Great advances in technology often result in huge increases in wealth. So as the AI boom continues, one obvious question is who will benefit – and by how much. My thought, which may be deflationary for entrepreneurs but good for consumers, is this: Relative to how much artificial intelligence will change the world, its early pioneers will not be particularly prosperous.
In fact fundamental changes transform every part of the economy. They do this only by being freely or easily available in various areas. Money will be made from AI, but it will be hard to get anything close to full value.
Consider the Internet. The most successful entrepreneurs in social media have amassed great wealth – but the early developers of the Internet didn’t do it themselves. Even as far back as 1992, if you were convinced that the Internet was going to be a huge thing, there was no easy way to make money from that insight. Just as the inventors of the early printing press, such as Gutenberg, did not become the richest men of their time.
And this raises another obvious question: Are current manifestations of AI – for example the larger language models embodied in services like ChatGPT – more like the Internet and the printing press, or more like social media? The evidence so far suggests that they are somewhere in between.
Facebook benefits from network effects. That is, you want to be able to connect with friends and family, so a social networking service with size and prominence will have a considerable market advantage. Likewise, how many people have actually left Twitter for Mastodon?
Major AI companies do not see this benefit. If I use OpenAI’s ChatGPT, and you use Anthropic’s Cloud, we can still easily communicate with each other through other media. It is also possible to imagine connecting one service to another using text through a third-party intermediary.
A small number of AI services, possibly even one, will probably be better suited than others for a wide range of purposes. Such companies can buy the best hardware, hire the best talent, and manage their brands relatively well. But they will face competition from other companies offering lesser (but still good) services at lower prices. When it comes to LLMs, there is a proliferation of services with products from Baidu, Google, and Anthropic already in the market. The market for AI image generation is overcrowded right now.
From an economic point of view, the leading AI company could be something like Salesforce. Salesforce is a leading vendor of business and institutional software, and its products are extremely popular. The company’s valuation so far, as of this writing, is around $170 billion. That’s hardly chump change, but it doesn’t come close to the $1 trillion valuations elsewhere in the tech sector.
OpenAI, a current market leader, has received a private valuation of $29 billion. Again, this is no reason for anyone to feel sorry – but there are plenty of companies you probably haven’t heard of that are worth far more. AbbVie, a biopharmaceutical corporation, is valued at approximately $271 billion, which is approximately 10 times that of OpenAI.
To be clear, none of this is evidence that AI will end. Instead, AI services will enter almost everyone’s workflow and spread throughout the economy. Everyone will be rich, most of all the workers and consumers who use the commodity. The key ideas behind AI will spread and replicate – and the dominant AI companies of the future will face considerable competition, limiting their profits.
In fact, the ubiquity of AI may reduce its value, at least from a market perspective. It’s likely that the AI boom hasn’t peaked yet, but the speculative enthusiasm is almost palpable. Share prices have responded enthusiastically to AI developments. Shares of BuzzFeed soared 150% in one day last month, for example, after the company announced it would use AI to generate content. Does it really make sense, considering all the competition BuzzFeed faces?
When those prices and valuations start falling, then you’ll know the AI revolution has really arrived. In the end, AI’s biggest impact may be on its users, not its investors or its inventors.
Tyler Cowen is a Bloomberg Opinion columnist. He is professor of economics at George Mason University and writes for the Frontier Revolution blog. He is the co-author of “Talent: How to Identify Energizers, Creatives and Winners Around the World”.
catch all technology news And updates on Live Mint. download mint news app to receive daily market update & Live business News,