Generative AI Could Add $4.4 Trillion a Year to the Global Economy, McKinsey Finds

 Generative AI Could Add $4.4 Trillion a Year to the Global Economy, McKinsey Finds

Vanessa Bates Ramirez in SigularityHub

There’s been concern about artificial intelligence taking away jobs for years, and with the recent boom in generative AI, those fears have grown. The ability to generate realistic and accurate text, images, or audio based on a prompt could make plenty of jobs obsolete (including, ahem, journalism and writing). But a new study says the doomsday predictions are misguided, because generative AI is far more likely to do just the opposite of canceling out jobs.

Last week, McKinsey published a report called The Economic Potential of Generative AI: The Next Productivity Frontier. It’s the result of a study involving 850 different job roles and 2,100 tasks across occupations in 47 countries. Researchers considered what portion of each existing job or task can be taken over by generative AI, as well as new occupations and responsibilities likely to be created by the technology. Their conclusion? Generative AI has the potential to create up to $4.4 trillion worth of annual value in the global economy.

$4.4 trillion is the high end of a range, with the lower bound sitting at $2.6 trillion. Even if the value created were to fall on the low end, it would still approximate the GDP of the United Kingdom, which was $3.1 trillion in 2021.  ... ' 

How Will the Space Economy Change the World?

 Good overview of Space and Economy. Not enough regards the timing and risks involved.  And how will key aspects, like supply chains,  be effectively translated into Space?  Note we need to do a key materials analysis to determine needs and sourcing,   Contact me for thoughts on Space Supply Chains. 

How will the space economy change the world?

November 28, 2022 | Article By Ryan Brukardt   in McKinsey

Space is no longer the sole domain of governments and aerospace and defense companies. Businesses that pursue emerging opportunities now may gain a first-mover advantage.    Article (6 pages) 

The passengers who boarded commercial flights just after World War II didn’t know that air travel would begin to soar over the next decade, nor did the masses who first logged onto the internet in the 1990s realize that computers would one day provide much of their news, entertainment, and social life. And today, few people understand that the space economy—broadly defined as activities in orbit or on other planets that benefit human beings—could soon transform how they live and work.

Some hints of the coming changes are apparent, including the frequent headlines about SpaceX, Blue Origin, and other private companies launching their own rockets and deploying satellite constellations. These activities, once primarily the domain of government agencies, are now possible in the private sector because recent technological advances in manufacturing, propulsion, and launch have made it much easier and less expensive to venture into space and conduct missions. Lower costs have opened the door to new start-ups and encouraged established aerospace companies to explore novel opportunities that once seemed too expensive or difficult. The technological improvements have also intrigued investors, resulting in a surge of space funding over the past five years.

The potential for innovative space applications is immense, especially if established aerospace companies form partnerships with businesses that traditionally haven’t ventured into orbit. Pharmaceutical companies might establish a lab on a space station to study cell growth, for instance, or semiconductor companies might manufacture chips in extraterrestrial factories to determine whether any aspects of the space environment, such as the lack of gravity, improve the process. Such possibilities, which might have seemed like the stuff of science fiction a few years ago, could become an essential part of a business across multiple industries in the near future.

But how and when should companies take advantage of their greater access to space and pursue emerging use cases? And how can they decide what opportunities are most promising when the technology is so nascent? Although much remains uncertain, companies that begin exploring these questions now could gain a long-term advantage.

The benefits of the space economy—with more to come

Space has long been a potent incubator for innovation—first from governments and large telcos and now from multiple private companies as well. From the launch of Sputnik 1 in 1957 through today, the space economy has delivered most of its value through satellite services, including communications and data and image collection and analysis. Satellites help large companies with multiple tasks, including inventory monitoring at distant locations, instant authorization of credit-card transactions, and international videoconferencing. Consumers use satellite technology whenever an online navigation system pinpoints their location, or when they make calls during plane flights or from rural locations that lack cell phone towers. And television viewers can thank satellites for beaming the signals that allow them to watch their favorite programs. The role of satellites in these activities is often overlooked—many people may think terrestrial computer networks provide the necessary connectivity—unless a glitch occurs and draws attention to the unobtrusive technology operating in the background.

