Artificial Intelligence

As Attractive and Elusive as the Holy Grail
 

Ever since Alan Turing defined the possibility of intelligent computers, the goal of creating Artificial Intelligence (AI) has proved as attractive and elusive as the Holy Grail. Computers have beaten chess masters, chatted with humans, guided robots and steered vehicles through city streets. Yet even children still outperform even the smartest machines. We do not fully understand the human mind well enough to develop good AI. In addition, a truly useful AI must deal with humans in real-world situations, be aware of the environment and make moral decisions. In this area, AI stills crawls.

But the marginal cost of applying AI is near zero, and a study from the Oxford Martin School suggests that nearly half of jobs could be automated in the next 25 years. Even intellectual jobs are being automated much the same way industrial automation did on the factory floor. One researcher said, “The work done by doctors, lawyers, and scientists could be done by computers.” Some people are thinking about an “AI-rmageddon,” in which artificial intelligence grows smarter than humans, takes control of the world, and subjugates our species.

IBM, Google, Microsoft, Facebook, DARPA and MIT continue to make gains in practical AI applications. Rather than try to make computer intelligence identical to humans, they focus on “weak AI,” smart machines that may not think like people yet are capable of replacing them in routine mental tasks. These special purpose AI systems are used in transportation, banks, hospitals, loan applications and in smartphones.  Andrew Ng, chief scientist at Baidu Research, called AI “the new electricity. Just as electricity transformed industry 100 years ago, AI will now do the same.” 

Progress is also supported by governments. The Chinese Ministry of Industry and Information Technology has developed a five-year plan that targets the big-data industry. The plan calls for Chinese companies in the field to exceed 1 trillion yuan (US$144 billion) in revenue by 2020. [i]


Success Stories in AI Applications

Applications of AI have been exploding as the technology takes off. GE and IBM are building entire labs devoted to AI systems for better managing complex systems like health care, power grids, auto traffic and almost everything else. Google, Facebook, Microsoft and Amazon all use personal-assistance software to anticipate users’ needs. 

Many millions of voice assistants (Amazon’s Alexa, Google Home, Microsoft’s Cortana)  are used in homes to turn off lights, order pizzas, fetch movies, settle dinner table disputes, answer homework questions and entertain friends. Parents say “She’s (sic) definitely part of our lives.” Google uses neural networks to read addresses off photographs, decipher CAPTCHAs with 95+ percent accuracy, and block Gmail spam with 99.9 percent accuracy. 

Google’s self-driving cars use visual indicators, GPS and a range of sensors to create AI software systems. “We believe the utility of reducing auto deaths and idle time in traffic add up to a US$200+ billion opportunity in autonomous vehicle technology,” says Gene Munster. Venture capitalist Bill Gurley predicts that hundreds of companies will claim to have successful AI-guided self-driving cars over the next five years, but the vehicles will operate in controlled environments that do not reflect the real world. 

After IBM’s AI system Watson famously beat human contestants in the TV show Jeopardy,Watson is being put to practical use. IBM, the Mayo Clinic and the Memorial Sloan Kettering Cancer Center are now training Watson to help doctors design “individualized, evidence-based treatment plans” for patients. Watson is being tested in business meetings both to answer simple requests for information and to help make complex business decisions. 

Doctors have started using artificial neural networks (ANNs) to screen for heart murmurs, detect lung nodules in chest radiographs, and find polyps in CT colonography. Researchers found ANNs correctly classified diagnoses in 95 percent of cases. 

Researchers at Imperial College London has created an AI program that taught itself to play chess by evaluating positions much as humans do, rather than using brute-force methods. After only 72 hours, it was able to match the best chess engines in the world.[ii]A computing system called AlphaGo developed by DeepMind defeated the reigning European champion player of Go and It later won a three-match series against world champion Ke Jie. 

InHong Kong’s subways, AI systems schedule and manage 10,000 people who carry out thousands of engineering tasks each week and boast a 99.9 percent on-time record, beating London and New York’s subways. Hong Kong’s Immigration Department uses AI to help process visa, passport, and residency requests. Dragon TV is using Microsoft’s Xiaoice (pronounced shao-ice) AI to deliver weather reports. “Xiaoice works more efficiently than human forecasters,” said director  Song Jiongming. [iii]


Research Advances Taking Off

Science is integrating machine learning, vision, navigation, manipulation, planning and reasoning, and natural-language processing into a general AI framework. “Separate fields are mature enough to fulfill the grand dream of AI,” said one Stanford researcher. Ray Kurzweil, Google’s Director of Engineering and a well-known futurist, said, “The median view of AI practitioners today is that we are still several decades from achieving human-­level AI. I am more optimistic and put the date at 2029.” [iv]

