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Promoters claim AI is so powerful that it is close to being sentient. The reaction by Paul Romer – Nobel Laureate Economist and Boston College professor who has been following the tech sector for four decades – is that close only counts in horseshoes and hand grenades.

Paul Romer Headshot

Since he clarified the fundamental difference between the dismal economics of scarce objects and the much more optimistic economics of ideas, Romer has seen wave after wave in which the tech sector uses this insight as an excuse to over-promise and under-deliver.

His reaction to the new AI wave that took over after the collapse of the cryptocurrency wave, is that all the hype is based on a very dubious achievement: large language models (LLMs) can make up claims that have zero basis in fact, but which sound so convincing that many people believe them.

“The growth of digital technology hasn’t in the past ushered us into this new era of much more rapid productivity growth, and I doubt that it’s going to do it now,” Romer explained in the South China Morning Post. “So, I think the perception that somehow everything has changed is like the perception that cyber currencies are going to change the world.”

As he notes in this video clip, there are use cases where AI can generate real value – he cites the example of autonomous tractors that follow a leader piloted by a farmer – but the tech sector has failed to deliver on its grandiose promise that we’d soon have fully autonomous automobiles. Progress came rapidly in the beginning, and we’ve been close to having them for years now.

Romer predicts that this is the pattern we’ll see over and over again: rapid progress that brings us close to the promised outcome. But close doesn’t count when lives are at stake.

Leaders are not wrong to be optimistic about the potential of AI, but they should be realistic about what it can and cannot do for productivity. Stern Strategy Group connects you with renowned thought leaders whose insights, strategies and management frameworks help organizations fuel growth and disruptive innovation to better compete in a constantly changing world. Let us arrange for these esteemed experts to advise your organization via virtual and in-person consulting sessions, workshops and keynotes.

The AI Bubble: Avoid Falling for the Hype was last modified: June 13th, 2024 by Whitney Jennings