In addition, satellites help world leaders address intractable social, environmental, and economic challenges. Consider a few ways that satellite data can provide insights: ... '

Thinking Industrial Policy

 Brought to my attention for comment,  somewhat dense, but scannable:

FIRST: A Note on "Industrial Policy”…

Stephen S. Cohen & J. Bradford DeLong

September, 2022

The not-quite-surprise passage of the CHIPS Act and the surprise passage of the IRA have brought the idea that the United States should consciously pursue  “industrial policy” back to the front burner of politics, and of political economy.

In some ways, however, “industrial policy” is a poisonous term in the discourse of U.S. politics. In the 1980s Democratic economic-policy stalwart Charles Schultze engaged in a full-throated campaign against the idea that the U.S. could run a successful “industrial policy”—“picking winners” in the rhetorical dismissive. Follower nations like Japan attempting to catch up to the U.S. that had succeeded in insulating economic bureaucracies from interest-group rent-seeking might be able to, he argued. But the United States would, to the extent that it embarked on industrial policy, further entrench dissipative rent-seeking interests. Allowing “industrial policy” into the rhetorical room would provide them with yet another set of plausible excuses that the legislators they influence could use for channeling resources in directions that had neither a valid social-welfare nor a valid economic-growth rationale for government protection and assistance.

So let us not call it “industrial policy”. Let us call it “pragmatism” instead. For it is a fact that, from Hamilton through Eisenhower and a bit longer, the American government’s attitude toward the use of public power and public funds for economic development was highly, highly pragmatic—and successful.

Looking back at the economic history of the United States, there is a pattern by which again and again the U.S. economy has been redesigned. The shifts of the economy toward new growth directions have sometimes been the emergent outcomes of innumerable individual actions guided by local price signals. But at other times, and perhaps at more times, they have not. New directions have, instead, been the results of purposeful decisions, taken by government backed by powerful and often broad political forces, guided by their vision of how the economy ought to change. And once the public sector and its allies have launched a new economic space, it has then been expanded and transformed in unimaginable ways by entrepreneurial activity and energy surging into those new directions.

The Economics of YouTube

Have now followed former University Prof Adam Ragusea for a few months on YouTube.  Mostly about food and cooking topics.    All very nicely and informatively done.  A good intro into the YouTube economy.   He has moved his family to a YouTube based economy and writes about the experience to date in a recent YouTube post: 

https://www.youtube.com/watch?v=G6pVD9Bya3E

Ask Adam: How does YouTube money work (or not)?     (PODCAST E23)

31,155 views Aug 27, 2022

Adam Ragusea, 2.03M subscribers   #podcast #askadam #foodie #foodpodcast #cookingpodcast #q&a

Wharton on the Economy this Year

Where are we going?  

What’s Ahead for the U.S. Economy in 2022

LISTEN TO THE PODCAST:

Wharton’s Jeremy Siegel speaks with Wharton Business Daily on SiriusXM about what’s ahead for the U.S. economy and the stock market in 2022.

Podcast Audio at link ...

The Federal Reserve must get “more aggressive” in 2022 by increasing interest rates and tapering down asset purchases in order to tame inflation, according to Wharton finance professor Jeremy Siegel. “The Fed is way behind the curve … and should have started raising interest rates by now,” he said on the Wharton Business Daily show on SiriusXM as he forecast market and economic trends for 2022. (Listen to the full podcast above.)

Siegel predicted the Dow and the S&P 500 will continue to climb in the year ahead, albeit at a slower pace than in 2021. The stock markets will face some headwinds when the Fed raises rates, but “stocks are real assets, and you want to hold real assets when there is inflation,” he said. His biggest concern is about containing the double-digit growth in money supply, which he said is not consistent with inflation at rates of even 2% or 3%. But with inflation edging towards 6%, he expected pressure on wage growth and resulting repercussions in the labor markets.

Following is an edited version of his interview.

