Which Came First: the Chicken or the Egg?

In many ways, artificial intelligence outcomes are a “which came first, the chicken or the egg?” process.

Some job functions are immediately amenable to AI substitution or augmentation. Software code generation and customer support functions come to mind. 

Job Function	Specific Tasks Enhanced or Automated by AI
Software and Product Development	Code Generation and Completion: Writing, debugging, and testing code, often referred to as "vibe-coding" or "AI-assisted coding." Documentation: Automating the creation of technical and product documentation. Refactoring: Modernizing and improving existing codebases more quickly.
Customer Service/Support	Customer Self-Service: Deploying AI-powered chatbots and virtual assistants to handle a high percentage of customer inquiries 24/7. Agent Support: Providing real-time knowledge assistance and suggested responses to human agents, reducing response time and improving resolution quality.
Sales and Marketing	Personalization: Generating highly personalized content, email marketing, and product recommendations at scale. Content Creation: Drafting marketing copy, social media posts, and campaign templates more efficiently. Lead Scoring & Forecasting: Using predictive analytics to identify high-value leads and forecast sales trends.
Human Resources (HR) & Recruitment	Candidate Screening: Automating resume parsing and initial candidate screening. Administrative Tasks: Scheduling interviews and managing administrative workflows.
Data Analysis & Business Intelligence	Data Collection and Processing: Automating the collection, cleaning, and organization of vast datasets. Insight Generation: Applying complex algorithms to find actionable insights, predict trends, and inform strategic decisions (Predictive Analytics).
Administrative and Office Work	Content Drafting: Writing emails, summarizing documents, and generating reports (Generative AI). Scheduling: Managing and optimizing complex scheduling and calendaring. Meeting Assistance: Real-time transcription, summarization, and action-item extraction from meetings.

Likewise, some industries already seem to be making routine use of AI. As typically is the case, financial services, advertising and e-commerce industries have been early adopters. Fraud detection is a major financial services use case, where personalization is huge in e-tailing and content industries. 

Industry	Primary AI Applications
Financial Services / FinTech	Fraud Detection: Real-time analysis of transactional patterns to identify and prevent fraudulent activities. Risk Management: Using advanced analytics for credit scoring, algorithmic trading, and personalized financial planning. Customer Service: AI-powered chatbots and virtual assistants for customer inquiries and automated banking tasks.
Healthcare and Life Sciences	Diagnostics: Analyzing medical images (e.g., X-rays, MRIs) for earlier and more accurate disease detection (e.g., cancer, heart disease). Drug Discovery: Accelerating research and development by identifying high-potential drug candidates and simulating molecular interactions. Operational Optimization: Streamlining hospital workflows, scheduling, and inventory management.
Technology and E-commerce/Retail	Personalized Recommendations: Analyzing user data to provide tailored product and content recommendations (e.g., Amazon, Netflix, Spotify). Inventory & Supply Chain: Sales and demand forecasting, warehouse automation, and dynamic pricing models. Cybersecurity: Real-time threat detection and response.
Manufacturing	Predictive Maintenance: Monitoring equipment and using AI algorithms to predict failures before they happen, reducing downtime and maintenance costs. Robotics: Integrating AI to enhance robot functionality for autonomous tasks in assembly lines and warehouses.
Logistics and Transportation	Route Optimization: Analyzing real-time data to find the most efficient delivery routes and traffic management. Autonomous Vehicles: Developing the software for self-driving cars and drone deliveries. Supply Chain Management: Predicting demand and managing inventory efficiently.
Education	Personalized Learning: Creating adaptive learning experiences that adjust to each student's pace and style. Administrative Efficiency: Automated grading and feedback for certain assignments.

Also, higher-performing entities tend to produce measurable gains first because they are better-performing entities overall. 

Such firms have the embedded processes that allow them to take advantage of new technologies faster. It’s likely worth keeping that in mind when we try to assess where AI is having the most impact. 

Anthropic's Economic Index takes a look at where Claude is being used, and for what purposes, by consumers and businesses across the world.  

Education and science usage shares are on the rise, while the use of Claude for coding continues to dominate the sample at 36 percent of total instances. But Claude use for  educational tasks increased from 9.3 percent to 12.4 percent, while use for scientific tasks from 6.3 percent to 7.2 percent.

Anthropic also notes a shift towards autonomy. “Directive” conversations, where users delegate complete tasks to Claude, grew from 27 percent to 39 percent. The study also notes increased use in coding (+4.5 percentage points) and a reduction in debugging (-2.9 percentage points). 

But we might also note the difference between correlation and causation, as there will be a tendency for value chain suppliers to argue that AI usage “produces” or “causes” observed performance gains (revenue, income, profit margin, productivity). 

