Will the adoption of AIs increase company productivity? – 04/02/2024 – Market

Wendy’s fast food menus. Ben & Jerry’s freezers in supermarkets. Abercrombie & Fitch’s marketing. Many pillars of the American consumer experience are increasingly linked to artificial intelligence.

The question is whether technology will actually make companies more efficient.

Rapidly improving productivity is the dream of both companies and economic policymakers. If hourly output remains stable, companies must sacrifice profits or raise prices to pay for wage increases or investment projects.

But when companies figure out how to produce more per hour worked, they can maintain or expand profits even while paying or investing more. Economies experiencing productivity booms can see rapid wage gains and rapid growth without as much risk of rapid inflation.

Many economists and policymakers seem to doubt that AI — especially generative AI, which is just getting started — has become widespread enough to show up in productivity data.

Jerome Powell, chairman of the Federal Reserve, recently suggested that AI “may” have the potential to increase productivity growth, “but probably not in the near term.”

John Williams, president of the New York Fed, made similar comments, specifically citing the work of Northwestern University economist Robert Gordon.

Gordon argued that the new technologies of recent years, while important, were probably not transformative enough to provide a lasting boost to productivity growth.

“The hype about big language models and ChatGPT has been a little overblown,” he said in an interview.

The last time productivity really took off, in the 1990s, computer manufacturing was becoming more efficient at the same time that computers themselves were making everything more efficient — enabling a sweeping productivity increase across the industry. Today’s gains may be less broad, according to the economist.

Other economists are more optimistic. Stanford University’s Erik Brynjolfsson bet Gordon $400 that productivity will soar this decade. His optimism is based in part on AI. He ran an experiment with it at a large call center in which AI helped less experienced workers, and co-founded a company aimed at teaching companies how to leverage the technology.

Here are some areas where AI is being used in ways that could influence productivity:

Have an annoying task? There is an AI for that

Employees spend a lot of time trying to figure out human resources issues. Companies have invested in generative AI to help answer these queries faster.

At Walmart, the largest retailer in the United States with 1.6 million workers, the company’s employee app has a section called “My Assistant” that uses generative AI.

The feature uses technology to quickly answer questions like “do I have dental coverage?” It also summarizes meeting notes and helps you write job descriptions.

Walmart rolled out the technology to its employees in the US last year.

The retailer made it clear that the tool aims to increase productivity. In an interview last year, Donna Morris, Walmart’s chief human resources officer, said one of the goals was to eliminate some repetitive tasks so that employees could focus on more impactful tasks.

It is expected to be a “huge productivity boost” for the company, he said.

Algorithms want to sell you things

Macy’s CEO Tony Spring said the department store chain is testing AI to personalize its marketing.

The company is using generative AI to write email elements and exploring ways to use the technology to add product descriptions and insert images of clothing or other products for sale in new backgrounds.

“It’s certainly proving to be a tool for some colleagues to reduce their workload,” Spring said in an interview.

Abercrombie & Fitch is using generative AI to help design clothes and write descriptions for its website and app. Designers use Midjourney to help them generate images while brainstorming outfit ideas.

Workers in Abercrombie’s marketing department also use generative AI to help write product description texts, which employees then edit.

AI goes well with burgers and ice cream

Some companies hope to use AI to help adjust prices to demand, similar to the way Uber sets ride prices based on how many people want to ride.

Wendy’s, for example, suggested the idea of ​​using AI to identify slower times of the day and discount the prices of menu items on its digital menus. The technology could also help with inventory management.

Ben & Jerry’s placed AI cameras in supermarket freezers to help alert the company when a location was low on jars of certain flavors.

The camera sporadically captures an image of the freezer shelves and the technology assesses the remaining quantity, sending alerts to the owner of Ben & Jerry’s and its distributors.

“The software identifies what is about to run out and also helps plan the most efficient routes for trucks that can replenish inventory,” Catherine Reynolds, a spokeswoman for Unilever, which owns Ben & Jerry’s, said in a statement.

The AI ​​technology is installed in 8,000 freezers, and the company said it planned to significantly increase that number this year. On average, AI-powered freezers increased sales by 13% because they were restocked with fresh pints of ice cream, especially the most sought-after flavors, Reynolds said.

AI is entering plantations

Agricultural equipment maker Deere and Co. has been using AI along with cameras to improve herbicide sprayers.

The equipment recognizes and specifically targets weeds, allowing for more precise use of chemicals. The technology was first introduced in 2022, and the company estimates it covered 40 million hectares and saved 30 million liters of herbicide last year.

The technology can enable “customers to reduce herbicide use, lower their costs and minimize the impact on their crops and land,” CEO John May II said at a February press conference.

Are these improvements revolutionary?

Skepticism about AI’s potential for significant change is mainly based on the fact that many of its applications imitate things that programs can already do: there are clear improvements, but not necessarily revolutionary ones.

But while companies may take time to fully take advantage of AI tools, the fact that the applications are broad has made some economists optimistic about what the new technologies could mean for productivity growth.

Analysts at Vanguard believe AI could be “transformational” for the U.S. economy in the second half of the 2020s, said Joseph Davis, the institution’s global chief economist.

He said the technology could save workers significant time — perhaps 20% — in about 80% of occupations.

“We’re not seeing that in the data yet,” he said, explaining that he believes the recent increase in productivity has been more of a recovery from a sharp drop during the pandemic. “The good news is there’s another wave coming.”