Wharton Business Daily: Give us your overview on how you thought 2021 was from a market perspective.

Jeremy Siegel: Early on in 2021, I saw the burst of the money supply that was produced by the Federal Reserve, and that really clued me in on what was going to happen. I had never seen such a strong provision of liquidity, and I knew it would first go into the markets because spending was repressed. But I had predicted that we were going to have substantial inflation in 2021, and so what has happened has not surprised me.

Wharton Business Daily: Are we past the point where we consider the rise in inflation to be transitory?

Siegel: Absolutely. It was never transitory in the sense that it’s only going to be a few months. In fact, I have been saying for over six months that I think the cumulative amount of inflation that we’re going to have over the next three or four years will be 20% to 25%. Now, I don’t mean that in one year. It’s impossible to know how it’s going to exactly be distributed. But when we come out of this, the price level of goods and services will be about 25% higher.  .... ' 

Measurement of the Digital Economy

Good piece by correspondent Dr Wladawsky-Burger:

A collection of observations, news and resources on the changing nature of innovation, technology, leadership, and other subjects.  By Irving Wladawsky-Berger 

A New Measurement Framework for the Digital Economy

Several weeks ago I heard a very interesting keynote presentation by Cambridge professor Diane Coyle at the annual workshop of the Stanford Digital Economy Lab, - What Don’t We Know About Measuring the Digital Economy? Professor Coyle is also a research associate of the UK Economics Statistics Centre of Excellence. In 2017 she was a recipient of the Indigo Prize on how to measure economic activity in the digital economy for her essay Making the Future Count, co-authored with Benjamin Mitra-Kahn.

“GDP captures only market transactions at the price of exchange, and not the welfare gains, externalities, environment, distribution of wealth or innovation which occurs in an economy,” wrote the authors. “Hence almost since its creation in the 1940s it has been criticised for its inability to capture economic welfare. Now changes in the economy, being restructured by digital technology and paying the price for unsustainable growth, make the case for a new measurement framework more pressing than ever. GDP was never an ideal measure of economic welfare and its suitability has been decreasing.”   .... '   (more plus useful links) 

Building A More Resilient Data-Driven Economy

Building a better economy:

Irving Wladawsky-Berger's Blog
A collection of observations, news and resources on the changing nature of innovation, technology, leadership, and other subjects. ... 

Building a More Resilient, Data-Driven Economy
“With each major crisis, be it war, pandemic, or major new technology, there has been a need to reinvent the relationships between individuals, businesses, and government,” wrote MIT professor Alex “Sandy Pentland in the first chapter of Building the New Economy.  Pentland cites two major historical examples.  In the early 20th century, the rise of mass manufacturing led to the creation of regulations governing working conditions and pay, health rules for mass-produced foods, and laws to prevent monopolies that stifled competition.  Then in mid-century, the decades following WWII saw greater access to higher education, racial and gender progress, and increased support for scientific research and medical advances. ... " 

Virus UnCertainty

McKinsey piece on restart, watching local businesses closely.

Crushing coronavirus uncertainty: The big ‘unlock’ for our economies

To safeguard lives and livelihoods, we must restore confidence.

This article was a collaborative, global effort by Sven Smit and Martin Hirt, with Penny Dash, Audrey Lucas, Tom Latkovic, Matt Wilson, Ezra Greenberg, Kevin Buehler, and Klemens Hjartar, representing views from The McKinsey Global Institute, and Strategy and Corporate Finance, Healthcare Systems and Services, Public and Social Sector, and Risk practices.

Only eight weeks ago, we published “Safeguarding our lives and our livelihoods: The imperative of our time.” Back then, we worried about the supply of ventilators and critical-care capacity, the world’s ability to suppress the coronavirus, and how governments would respond to the pandemic’s economic fallout. So what has the world learned since?

