Companies Wasting Millions on AI Spending - MIT Professor

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Don’t believe the hype: MIT institute professor Daron Acemoglu
KPMG survey says 81% of US executives worry about lagging behind on tech but MIT economist says AI will only replace 5% of jobs

MIT professor Daron Acemoglu believes that companies are wasting vast amounts of money investing in AI, when its net effect is going to be marginal. 

CEOs have jumped on artificial intelligence as the ultimate worker who doesn’t need to be paid or sleep or take lunch breaks, with many predicting AI will replace the majority of white-collar jobs.

In fact, says Acemoglu, AI will displace or heavily assist just 5% of the workforce, far too few in number to justify the billions being invested in the technology.

‘A lot of money is going to get wasted’

MIT institute professor Daron Acemoglu

This suggests the estimated economic benefits of massive efficiencies and productivity gains from AI are not going to be realised for a very long time. 

“A lot of money is going to get wasted,” Professor Acemoglu told Bloomberg. “You’re not going to get an economic revolution out of that 5%.” 

AI hype has driven a stock market boom in America, with Nvidia CEO - who obviously has skin in the game as his company makes the chips AI relies on – predicting that as much as US$1 trillion will have to be spent upgrading data centres to keep on top of demand.

By contrast, Professor Acemoglu told Bloomberg that three scenarios could now play out:

  • The AI hype slowly cools as companies make “modest” investments in the technology.
  • AI frenzy builds for another year or so, leading to a tech stock crash which leaves the C-suite and investors disillusioned with the technology. “AI spring followed by AI winter,” he called it. 
  • The mania continues to build for years, leading companies to make huge redundancies and pump hundreds of billions into AI “without understanding what they’re going to do with it” – only to be left scrambling to try and rehire workers when they realise the emperor has no clothes.
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Cycle yet to peak?

Professor Acemoglu believes the most likely outcome is a combination of the second and third scenarios. Executives are too afraid of missing out on the AI boom for him for the hype cycle to peak yet, and “when the hype gets intensified, the fall is unlikely to be soft”.

The MIT professor’s prognosis is backed up by a KPMG International report published on Tuesday which found that 81% of US executives said it’s difficult to keep up with the rapid pace of technological change - and they worry about lagging behind other companies. 

While the MIT economist is impressed by what large language models like ChatGPT can do, reliability issues means they won't replace humans in the workplace for a very long time.

“You need highly reliable information or the ability of these models to faithfully implement certain steps that previously workers were doing,” Acemoglu said.

He added: “They can do that in a few places with some human supervisory oversight” like coding, “but in most places they cannot. That's a reality check for where we are right now.”

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