In fact, quite the opposite could be happening. High AI usage occurs in industries, countries or by individuals who are already wealthy, well educated and working in settings where cognitive or intangible products are an important part of the output. 

In other words, high AI adoption follows firm and industry success, rather than “causing” it. It’s similar to the “correlation versus causation” argument we might have about home broadband “causing” economic development. 

Some might note that high-quality home broadband tends to be deployed in areas of higher density, higher wealth, higher income and higher education. Quality home broadband (“fastest speeds”) does not cause the wealth, income or educational attainment.

Rather, such characteristics create the demand for such services. 

source: Anthropic 

Many studies have noted the tension between correlation and causation when evaluating the impact of new technologies. 

• Acemoglu et al. (2023) “Advanced Technology Adoption: Selection or Causal Effects?” Firms adopting advanced technologies had higher productivity before adoption, suggesting selection effects rather than pure technological causationLongitudinal firm-level analysis using Census dataPre-existing firm characteristics → Technology adoption

• Autor, Levy & Murnane (2003) “The Skill Content of Recent Technological Change” Computer adoption correlated with pre-existing skill demands rather than creating new skill requirements. 

• Caselli & Coleman (2001) “Cross-Country Technology Diffusion: The Case of Computers” Countries with higher skilled labor adopted computers faster; computer adoption didn't independently increase skill premiums. 

• Krueger (1993) “How Computers Have Changed the Wage Structure” Workers using computers earn higher wages, but much of the premium reflects selection of skilled workers into computer-using jobs. 

• DiNardo & Pischke (1997) “The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?” Computer wage premium largely reflects unobserved worker heterogeneity, as similar premium exists for pencil use.

• Beaudry, Doms & Lewis (2010) “Should the Personal Computer Be Considered a Technological Revolution?” Computer adoption followed rather than preceded productivity gains in most industries.

• Forman, Goldfarb & Greenstein (2012) “The Internet and Local Wages” Internet adoption increased wages more in cities with complementary skilled workforce and business services

• Akerman, Gaarder & Mogstad (2015) “The Skill Complementarity of Broadband Internet” Broadband access increased demand for skilled workers but only in firms/regions with existing high skill levels

• Bloom, Sadun & Van Reenen (2012) “Americans Do IT Better: US Multinationals and the Productivity Miracle” Management practices explain technology adoption and productivity gains; technology alone insufficient

• Cariolle (2021) “International Connectivity and the Digital Divide” Submarine cable connections improve economic outcomes primarily in countries with existing institutional capacity

• Hjort & Poulsen (2019) “The Arrival of Fast Internet and Employment in Africa” Fast internet increased employment in skilled jobs but decreased it in unskilled jobs

• Jensen (2007) “The Digital Provide: Information Technology, Market Performance, and Welfare” Mobile phone adoption by fishermen improved market efficiency, but required existing market infrastructure

• Aker (2010) “Information from Markets Near and Far” Mobile phone coverage reduced price dispersion only in markets with existing trading relationships

• Duflo & Saez (2003) “The Role of Information and Social Interactions in Retirement Plan Decisions” Retirement plan participation increased after information sessions, but mainly among already financially sophisticated employees

• Kling & Liebman (2004) “Experimental Analysis of Neighborhood Effects on Youth” Moving to better neighborhoods improved outcomes, but families that moved had different characteristics than non-movers

• Malamud & Pop-Eleches (2011) “Home Computer Use and the Development of Human Capital” Home computers had mixed effects on student achievement; benefits concentrated among students with higher initial ability

• Vigdor, Ladd & Martinez (2014) “Scaling the Digital Divide: Home Computer Technology and Student Achievement” Computer and internet access at home had negative effects on student achievement for disadvantaged students

Study (Year)	Subject	Key Findings	Direction of Causality
Bils and Klenow (2000)	The Causal Impact of Education on Economic Growth	Correlation between education and growth may be due to reverse causality; richer, faster-growing states find it easier to increase education spending.	Primarily from economic growth to education, with a feedback loop.
Comin et al. (2012)	How Technology Adoption Affects Global Economies	The rate at which nations adopted new technologies centuries ago strongly affects whether they are rich or poor today. Technology adoption lags account for a significant portion of income differences.	Technology adoption has a long-term causal effect on economic prosperity.
Nazarov (2019)	Causal relationship between internet use and economic development in Central Asia	A unidirectional causality exists from GDP per capita to Internet use, suggesting that economic growth stimulates technology adoption.	From GDP per capita to technology use.

Critical thinking isn't about being critical in the negative sense; it's an intellectually disciplined process of actively and skillfully analyzing, evaluating, and synthesizing information.

One Set of AI Regulations is Probably Better than 50 to 100

Some states are creating statewide regulations for artificial intelligence. Whether that is a good thing or not is debatable. The wisdom of AI regulations is not perhaps the issue. Everyone acknowledges there will be some regulation, at some point.