Qualcomm has been manufacturing a neuromorphic computer chip that mimics the neural structures and processing methods found in the brain and now plans to use it in drones, cars, PCs, VR, and other devices. IBM is developing a chip  that simulate 10 billion neurons with 100 trillion connections. [v]

Vision systems based on deep learning can perceive the world much as a human. One program correctly identified hand drawings 75 percent of the time while humans scored only 73 percent. Georgia Tech graduates have created a neural network that recognizes daily activities in real-life images with about 83 percent accuracy. Google calls its new Google Lens “a search box for real life.” Point your smartphone’s camera at something, and Google will tell you about it, answering your questions before you ask them.[vi]

Facebook is using deep learning algorithms—AI methods that build abstract relationships based on lots of data—for facial recognition, targeted advertising, and designing AI applications, while keeping its code open for anyone to use. Machine Learning has been successfully used to read the mind using MRI scans.

Tufts researchers are trying to identify basic components of human morals and embed them into an AI. The effort could enable an AI to make complex ethical decisions that can override rigid instructions sets. 

Researchers are developing deep learning systems that allow robots to figure things out for themselves—for example, detecting objects in video and recognizing how to grasp them. Todai Robot is an AI project that scored in the top 20 percent of students on the U of Tokyo entrance exam. 

Elon Musk co-founded OpenAI to develop general purpose AI systems that outperform humans at most economically valuable work. He wants to make machines smarter than people. Scientists at MIT and Brown U. have given a robot the power of abstract reasoning, allowing it to follow instructions without being told what to do.[vii] 

 
The Limits of AI

The development of a general-purpose AI comparable to human intelligence seems far off because it appears to depend on understanding the workings of our brain. “Machine learning is a painstaking, slow process of acquiring information through millions of examples. A machine improves itself, yes, but very, very slowly and in very specialized ways,” said Yoshua Bengio, professor at Université de Montréal, Canada. Nobel Laureate Herbert Simon predicted a computer would become chess champion of the world by 1967, three decades before IBM’s Deep Blue beat Garry Kasparov in a six-game match.

Stephen Hawking, Elon Musk, and many other famous authorities have been warning that AI could lead to a dangerous new arms race. An open letter with hundreds of signatories claims, “a global arms race is virtually inevitable, and the endpoint of this technological trajectory is obvious: autonomous weapons will become the Kalashnikovs of tomorrow.” “The thing I’m more worried about are things like manipulating people through smart advertising and the social impact, like people losing their jobs,” said Yoshua Bengio, professor at Université de Montréal, Canada. 

As AI becomes more capable, it becomes increasingly difficult to figure out how it works. Programmers of advanced expert systems already have to make special provisions so users can figure out how the software arrived at its recommendation. We soon may find ourselves relying on AI systems that we simply cannot understand. In many complex tasks, machines cannot yet replace human skill and judgment. For example, an Air France airliner crashed in South America after the autonomous autopilot returned control to the human captain, who could no longer handle the situation. 


Forecast

Authorities are generally optimistic. The Artificial General Intelligence Conference estimates that AI is likely to arrive in the 2020s, and the leader of the OpenCog project said, “I am confident that we will have human-level AI by 2025.” 

Gartner forecasts that 85 percent of customer interactions will be managed without a human by 2020. By the end of 2018, “customer digital assistants” will recognize customers by face and voice across channels and partners. [viii]

PwC and Accenture project that by 2030, AI will add US$15.7 trillion to the global economy. [ix]

McKinsey is also optimistic, forecasting that  AI-powered applications will add US$13 trillion to the global economy over the coming decade, averaging roughly US$ 1 trillion each year.[x]

TechCast experts estimate that AI reached its take-off point of 15% adoption about 2018 and should reach mainstream in the mid 2020s when 30% of routine mental tasks are likely to be automated.  AI is forecast to create a global market of more than US$1 Trillion/year in 2030 and possibly much higher. Our experts feel relatively confident in this estimate. See the Life Cycle Graph to illustrate. 


Strategic Implications  

AI could free workers from non-intellectual tasks. White-collar professionals too will see a radical change in their labor market in the next decades. AI will relieve humans of tasks that are dangerous or boringly repetitive. In doing so, they will free us to pursue more satisfying careers. 

