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AI is not magic - it's no more than cost savings

Artificial intelligence (AI) and automation make the seemingly impossible possible. They magically bring machines to life – driving cars, trading stocks, teaching children or providing healthcare. In Prediction Machines, Avi Goldfarb and two fellow economists debunk this magical myth and recast the rise of AI as nothing more than a drop in the cost of prediction.

With this one masterful stroke their thinking transforms the debate, lifting the curtain on AI-as-magic and revealing how applying basic economic tools can transform how CEOs, CFOs and FDs view the AI revolution. By framing AI as merely cheap prediction, they reframe the debate. As this extract from Prediction Machines demonstrates, at the heart of this process is a requirement to unpack and understand the process of making decisions.

We typically associate decision-making with big decisions. Should I buy this house? Should I attend this school? Should I marry this person? No doubt, these life-changing decisions, while rare, are important.

But we also make small decisions all the time. Should I keep sitting in this chair? Should I keep walking down this street? Should I keep paying this monthly bill? We handle many of our smaller decisions on autopilot, perhaps by accepting the default, choosing to focus all our attention on bigger decisions. However, deciding not to decide is still a decision.

This is an extract from the Business & Management Magazine, Issue 266, July 2018.

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