We now know that we can curb the spread of the virus, can rapidly expand critical care, and are on our way to scaling the availability of testing. We have seen most governments and central banks rapidly move to implement stimulus and liquidity measures to cushion the economic impact. Unfortunately, we have also confirmed that lockdowns cause deep economic shocks: peak to trough, developed economies are likely to see GDPs decline by between 8 and 13 percent in the second quarter of 2020 (Exhibit 1). By the end of April, more than 20.5 million jobs have been lost in the United States since the start of the pandemic. Clearly, some of the initial uncertainty associated with the coronavirus has been reduced—but it remains high.   ... "

Wharton on Global Economic Impact of Coronavirus

Considerable piece here from Wharton.  Notable for other implications for epidemics and their influence on economic systems.  The embedding of uncertainty in large scale effects.  Notable the mention of SARS example now two decades ago.

Containing the Coronavirus: What’s the Risk to the Global Economy?

On Monday, February 24, stock indices tumbled, spooked by reports that the coronavirus outbreak that emerged in China is spreading to countries including Italy, Iran and South Korea. A day later, trading in stocks across world markets remained choppy, reflecting hope that the economic fallout might be manageable — just as damage from the SARS epidemic was some two decades ago — but also fear that the economic impact could be significant and linger longer.

The markets’ movements mirror the uncertainty that prevails and persists not just in the U.S. but all over the world. Several weeks into the coronavirus outbreak that has brought the world’s second largest economy to its knees, some of the most basic aspects of the virus remain unknown. It’s not yet clear how widely beyond China COVID-19 will spread; this week, numbers of infected individuals have surged outside China. Still, exactly how it is transmitted, how easily, and how lethal it might be are aspects of this coronavirus that remain to be uncovered, according to University of Pennsylvania scientists.

As the human toll mounts, so does the economic damage. The business realm, of course, tends to shudder in the face of uncertainty, and right now, with reports on the seriousness of the coronavirus evolving each day if not each hour, the eyes of commerce are on epidemiology.  ... " 

Challenges of Automation

Former IBMer we worked with writes:

Irving Wladawsky-Berger:  A collection of observations, news and resources on the changing nature of innovation, technology, leadership, and other subjects. ....

The Challenges of Automation in a Fast Changing Economy

“Technological innovation should be embraced,” notes Automation and a Changing Economy, a recently published report by The Aspen Institute.  “Automation has been a largely positive economic and social force, and looking forward,   automation will be necessary to feed, house, and raise the living standards of a growing and aging population.”  

But, “While it is important to note that automation’s overall, long-run effect on the economy has been positive - more jobs, more growth, higher living standards - this does not negate the disruptive impact of automation on individuals and communities, which results from displacements, changing skill needs, and income inequality.”

The report is divided into two sections: The Case for Action, which explores how automation impacts the economic security and opportunity of American workers, and Policies for Shared Prosperity, which outlines a policy agenda for addressing automation’s challenges and opportunities.  Let me summarize the key conclusions and recommendations in each of the report’s two sections. ... " 

Scenarios for the Future of Work

As usual excellent pointers to learning in this area.

Via the O'Reilly Next Economy Newsletter

4 scenarios for the future of work  (70+ page PDF)

Based on a methodology called morphological analysis, new research from the UK’s Royal Society for the Encouragement of Arts, Manufactures, and Commerce on prospects for the future of work by the year 2035 finds four potential scenarios: the “Big Tech Economy” of fast-paced technological innovation; the “Precision Economy” of hypersurveillance, algorithmic optimization, and ratings-driven professional reputations; the “Exodus Economy” of slower growth and alternative economic models; and the “Empathy Economy” of corporate responsibility and greater appreciation of human-touch sectors. .... " 

Economy of Supply Chains

An economy of Supply Chains.  Thoughts and Statistics.

In HBS Working Knowledge

Business Research for Business Leaders

The Secret Life of Supply Chains
By Michael Blanding:  While US policymakers and politicians focus on reviving the manufacturing sector, Mercedes Delgado and Karen Mills unearth a source of better jobs hidden in plain sight. Call it the supply chain economy.

Like archeologists digging on a remote hillside, business researchers have unearthed an important segment of the United States economy all but hidden from traditional innovation policy, yet accounting for tens of millions of jobs crucial to America’s ability to produce goods and services.

