The rapid deployment of Artificial Intelligence (AI) applications, computer systems that mimic human intelligence, could turn the service economy into a winner-take-everything game. A few large companies developing the hardware and the software that powers these systems would capture almost all the value the service economy creates, with far-reaching consequences for Wall Street and Main Street.
Technology has always been a significant force of change in the economic game, benefiting society. For instance, the first and second industrial revolutions led to the mechanization of the production of goods, the creation of large cities, and the division of labor.
While these technologies favored larger companies over small ones and abolished some jobs; they created new ones that replaced the old ones. At the same time, they fostered the development of new products and productivity that benefited everyone.
The third industrial revolution brought many more changes in how economies produce goods and services. It advanced further the division of labor and raised productivity. Still, it tipped the game towards a smaller group of countries, companies, and individuals who possess knowledge, the critical resource behind this revolution.
The "fourth industrial revolution," driven by AI systems, will accelerate this trend for several reasons. First, it moves at a rapid pace.
"AI is taking a variety of different shapes and forms, but regardless of its specific design or functionality, the overall goal behind AI is to improve and advance," David Kemmerer, CEO of CoinLedger, told International Business Times. "These past few years of AI development have shown us that the improvement and advancement brought on by AI moves at an exponential rate."
Second, the job replacements will be massive, concentrated in the service sector, which provides two-thirds of jobs in developed countries like the U.S. Service jobs not touched by the previous revolutions, like accounting, medical, legal, and educational services, will be at the mercy of AI systems.
Third, AI systems use hardware and software tools developed by a handful of companies. For instance, AI hardware uses Nvidia and AMD, Intel, Apple, IBM, Alphabet, and Qualcomm. Likewise, AI systems use software made by Microsoft, Alphabet, Google, and Amazon software.
The massive replacement of service jobs by AI systems and the concentration of production of these systems to a few large companies further means the tipping of the balance between labor and capital income in favor of the second. It additionally implies that the shares of these large companies that make the AI systems are good long-term investments despite the big run-up in 2023.
Kemmerer advises companies to rush to join the AI trend to survive and thrive in the AI economy. "The sooner a company can hop onto a new kind of AI technology that proves innovative, the further ahead of the competition they can get," he elaborated.
"So, because of the exponential rate of AI growth, AI may turn the world economy into a winner-take-everything game," he added. "Those economic powers with more resources can afford to adopt new AI sooner, putting them on the fast track to success while smaller economic powers could be left behind, trying to catch up."
Josh Amishav, Founder and CEO, provides further insight into how this economic divide in the service sector would unfold. "AI systems, particularly those involving deep learning, have potent network effects," he told IBT.
"They become more accurate and valuable as they're trained on more data. This creates a feedback loop that widens the gap between leaders and laggards. If this plays it, it will create a situation where a single dominant AI player emerges in a particular market or domain."
Still, Steven Pivnik, serial entrepreneur specializing in the information technology market and the author of "Built to Finish: How to Go the Distance in Business and in Life", is still working on the idea that AI would turn the service economy into a winner-take-all game.
"Not," he told IBT. "AI has made INCREDIBLE advancements, but nothing will compensate for real-world experience and trials by fire with leadership facing challenging scenarios. AI can provide historical guidance on past events, but current thinking continues to evolve, and AI does not benefit from that."
Eric Eng, a business owner and the founder and CEO of AdmissionSight, is of a similar opinion.
"AI is indeed transformative, but it doesn't necessarily mean it will turn the world's economy into a winner-take-all game," he elaborated. "AI can potentially boost economic productivity and wealth, but its impact can be both inclusive and disruptive. But, if you're wondering whether AI will create a "winner takes everything" game, the answer is no."
