘user experience’ with nearly all the software you use daily. What about apps on your phone or tablet? Yes, those too. Those especially. Apple, Microsoft, Google, Meta and many others are spending hundreds of billions of dollars on developing and expanding AI on every level. 

AI is Moving the Market in More Ways Than You Think

Currently total approximate global AI investment is over $500 billion. That is expected to expand to about $2 trillion by 2031. This chart says it all:

That is a CAGR (Compound Annual Growth Rate) of 21.6%. Compare that to the CAGR of the S&P 500 from inception in 1926 of 9.8% (or 6% adjusted for inflation), including dividends. The potential is staggering, to put it mildly. Of course, these are projections that could be overstated or understated.

Consider this chart of Nvidia (NVDA) stock from 2019 when the company made research and investments into AI and is now considered one of the leaders of the AI revolution.

So, what makes NVDA an AI darling? Their chips are at the core (pun intended) of the computing power needed for LLMs, neural networks, etc. There are other players, naturally, and who knows how many more NVDAs there will be or where they will come from. But there will be more. Likely many more assuming the first graph in this section is even close to correct.

Is AI Good or Bad for Us? The Creative Destruction of Progress

This is a question that is hotly debated by some of our greatest minds. You don’t have to look far to find an article or video where Elon Musk, the CEO of Tesla and owner of X, is warning of the perils of AI. Opposing him are many other tech CEOs like Meta’s Mark Zuckerberg, Apple’s Tim Cook and Nvidia’s Jensen Wong.

But who is right? In many ways both sides are. AI will be a great force for economic change and efficiency the like of which we have not experienced. Consider this infographic:

This illustrates the AI benefits to the retail industry, although many of these would be applicable to various other industries. Everything on the graphic looks great (Well maybe not that robot thing…). As a consumer or business owner you want these advantages that AI can offer.

So, what’s not shown here? The human cost. Jobs will be lost. Jobs are always lost to industrial innovation, but the AI revolution could be particularly bad. Nearly all industries will be impacted. The scope of the coming change is hard to fathom.

However, as old opportunities fade, new ones come into focus. There will be a need for new kinds of jobs, many of which we can’t conceive of today. This is the economic phenomenon known as creative destruction as put forward by the economist Joseph Schumpeter.

Even with all the new era jobs, the price of this transition could be a heavy one.

Conclusions: Our AI Future

AI is here to stay; that is of course if nothing goes wrong. And a lot could go wrong. But it probably won’t, maybe. See the links below for a couple of good articles on the potential dangers of AI.

We are at the beginning of a new era for technology. Just as the Internet boom did, the AI revolution will raise new questions to be answered about the role of AI, about privacy, about control. And about us, humans, and where we fit in.

I want you to know that I did all the research for this letter using Microsoft’s Copilot. That’s right, I used AI to help me write a newsletter about AI. It would have written the entire thing if I had asked it to.

I did ask Copilot to render an image using the prompt, “Our AI Future”. The image below is the output. Here is what Copilot had to say about the image, “A futuristic cityscape with AI robots and humans coexisting peacefully.” As worrying as this is in some ways, I don’t think we need to kidnap Miles Dyson and infiltrate Cyberdyne Systems. Not just yet.

Thanks for reading,

 

The True Dangers of AI are Closer Than We Think

Why AI May be Extremely Dangerous, whether it is Conscious or Not

 

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