The research rethinks what academics and practitioners have simply called the supply chain—a loose federation of individual suppliers that feed companies with the goods and services necessary to create products for consumers and businesses. But a deeper look reveals existence of an important “supply chain economy.”

According to the researchers, “Supply chain industries are a distinct and large segment of the economy. In 2015, they accounted for over 53 million jobs, 43 percent of US employment.”

“We think this is a breakthrough—a new way of categorizing the economy that recognizes the unique role of suppliers, and seems to have implications for policies that promote innovation and good jobs,” says the study’s coauthor, Harvard Business School Senior Fellow Karen Mills.

For example, the research challenges the focus on reviving the manufacturing sector as the main way to rebuild the American economy. Since 2000, domestic manufacturing jobs have slid on a roller-coaster drop, falling more than 30 percent, or 5 million jobs, largely due to import competition and automation. About 12 million jobs remain in the sector..... "

McKinsey on the Frontier of Artificial Intelligence

An 80 page non-technical overview of AI today.  Perhaps not enough detail, but a useful exec view of where we are, where we are going , and some reasonable domain specific descriptions.

Mckinsey Global Institute
Artificial Intelligence, the Next Global Frontier

 Since its founding in 1990, the McKinsey Global Institute (MGI) has sought to develop a deeper understanding of the evolving global economy. As the business and economics research arm of McKinsey & Company, MGI aims to provide leaders in the commercial, public, and social sectors with the facts and insights on which to base management and policy decisions. The Lauder Institute at the University of Pennsylvania ranked MGI the world’s number-one private-sector think tank in its 2016 Global Think Tank Index for the second consecutive year.

MGI research combines the disciplines of economics and management, employing the analytical tools of economics with the insights of businessleaders. Our “micro-to-macro” methodology examines microeconomic industry trends to better understand the broad macroeconomic forces affecting business strategy and public policy. MGI’s in-depth reports have covered more than 20 countries and 30 industries. Current research focuses on six themes: productivity and growth, natural resources, labor markets, the evolution of global financial markets, the economic impact of technology and innovation, and urbanization.

Recent reports have assessed the economic benefits of tackling gender inequality, a new era of global competition, Chinese innovation, and digital globalization. MGI is led by four McKinsey and Company senior partners: Jacques Bughin, James Manyika, Jonathan Woetzel, and Frank Mattern, MGI’s chairman. Michael Chui, Susan Lund, Anu Madgavkar, Sree Ramaswamy, and Jaana Remes serve as MGI partners. Project teams are led by the MGI partners and a group of senior fellows and include consultants from McKinsey offices around the world. These teams draw on McKinsey’s global network of partners and industry and management experts. Input is provided by the MGI Council, which coleads projects and provides guidance; members are Andres Cadena, Sandrine Devillard, Richard Dobbs, Katy George, Rajat Gupta, Eric Hazan, Eric Labaye, Acha Leke, Scott Nyquist, Gary Pinkus, Oliver Tonby, and Eckart Windhagen. In addition, leading economists, including Nobel laureates, act as research advisers.

McKinsey & Company is a member of the Partnership on AI, a collection of companies and non-profits that have committed to sharing best practices and communicating openly about the benefits and risks of artificial intelligence research. The partners of McKinsey fund MGI’s research; it is not commissioned by any business, government, or other institution. For further information about MGI and to download reports, please visit   www.mckinsey.com/mgi. 

API Economy

Expanding business models

2017 Is Quickly Becoming The Year Of The API Economy

This year more CIOs will have their bonuses tied to how many new business models they help create with existing and planned IT platforms than ever before. This trend will accelerate over the next three years. CIOs and IT staffs need to start thinking about how they can become business strategists first, technicians and enablers of IT second. CIOs must create and launch new business models faster to keep their companies competitive. APIs are the fuel helping to make this happen.

