Don't be surprised if artificial intelligence, after a few more years, seems not to have very much positive impact on productivity overall, though it almost certainly will have had observable impact in some industries and use cases.
Information technology innovations tend not to register too much gain for entire economies, as a rule. Economy-wide productivity is the result of all sorts of changes and inputs, and improvements on that score are relatively modest, taken in total.
Keep in mind that total productivity changes include effects from all sources, not just information technology. So unless you believe IT was solely responsible for total productivity change since 1970, the actual impact of IT arguably is rather slight, perhaps on the order of 0.5 percent up to about 1.5 percent per year, maximum.
And those years would include the impact of personal computers, the internet and cloud computing, to name a few important information technology advances.
That noted, some industries seem to boost productivity more than others, and perhaps we can argue that IT is responsible, in part.
Perhaps there is no contradiction between low historical total factor annual productivity gains and high expected generative artificial intelligence revenue impact; productivity impact or profit impact for some firms in some industries.
Industry Sector (NAICS Code) | Description | Percent Change in Labor Productivity (1977-2022) |
Total Nonfarm Business (All) | Covers all industries except agriculture, government, and private households | 1.0% |
GoodsProducing Industries (1133) | Includes mining, construction, and manufacturing | 0.4% |
Manufacturing (3133) | Factory production of goods | 0.5% |
Construction (23) | Building, renovation, and maintenance of structures | 1.2% |
Mining (21) | Extraction of minerals and natural resources | 2.3% |
ServiceProviding Industries (4892) | Covers a wide range of service businesses | 1.4% |
Wholesale Trade (42) | Selling goods to businesses in bulk | 1.2% |
Retail Trade (4445) | Selling goods directly to consumers | 0.4% |
Transportation and Warehousing (4849) | Moving people and goods | 2.1% |
Information (51) | Publishing, broadcasting, and telecommunications | 2.5% |
Financial Activities (52) | Banking, insurance, and real estate | 1.2% |
Professional and Business Services (5456) | Legal, accounting, consulting, and scientific services | 2.0% |
Education and Health Services (6162) | Schools, hospitals, and other social services | 1.3% |
Leisure and Hospitality (7172) | Accommodation, food services, and entertainment | 3.9% |
Other Services (8189) | Repair shops, personal care services, and religious organizations | 0.8% |
On the other hand, some forecasts of higher impact for some firms in some industries are not necessarily incompatible with the “all industries” trends for productivity improvements. The best firms in the industries most able to use GenAI might well wring more benefit from the technology.
In fact, that might tend to be the case for the best and worst firms in almost any industry.
Also, cumulative productivity gains over a period of years will of course be higher than single year gains.
Revenue gains in excess of 10 percent for some companies in some industries over a multiyear period are conceivable, even if single-year gains are in single digits or less.
Industry | Potential Impact | Source, Forecast |
Manufacturing | Increased product design efficiency and innovation Improved production line optimization Reduced waste and defects | McKinsey & Company: 20% to 40% productivity gains by 2030 PwC: Up to $3.7 trillion global GDP impact in manufacturing by 2030 |
Retail and Ecommerce | Personalized marketing and promotions Enhanced customer experience (chatbots, product recommendations) Optimized pricing and inventory management | J.P. Morgan: Up to 10% revenue growth for retailers by 2030 Accenture: Up to $1 trillion in annual revenue growth for retailers by 2035 |
Financial Services | Fraud detection and risk management Algorithmic trading and portfolio management Personalized financial advice and wealth management | Goldman Sachs: Up to $1.2 trillion in annual cost savings for financial institutions McKinsey: Up to $200 billion in annual revenue growth for wealth management by 2030 |
Healthcare | Drug discovery and development Personalized medicine and treatment plans Improved medical imaging analysis | PWC: Up to $150 billion in annual savings in the US healthcare system McKinsey: Up to $6 trillion in global healthcare productivity gains by 2030 |
Media & Entertainment | Content creation (music, scripts, video) Personalized content recommendations Streamlined content production workflows | Bain & Company: Up to 10% productivity gains in media content creation by 2030 |
The point, though, is that big numbers predicted for applied GenAI have to be understood in context. Total-economy gains will be far smaller than many expect, even if some firms, in some industries, will show higher revenue growth; profit rates or productivity gains.
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