The issue is whether many different regulations and regimes is helpful or harmful.

By some accounts, State lawmakers across the US introduced nearly 700 AI-related bills in 2024, according to the Business Software Alliance. Of the bills that were introduced, 113 were ultimately enacted into law. 

That process of creating separate rules in potentially 50 different jurisdictions, while perhaps well-intentioned, virtually always raises costs of suppliers, and almost inevitably costs to consumers. 

The same sort of process applies in lots of industries. 

National vs. Local Regulation and Consumer Prices
Study	Key Findings
Chambers & Collins (Mercatus Center), How Do Federal Regulations Affect Consumer Prices?	Found that a 10% increase in total regulations leads to a 0.687% increase in consumer prices. The study also highlighted that low-income households are disproportionately affected, as they spend a larger share of their income on heavily regulated goods.
IFAC & BIAC Survey (2018), Patchwork Financial Regulation a $780 Billion Drag on the Economy	Estimated that fragmented financial regulations cost the global economy over $780 billion annually, equating to 5–10% of annual revenue turnover for financial institutions. Over half of the respondents indicated that resources were diverted from risk management due to the costs associated with diverging regulations.
Mercatus Center Study, Regulatory Accumulation and Its Costs	Determined that regulatory accumulation has reduced the annual growth rate of the U.S. GDP by an average of 0.8%. The study also found that increased regulations disproportionately burden low-income households by raising the prices of basic goods such as food and utilities.
Bergeaud & Raimbault (2017), An empirical analysis of the spatial variability of fuel prices in the United States	Identified that state-level policies and local socio-economic factors significantly influence fuel prices, leading to substantial variability across different regions. The study underscores the impact of local regulations on consumer prices.
Li, Gordon & Netzer (2018), An Empirical Study of National vs. Local Pricing by Chain Stores Under Competition	Found that national pricing can be more profitable for firms in certain competitive environments, as it helps avoid intense local competition. However, the optimal pricing strategy varies depending on market conditions, indicating that uniform national pricing isn't always the most beneficial approach.

Most observers would acknowledge that higher consumer prices are a result of the fragmented regulatory regimes in many industries. 

Regulated Industry	State-Level Regulation Example	National Regulation (or Lack Thereof)	Impact on Consumers	Price Impact
Artificial Intelligence (AI)	Data privacy, algorithmic fairness	California Consumer Privacy Act (CCPA) imposes strict AI and data-use limitations	Developers must customize products for each state's privacy laws; increased legal risk	Slower rollout of AI tools; higher costs passed on to users
Automotive / EVs	Emission standards, sales mandates	California's zero-emission vehicle (ZEV) mandates; bans on gas car sales post-2035	Auto makers must produce state-specific vehicle variants; complex distribution logistics	Higher car prices in ZEV states; reduced consumer choice
Healthcare	Telemedicine, insurance coverage	States have unique rules on provider licensing and allowable services	Providers face barriers offering services across state lines; insurers must tailor plans by state	Unequal access to care; administrative costs increase insurance premiums
Energy	Fuel formulations, renewable mandates	California requires special gasoline blends; some states mandate renewable quotas	Refineries must produce multiple blends; adds transportation and inventory costs	Higher fuel prices in regulated states; seasonal price swings
Finance / FinTech	Lending rules, crypto regulation	New York's BitLicense for crypto firms; state usury laws	FinTechs must obtain licenses in each state; may avoid high-cost states like NY	Restricted availability of services; delays in access
Employment / Labor	Minimum wage, gig worker classification	California’s AB5 reclassifies many gig workers as employees	National firms (Uber, Doordash) must operate under different employment models across states	Increased service fees; reduced flexibility in gig services
Education / EdTech	Student data privacy, content standards	Illinois Student Online Personal Protection Act (SOPPA) imposes strong data privacy rules	EdTech firms must develop state-specific compliance features	Slower implementation of new tools; reduced access for smaller schools
Food & Agriculture	Labeling, animal welfare	Massachusetts requires cage-free eggs; Vermont passed first GMO-labeling law	Food producers face higher costs from differing labeling/packaging and sourcing requirements	Higher food prices; limited product availability in some regions
Construction / Housing	Building codes, zoning laws	Each state/city sets codes; California has stricter seismic/energy efficiency rules	Builders must redesign projects by region; national firms struggle to scale housing solutions	Higher housing costs; slower construction timelines
Tobacco / Cannabis	Sales restrictions, taxation	States regulate sales age, THC limits, and advertising; some states prohibit sales	Multistate cannabis firms must customize operations for compliance; interstate transport often banned	Prices vary widely; consumers in prohibition states pay black-market premiums