Prediction Machines: The Simple Economics of Artificial Intelligence

by Ajay Agrawal, Joshua Gans, Avi Goldfarb

Overview

"What does AI mean for your business? Read this book to find out." -- Hal Varian, Chief Economist, Google

Artificial intelligence does the seemingly impossible, magically bringing machines to life--driving cars, trading stocks, and teaching children. But facing the sea change that AI will bring can be paralyzing. How should companies set strategies, governments design policies, and people plan their lives for a world so different from what we know? In the face of such uncertainty, many analysts either cower in fear or predict an impossibly sunny future.

But in Prediction Machines, three eminent economists recast the rise of AI as a drop in the cost of prediction. With this single, masterful stroke, they lift the curtain on the AI-is-magic hype and show how basic tools from economics provide clarity about the AI revolution and a basis for action by CEOs, managers, policy makers, investors, and entrepreneurs.

When AI is framed as cheap prediction, its extraordinary potential becomes clear:

• Prediction is at the heart of making decisions under uncertainty. Our businesses and personal lives are riddled with such decisions.
• Prediction tools increase productivity--operating machines, handling documents, communicating with customers.
• Uncertainty constrains strategy. Better prediction creates opportunities for new business structures and strategies to compete.

Penetrating, fun, and always insightful and practical, Prediction Machines follows its inescapable logic to explain how to navigate the changes on the horizon. The impact of AI will be profound, but the economic framework for understanding it is surprisingly simple.

Product Details

ISBN-13:	9781633695689
Publisher:	Harvard Business Review Press
Publication date:	04/17/2018
Sold by:	Barnes & Noble
Format:	eBook
Pages:	272
Sales rank:	979,819
File size:	3 MB

About the Author

Ajay Agrawal is Professor of Strategic Management and Peter Munk Professor of Entrepreneurship at the University of Toronto's Rotman School of Management. He is also cofounder of The Next 36 and Next AI, cofounder of the AI/robotics company Kindred, and founder of the Creative Destruction Lab. Ajay conducts research on technology strategy, science policy, entrepreneurial finance, and the geography of innovation.

Joshua Gans is Professor of Strategic Management and the holder of the Jeffrey S. Skoll Chair of Technical Innovation and Entrepreneurship at Toronto's Rotman School of Management. Gans is a frequent contributor to outlets like the New York Times, Harvard Business Review, Forbes, Slate, and the Financial Times. Joshua also writes regularly at several blogs including Digitopoly.

Avi Goldfarb is the Ellison Professor of Marketing at Toronto's Rotman School of Management, University of Toronto. Avi is also Chief Data Scientist at the Creative Destruction Lab, Senior Editor at Marketing Science, a Fellow at Behavioral Economics in Action at Rotman, and a Research Associate at the National Bureau of Economic Research. His research has been widely covered in the popular press.

Table of Contents

Acknowledgments ix

1 Introduction: Machine Intelligence 1

2 Cheap Changes Everything 7

Part 1 Prediction

3 Prediction Machine Magic 23

4 Why It's Called Intelligence 31

5 Data Is the New Oil 43

6 The New Division of Labor 53

Part 2 Decision Making

7 Unpacking Decisions 73

8 The Value of Judgment 83

9 Predicting Judgment 95

10 Taming Complexity 103

11 Fully Automated Decision Making 111

Part 3 Tools

12 Deconstructing Work Flows 123

13 Decomposing Decisions 133

14 Job Redesign 141

Part 4 Strategy

15 Al in the C-Suite 155

16 When AI Transforms Your Business 167

17 Your Learning Strategy 179

18 Managing Al Risk 195

Part 5 Society

19 Beyond Business 209

Notes 225

Index 239

About the Authors 249

Editorial Reviews

Prediction Machines does a good job of showing where computers work best and where humans still have an edge. The authors argue, though, that we shouldn't see this as an either/or fight to the death. In many cases, the best answer is to combine the powerful pattern recognition of a computer with the insight of a trained human.

The New York Times Book Review - Ina Fried

Named one of the "Top Ten Technology Books of 2018" by Peter High, Forbes.com

"Compared with the amount of ink spilled over the prospects of artificial general intelligence and all its accompanying fears--the singularity!--there's been much less attention to the smaller changes already happening in the realm of A.I. and their quite profound economic implications. Enter Prediction Machines." -- The New York Times

"…a readily understandable guide to artificial intelligence and the immensely consequential effects it could have on our economy, our society and our political system." -- Robert E. Rubin, former U.S. Treasury secretary and co-chair Emeritus, Council on Foreign Relations

One of "10 Great Reads For The Summer" -- Dave McKay, President & CEO at RBC

"Prediction Machines: The Simple Economics of Artificial Intelligence by Ajay Agrawal, Joshua Gans and Avi Goldfarb. This 2018 book…on the timely topic of AI - tops my summer reading list. The authors…offer a compelling framework for mapping out the likely impact of AI on economies in the decades ahead. -- BlackRock Investment Management

Named a Hardcover Non-Fiction Bestseller by the Globe & Mail (Canada)

"An excellent book on the economics of Artificial Intelligence. Steeped in both economics and AI/ML, this book steers clear of hype (or anti-hype), applying standard economic concepts to a rapidly emerging phenomenon. The book is geared to business readers not economists or policymakers but it has a lot to offer to everyone... Highly recommended." -- Jason Furman, former Chair of President Obama's Council of Economic Advisors on Goodreads

"This is a timely book, well written, and accessible putting forward their insights, and is well worth reading." -- Irish Tech News

Advance Praise for Prediction Machines:

Lawrence H. Summers, Charles W. Eliot Professor, former president, Harvard University; former secretary, US Treasury; and former chief economist, World Bank--
"AI may transform your life. And Prediction Machines will transform your understanding of AI. This is the best book yet on what may be the best technology that has come along."

Susan Athey, Economics of Technology Professor, Stanford University; former consulting researcher, Microsoft Research New England--
"Prediction Machines is a path-breaking book that focuses on what strategists and managers really need to know about the AI revolution. Taking a grounded, realistic perspective on the technology, the book uses principles of economics and strategy to understand how firms, industries, and management will be transformed by AI."

Dominic Barton, