Stanford’s Erik Brynjolfsson Shares His Insights on the Digital Economy and the Role of Artificial Intelligence (AI) Technology

By TAP Staff Blogger

Posted on March 4, 2022


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AI is what I call a general-purpose technology. Like the steam engine or electricity before it, each of these technologies drives waves or cascades of complementary innovations that restructure the way business is run. Ultimately that drives productivity.
- Erik Brynjolfsson, Director of the Stanford Digital Economy Lab

 

Erik Brynjolfsson, Professor and Director of the Digital Economy Lab at Stanford's Institute for Human-Centered AI (HAI), shared his insights on the digital economy and the role of artificial intelligence (AI) technology with Global X. In “Q&A with Erik Brynjolfsson on Disruptive Technology and the Digital Economy,” Professor Brynjolfsson discusses the strengths of AI technology, the challenges of measuring the economic impact of the digital economy, and how digitally resilient companies were in a better position to thrive through the pandemic than others.

 

Below are a few excerpts from “Q&A with Erik Brynjolfsson on Disruptive Technology and the Digital Economy” (Global X, December 2021).

 

Is There a Correlation Between AI Technology and Productivity?

 

One of the great paradoxes of our current economy was that we’ve had these amazing technologies and more and more of them coming online, especially in the past decade. And yet productivity hasn’t really grown much. In fact, productivity growth was about 2.8% in the 1990s and early 2000s. And for the past decade and a half, it’s been only about 1.3%. So less than half as fast as it used to be. Now, why is that?

 

Well, it goes back to the idea of general-purpose technologies. A GPT, a general-purpose technology, is powerful but it also requires a lot of transformation of business processes, new products and services, new skills, and those all take time.

 

With the steam engine, it was about 40 years before we saw big productivity growth. With electricity it was about 20 to 30 years. I’m hoping it will be even shorter with AI and other related general-purpose technologies. But until we had that business transformation to really harness the technology, we’re not going to see big productivity growth.

 

I am confident that productivity is going to surge. In fact, there’s some evidence it is already beginning to surge.

 

What Type of Tasks Are AI Technologies Succeeding At and What Types Are Best Left to People?

 

Some broad categories that we found were, for the things that were routine and repetitive, machines could do them better. On the other hand, things that involve a lot of creativity like entrepreneurship, scientific discovery, art, were very hard for machines to do in a serious way.

 

Also, interestingly, there are a lot of tasks that involve high emotional intelligence – childcare, nursing, coaching, teaching. Those often also were difficult for machines to do because they involve a human touch and a human interaction.

 

It’s not as simple as just automating tasks. Instead, what we find is that you have to rethink how tasks are put together. Simply taking a job that a person is doing right now and trying to replace it with machine learning rarely works. Instead, you need to combine humans and machines into kind of a hybrid or centaur system, and that’s where you get the most value. The companies that figure that out are going to pull ahead. We’re already seeing the top 10% of companies pull ahead from the rest of their competitors and I expect that to continue over the next decade.

 

What Is Digital Resilience?

 

The pandemic was a huge shock to American businesses and some companies managed it much better than others. We call that digital resilience. There were some companies that were able to plow ahead and actually increase productivity, profits, customer satisfaction and gain market share from their rivals.

 

We dove in deeper to figure out what were the differences between the digitally resilient companies and the others. It had a lot to do with their digital infrastructure. They had more cloud, more data science, more technology, and more sophisticated skills in their workforce.

 

What we’re seeing now is that some of the companies that were left behind are rushing to try to catch up in terms of digital resilience and they’re investing faster than the leaders in an effort to close that gap.

 

Read the full interview: “Q&A with Erik Brynjolfsson on Disruptive Technology and the Digital Economy” (Global X, December 2021).

 

Erik Brynjolfsson is the Jerry Yang and Akiko Yamazaki Professor and Senior Fellow at the Stanford Institute for Human-Centered AI (HAI), and Director of the Stanford Digital Economy Lab. He also is the Ralph Landau Senior Fellow at the Stanford Institute for Economic Policy Research (SIEPR), Professor by Courtesy at the Stanford Graduate School of Business and Stanford Department of Economics, and a Research Associate at the National Bureau of Economic Research (NBER).

 

Professor Brynjolfsson’s research examines the effects of information technologies on business strategy, productivity and performance, digital commerce, and intangible assets. He was among the first researchers to measure productivity contributions of IT and the complementary role of organizational capital and other intangibles. He has done pioneering research on digital commerce, the Long Tail, bundling and pricing models, intangible assets, and the effects of IT on business strategy, productivity, and performance.

 
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