Artificial intelligence is being viewed by investors as the Next Big Thing, with rising exuberance contributing to rising stock prices. While there is nothing wrong with being forward-looking regarding AI, it’s important to have a balanced perspective about the technology. The reality is that most technologies are less impactful in the short run than people think they will be, and more impactful in the long run than people expect.
Let’s look at the internet as an example—when the technology was developed in the late 1980s, it had very little impact initially. Then in the early 1990s, we started to see the development of public-facing websites. This ultimately led to the Dotcom craze and the excitement around any company with “clicks,” “eyeballs” and a website. Yet for years, the internet had very little impact on business or general daily life. By 1999, e-commerce and online shopping were mostly unknown, search engines were still more like phone books than anything else, relatively few people had email addresses, and concepts like social media, streaming video and remote work were embryonic at best.
Even a decade after the internet was created, there was still no Google or Google Maps, no Facebook, Netflix, Zoom or TikTok, and no Uber, AWS, Fiverr or Airbnb. While Amazon existed, it was in its infancy and certainly was not offering anything like the variety of products it has today, or free Prime shipping. AOL was seen as the future, and there was online stock trading—on dial-up modems with each trade carrying a commission of anywhere from $15 to $50 in general.
All of this changed of course, and today the Internet is central to business and everyday life. However, it has taken 30-plus years to see that transformation. Part of this is due to the technology growing alongside complementary innovations. For instance, the Internet is much more useful today thanks to smartphones, high-speed broadband, low-cost computers, reams of digitized data and a constellation of private satellites around the world, all of which were developed since 1999.
Artificial intelligence is likely to go the same way as the internet. In 30 years, AI will seem integral to business and personal life, and while people will be able to imagine a world without it, just as we can imagine or remember a world without the internet today, in the long run, it will be clear to nearly everyone that AI has had a significant impact on daily life. The internet was a rounding error on both expenses and revenues for the vast majority of firms throughout the 1990s and the same will likely be true for most companies with AI. The long-run business winners in AI may not even be in existence yet, just as the internet “giants” of 1995 are not necessarily the giants of today.
In summary, there is no reason investors cannot get excited about the potential of AI. However, that excitement should be balanced by remembering that the financial impact of this technology on most businesses is currently very limited, and will likely take years to fully develop.
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