The future of artificial intelligence (AI) is a topic of much debate, with opinions varying widely on its potential impact. Some view AI as a fleeting trend, merely another bubble inflated by hype and misguided investments. Others perceive it as a looming threat, likely to displace jobs en masse and disrupt economies. Amid these contrasting views, the rapid evolution of AI technology continues, alongside an unprecedented surge in investment. Financial experts, however, often maintain that the economic landscape will remain unchanged in the near future. In an effort to refine their understanding of AI’s capabilities, Joseph Davis, Vanguard’s global chief economist, and his team developed a new analytical framework, the Vanguard Megatrends Model, based on a proprietary dataset spanning several years. Their research indicates that AI is set to emerge as a vital general-purpose technology, one that not only enhances productivity but also reshapes industries and complements human labor rather than replacing it.
Davis asserts that the prevailing belief among economists—that the future will mirror the present—is likely misguided. His projections suggest that AI could have a more substantial impact on productivity than personal computers did in the past. While acknowledging the potential for job displacement in certain sectors, he emphasizes that approximately 80% of jobs will likely evolve to incorporate a blend of innovation and automation. This paradigm shift will enable workers to concentrate on higher-value tasks, with AI acting as a supportive co-pilot in various professions. Furthermore, traditional economic models often overlook the transformative effects of AI, as they fail to connect short-term productivity fluctuations with the broader implications of technological advancement. Davis highlights that automation enhances productivity by managing routine tasks, while augmentation empowers workers by amplifying their skills and fostering the emergence of new industries.
Despite recent rapid advancements in digital technology, Davis points out that the U.S. has experienced stagnation in productivity growth, largely due to inadequate automation in sectors like finance, healthcare, and education. The services sector, which constitutes over 80% of the U.S. GDP and workforce, has seen the slowest growth in productivity. As the workforce demographics shift—characterized by an aging population and declining birth rates—the necessity for technological integration becomes even more pressing. Davis notes that while concerns about job loss due to AI are valid, the reality may be a shortage of workers rather than an oversupply. For instance, in healthcare, AI tools can enhance the efficiency of nursing by streamlining administrative tasks, allowing professionals to devote more time to patient care. He estimates that within five to seven years, AI could effectively add the equivalent of 10 million to 15 million workers to the U.S. labor force, easing demographic pressures. Overall, Davis encourages investors to focus on the beneficiaries of AI adoption—its users—rather than its creators, as companies that effectively integrate AI into their operations could see significant boosts in productivity and profitability.
Source: Rethinking AI’s future in an augmented workplace via MIT Technology Review