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Warren Buffett on the question of AI which has baffled economists for a century

Warren Buffett: AI is deep, and that's what makes it genius

Warren Buffett is the first to admit that he doesn’t know much about artificial intelligence. This is consistent with its long-standing philosophy of avoiding technologies that are beyond its reach. His massive stake in Apple, for example, his largest stock holding, even if it was reduced, appeared more as a revelation linked to its success with consumers than as a technological bet, he said this weekend. end at Berkshire Hathaway’s annual meeting. But at this year’s well-attended Omaha event, the billionaire investor and CEO and chairman of Berkshire couldn’t avoid AI being a topic of concern to shareholders.

Buffett answered several questions about artificial intelligence. Calling AI profound, Buffet said the technology is like a “genie”: Once out of the bottle, it could have disastrous effects. The worst fears he sees are the capacity for mass fraud enabled by AI at the threat of a scientific breakthrough equivalent to nuclear weapons, with unintended consequences and risk to humanity. And there is at least one question, Buffett said, that no one can answer when it comes to the impact of AI on the world, which can change the lives of every individual on a daily basis. It’s a question, he says, that has preoccupied the best economists for a century.

“It can create a tremendous amount of free time,” Buffett said. “Now what the world does with free time is another question. … I know a lot of people think that in the beginning, when they go to work, what they want is free time – and that “What I like is actually having more problems to solve,” said Buffett, famously said to have “tap danced” to work in his Omaha office for decades.

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Buffett cited the example of John Maynard Keynes, one of the most important economic thinkers of the modern era, who correctly predicted that output per capita would increase at an exponential rate, but failed to predict that that humans would do with increased productivity. Keynes is generally considered the father of macroeconomics, best known for his support of government intervention through social and employment programs to stabilize the economy during economic downturns, notably the Great Depression, and for his books such as “The General Theory of Employment, Interest and Money”. “, which Buffett recommended adding to a reading list.

Productivity has been booming for several quarters. According to BLS data, after a massive spike in productivity during Covid, there was a prolonged decline, and only in the last four quarters has the data reversed itself, up about 3 % over one year. This rebound has business leaders wondering about the factors that could come into play, from AI to return-to-office mandates. But most say it is still too early in the technology’s implementation to make a connection, drawing a distinction between AI that has already been deployed for years and whose gains can be tracked, and AI generative that everyone is talking about today, and which will take some time to appear in the data.

AI will ultimately be a major driver of labor productivity, even if it’s not there yet. IBM Vice Chairman and former head of the National Economic Council Gary Cohn said last week on CNBC that AI adoption is happening quickly and productivity gains are also happening, albeit slowly. “Every company is looking at AI and deciding where it’s going to help,” he said during a recent interview on CNBC’s “Money Movers.”

“It’s an evolution; we’re going to move toward that in the productivity game, and it’s going to trickle down to the economy slowly,” Cohn said. But he added: “I don’t think we’ve seen a real productivity gain from AI.”

Most companies are still at the stage of setting budgets for AI and overall strategy on how it can help both customers and employees, and are trying to move into implementation mode.

Dev Ittycheria, CEO of MongoDB, whose company last week released a suite of tools to help businesses “overwhelmed by AI,” recently told CNBC that executives have gotten to the point of wondering when the The value and return of the AI ​​would go to them. The market is going through the phase where value accumulates only at the bottom layer, such as Nvidia and ChatGPT/OpenAI, and it is now essential for companies to prepare for applications built on this infrastructure.

“Clearly, there is a trend towards ‘agentic’ workflows, where agents take actions on behalf of the end user autonomously. It’s a bit far, but people need to build applications, enrich the customer experience and generate more costs. the business and find new ways to drive growth.

Productivity booms and technology

Productivity booms are rare and tend to be once-in-a-generation events – the last one occurred in the mid-to-late 1990s, before the dot-com crash – a period of significant economic growth that is notably not not driven by the creation of new jobs.

The problem of technological advances reducing the number of available jobs is an ongoing concern, and countless surveys have been released since ChatGPT’s release in late 2022 on job losses, or in the jargon often used to reflect uncertainty as for the exact impact, jobs. with “exposure to AI”.

Companies like to say that AI won’t replace jobs, but will allow human workers to focus on higher value skills and tasks while handing over to machines the rote work that humans don’t like to do anyway. But about 37% of business leaders surveyed by Resume Builder said technology would replace workers in 2023, and 44% of them say more layoffs would occur this year because of advances in AI. However, historically, technological advances – such as increased industrialization – have not proven to be the career killers that experts warn about.

Due to the potential lack of job opportunities related to the growth of AI, some experts, as well as billionaires and politicians, have expressed the need for a universal basic income, or UBI, in order to supplement low or non-existent wages and keep the economy afloat. . Tech icons discussing the idea include Elon Musk, Mark Zuckerberg and Sam Altman.

There are, however, reasons to be skeptical about the exact relationship between technology and jobs.

In the words of the godfather of productivity research, Nobel Prize-winning economist Robert Solow, in the late 1980s, “the computer age is visible everywhere except in productivity statistics.”

This was called the Solow productivity paradox, and the boom of the late 1990s would challenge it. But subsequent research showed that there was actually a murky relationship between the Internet age and productivity gains. A co-author of the book at McKinsey told the Harvard Business Review that adopting Solow’s view of the 1990s tech boom was “oversimplistic,” as was the view that followed, according to which the Internet was the engine of the productivity boom.

With these concerns and unanswered questions in mind, Buffett said labor-intensive companies like Berkshire Hathaway need to think about a balance between how technology can help them become more efficient without put humans in danger.

“I don’t know how you can be sure that that’s what’s happening any more than I know how to be sure that when you used two atomic bombs in World War II you knew you didn’t have created something that could destroy the world later,” Buffett said.

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