Unlike fallible humans, AI systems never get tired or bored or frustrated enough to tell off customers on the tech support line, never let their attention wander, never pilfer from their employers or show up on Monday morning with a hangover. When AI replaces human workers, error rates often plummet while productivity soars; a factory in Dongguan, China, replaced 90 percent of its workers with robots and witnessed a 250-percent rise in productivity with 80 percent fewer defects. [xi]

It’s also possible, and perhaps more likely, that AI will benefit humanity in unexpected ways. “AI can be our friend,” Microsoft’s Bill Gates said. “AI is just the latest in technologies that allow us to produce a lot more goods and services with less labor. And overwhelmingly, over the last several hundred years, that has been great for society.” Gates noted, however, that society must figure out how to retrain workers and distribute benefits in a new economy. [xii]

That is exactly what McKinsey identified as the key to sustained growth of the “AI powered organization.” The challenge is to build robust AI systems that avoid the risks of alienating employees through job losses and stress, and also causing lost productivity. It’s also essential that good AI systems retain customers trust, privacy and patronage. This requires building AI with carefully defined data sets, ensure accuracy of the results, avoid human bias and ensure transparency and accountability.

In the end, McKinsey advocates applying the stakeholder model to involve employees, customers, suppliers, governments and other constituencies in design sound AI systems. They estimate that “Tech for better lives” systems will outperform traditional approaches by a factor of roughly two, or a 100 percent gain.[xiii]Coming from the top consulting firm in the world, this recommendation reinforces the move toward “stakeholder democracy” that TechCast and others like the Conference Board have advocated.                                                                                                                                                                                                                                                     

 i  South China Morning Post, Apr 10, 2017
[ii]TechCrunch, May 24, 2017
[iii]Brookings, Apr 26, 2017
[iv]Futurism, Mar 15, 2017
[v]Fast Company, Jan 10, 2017
[vi]Fast Company, May 18, 2017
[vii]Journal of Artificial Intelligence Research, Q1 2018
[viii]Gartner, Mar 2, 2017
viiVisual Capitalist, Aug 21, 2017
[x]McKinsey Quarterly, August 2019
[xi]ZME Science, Feb 3, 2017
[xii]CNBC, Feb 16, 2018
[xiii]McKinsey Quarterly, August 2019

Democratic Enterprise Arrives

Democratic Enterprise

TechCast has been forecasting the possibility that corporations will become quasi-democratic by pursuing the interests of their employees, customers, partners and communities in addition to shareholders. Now that the US Business Roundtable has broadened the role of corporations to include all stakeholders, the time is right to claim that the concept of democratic enterprise has arrived.

Alan Murray, chief editor of Fortune magazine, recently noted our economic system is stalled by stifling income inequality, loss of jobs to global trade, a new acceptance of socialism and the failure of democratic governments:

             “…an ever growing group of business leaders believe they must take up the mantle to address social problems into the core of their business … Companies are moving beyond fuzzy notions like sustainability and corporate citizenship to making meaningful social impact central to how they compete.” (Fortune, Sep 1, 2016)

 

Murray cited Michael’s Porter’s concept of “shared value” as a guiding principle, but he could just as easily have noted the growing interest in collaboration, conscious capitalism, or what TechCast calls democratic enterprise. These and related ideas are now practiced widely among progressive companies and taught in the curriculum of 500 business schools around the world. We have been forecasting the widespread adoption of a quasi-democratic form of business as a wild card at TechCast, and our experts assigned it’s arrival a modest 35 percent probability, although they also think it should have a large positive social impact of + 4. 

Shared value is but a small step in this direction, yet it marks a critical divide in business that could be truly revolutionary. By simply recognizing the economic reality that employees, customers, the public and other stakeholders are essential to business success, corporations could enter the modern world as engines of both social progress as well as financial gain. Moving from a profit-centric to a human-centric model of enterprise would be roughly comparable to the shift from an Earth-centric view of the universe to Copernicus’s understanding that planets revolve around the Sun.

The impacts of such a historic change are so vast they defy analysis, but a few big advantages stand out. The dominance of money in economic affairs would yield to a more balanced concern that includes the people involved. Business leaders could assume their rightful place as social heroes instead of pariahs. Governments could hand off much of their responsibility for the social welfare to this new form of self-regulating business ecosystem.

These are powerful forces for creating a new form of political economy that is badly needed. But the greatest change is the realization by business leaders that combining profit and social needs is not only possible but also a competitive necessity. Here’s how Microsoft’s CEO, Satya Nadella, described it: “We don’t have a long-term business if we don’t address the inequities.”

For more, see our original wild card forecast on Democratic Enterprise.

 

China Falls

China

Will China Collapse Like the USSR?

