🤖 The Effects of AI on the Economy

NP #009

Neon Pulse Team
June 21, 2023

Good morning and welcome to the latest edition of neonpulse!

Today’s issue is all about the intersection between AI and the economy, because McKinsey estimates AI will add $4.4 trillion annually to the global economy.

The Effects of AI on the Economy

When talking about the impact of AI, people are often worried about it replacing jobs. However, McKinsey, the management consulting firm, sheds a positive light on the subject. According to their recent report, titled "The economic potential of generative AI", McKinsey estimates that AI has the potential to contribute a staggering $4.4 trillion annually to the global economy.

What’s the value and impact of #generativeAI? Companies across countless industries are already experimenting with its applications. Our new research has found that the value at stake is huge–potentially $2.6 to $4.4 trillion in #productivity annually➡ mck.co/43GmElA
— McKinsey & Company (@McKinsey)
2:10 PM • Jun 14, 2023

$4.4 trillion is actually the bull scenario in this case. Their estimates suggest that this technology could add anywhere between $2.6 trillion to $4.4 trillion annually to the global economy. These figures have the potential to double if generative AI is integrated into various software applications beyond its current applications.

While all industries will be influenced by this technology, banking and life sciences are expected to experience the most disruption. In fact, the report indicates that banking alone could witness an annual added value of $340 billion by embracing generative AI.

McKinsey also predicts that by 2045, over half of today's work will be automated as a result of generative AI. Interestingly, this timeline has been accelerated by nearly a decade due to the rapid growth and investment in this technology.

Generative AI offers significant value in key areas such as customer operations, marketing and sales, software engineering and R&D, accounting for approximately 75 percent of its potential benefits.

Contrary to common belief, the report suggests that higher-ranking positions will face the most disruption, impacting knowledge work associated with higher wages and educational requirements.

McKinsey's findings align with other global institutions, such as Goldman Sachs and the World Economic Forum, which also anticipate a significant shift in the workforce due to AI-powered automation.

However, there are still skeptics who believe that generative AI may not live up to the high expectations. David Autor, an economics professor at MIT, cautions against overestimating the miraculous potential of this technology.

The impact generative AI will ultimately end up having remains to be seen. While the future remains uncertain, the estimates by experts such as McKinsey present a promising future…