The Urgency To Create New Business Models Is Driving API Proliferation

APIs (Application Programmer Interfaces) are the components that enable diverse platforms, apps, and systems to connect and share data with each other.  Think of APIs as a set of software modules, tools, and protocols that enable two or more platforms, systems and most commonly, applications to communicate with each other and initiate tasks or processes. APIs are essential for defining and customizing Graphical User Interfaces (GUIs) too. Cloud platform providers all have extensive APIs defined and work in close collaboration with development partners to fine-tune app performance using them. Amazon Web Services, Facebook, Google, Marketo, Salesforce, SAP Hybris, Twitter and thousands of other companies have APIs available. As of today, the Programmable Web lists 16,590 APIs in its database.

Removing The Hype By Benchmarking API Maturity .... "

Procter Call to Digital Ad Economy

In Adage:

 Will P&G's Forceful Call to Arms Reform the Digital Ad Economy?  By Nat Ives

Procter & Gamble Chief Brand Officer Marc Pritchard has unleashed a broadside against the way things are done in digital advertising. "The days of giving digital a pass are over," Mr. Pritchard told the Interactive Advertising Bureau's recent annual leadership meeting. "It's time to grow up. It's time for action."

P&G, the biggest advertiser in the world, is re-examining all media-agency contracts after it found a surprise in at least one and making all partners use industry-standard viewability metrics, fraud protection and third-party verification. ...  "

Uncertainty in US Economy

In Knowledge@Wharton,  on uncertainty in the US economy

" ...  “The biggest risk we face is uncertainty. If you ask every business leader, their biggest concern is: ‘Whatever changes occur, just do them gradually. Let us adapt.’ They have been in a world of change for a long time. That’s not going to go away; we can’t take away change…. Their biggest concern is if something hits them, and they simply can’t or don’t have the time and the resources to adjust.”

Harker and Wharton finance professor Jeremy Siegel discussed the outlook for the U.S. economy in 2017 on the “Behind the Markets” show on Wharton Business Radio on SiriusXM channel 111. Siegel hosts the show with Jeremy Schwartz, director of research at WisdomTree. (Listen to the podcast at the top of this page.) ... " 

McKinsey Surveys the Gig Economy

McKinsey via surveys and useful interpretation and advice for our 'industry'.

Independent work: Choice, necessity, and the gig economy

By James Manyika, Susan Lund, Jacques Bughin, Kelsey Robinson, Jan Mischke, and Deepa Mahajan 

The McKinsey Global Institute examines all the ways people are earning income, as well as the challenges independent work presents.

Working nine to five for a single employer bears little resemblance to the way a substantial share of the workforce makes a living today. Millions of people assemble various income streams and work independently, rather than in structured payroll jobs. This is hardly a new phenomenon, yet it has never been well measured in official statistics—and the resulting data gaps prevent a clear view of a large share of labor-market activity.  ... " 

Data Scientists in an Insight Economy

What is the Role of the Data Scientist in the Insight Economy?
The insight economy is based on the monetization of data and analytics. This model isn’t new — I mean, what do you think Bloomberg does all day? — but it goes beyond that. Really, it’s all about changing the way you look at people’s roles within a company. The data scientist is an important part of the team that facilitates the transition to the “insight economy” model. .... " 

Global Competition for Profits

In McKinsey:   Having been part of a global enterprise, the dynamics of global profits have always been interesting.    A radical change in progress?

" .... The world’s biggest corporations have been riding a three-decade wave of profit growth, market expansion, and declining costs. Yet this unprecedented run may be coming to an end. Our new McKinsey Global Institute report, Playing to win: The new global competition for corporate profits, projects that the global corporate-profit pool, which currently stands at almost 10 percent of world GDP, could shrink to less than 8 percent by 2025—undoing in a single decade nearly all of the corporate gains achieved relative to the world economy during the past 30 years ... "  

Shareology: Why we Share and How We Can do it Better

Reading Bryan Kramer's new book  Shareology: How Sharing is Powering the Human Economy. Addresses sharing among humans in general, and also why I run a blog and am interested in what I do.  So far a very good and surprisingly up to date book.   It maps some of my own experiences.  Will review further when I complete it.