Although China has been one of the world’s fastest-growing economies, averaging 10 percent growth in GDP for nearly three decades, it began losing momentum in 2012. As a result of emphasizing manufacturing and exports rather than consumption, poor quality control, and lax banking practices, China is now experiencing a housing bubble, high unemployment, severe  pollution, and growing social unrest. These have caused a ripple effect throughout the economy. Could China—once called the next superpower—collapse? James Fallows reports that “China is less free, less open, and more belligerent that it was five years ago, or even ten.” [i]

On the other hand, China is also implementing its “One belt one road” policy that carries forward the growth momentum to establish trading partners around the world. It is cracking down on internal dissent and corruption as well as espousing globalization and a leader in taking steps to reduce global warming. Its leaders plan to eliminate absolute poverty by 2020 and become the dominant developed country by 2035.

 

Signs of Decline

The signs of trouble in China are serious: slowing growth, mounting risk and debt,  poor quality, increasing unemployment, environmental pollution.The central bank chief has recently warned of ‘Sudden, Contagious and Hazardous’ financial risks that the Chinese financial system is facing due to easy credit and high levels of debt. [ii]

More than 13 million tons of crops harvested each year are contaminated with heavy metals, and 22 million acres of farmland are contaminated by pesticides. Although no scientific proof is available, it is suspected that numerous cancer deaths are linked to industrial waste in the food chain. Some 400 cities in northern China suffer water scarcity. More than half the region’s groundwater is so polluted it should not be allowed to contact human skin.[iii]

The existing oversupply of peasant and college-educated manufacturing labor is being worsened by automation. Foxconn, an electronics manufacturer, aims to replace 1 million workers with robots in this decade, and robotics are projected to expand at over 18 percent annually in the coming years. These changes will save money and reduce waste but will eliminate many jobs. 

China became the world’s leading car manufacturer with the purchase of Volvo from Ford in 2010. However, to reduce congestion and air pollution, the government is limiting car registrations in Chinese cities, which will further slow economic growth. 

The ratio of old to young in China is decreasing from 5 to 1 to 1.6 to 1, making this one of the oldest societies in the world. The preponderance of old people is decreasing savings and economic growth. 

 

China’s Strengths

But the Chinese economy has great strengths that could withstand crisis. Economists estimate 10 to 20 percent of China’s economy is off the books. Many companies keep three sets of accounting records—one for official purposes, one for investors, and one for themselves. Private consumption in China continues to rise, reflecting the increasing affluence of the households. While growth has moderated in recent years, consumption expenditure per capita continues to grow at nearly 7 percent per annum.[iv]

China is the world’s largest exporter, with the highest revenues in textiles, electronic equipment, agriculture, and chemicals. It is also the world’s second largest importer. Recent estimates suggest the new consumer-led economy could generate 36 trillion renminbi (US$5.6 trillion) of additional GDP by 2030, compared with continuing the present export path.

Five-Year Plans have brought over 500 million people out of poverty since 1980. Large-scale surveys indicate a majority of Chinese people support the government, which has stoked nationalism to promote unity and inhibit dissent.  The government also owns much of the land, which has the largest reserves of precious metals in the world. 


Most Likely Forecast

There a few guides to estimating a highly uncertain event like the fall of a superpower. The best example is that nobody foresaw the collapse of the USSR. It is clear thatChina’s GDP growth has been below 7 percent recently, with further weakening to 6.4 percent forecasted by 2019. [v]

Such conditions of high uncertainty are exactly where the TechCast system of collective intelligence excels.  Pooling the judgment of our Global Brain Trust of experts over this issue produces the following a consensus. They collectively estimate a low probability of China’s collapse over the next few decades, about  15 percent. Of course, that could change as conditions develop, and we could be surprised by a sudden catastrophic tumble anytime. In the event of a China collapse, the impact is thought to be serious, -3 on a ten-point scale. 


Strategic Implications

The cost in world economic growth could be considerable. The economies of China’s largest trading partners—the US, Europe, Korea, Japan, Russia, Australia, Brazil, Canada, Chile, Peru, and South Africa—would also suffer from lost export revenues. 

China has gone from receiving aid to providing needed loans to the US and Europe. An insolvent China would hinder global recovery from future economic downturns, increase the cost of borrowing money, and inhibit the world’s economic growth for years to come.

Regime change would alleviate much of the social unrest by the lower class and emerging educated middle-class dissidents. Economic and political reforms could result in more personal freedoms and democracy within China.

[i]Atlantic, Dec 2016

[ii]Bloomberg, Nov 4, 2017

[iii]CNN, Apr 20, 2017

[iv]BBVA Research, March, 2017

[v]OECD, Nov, 2017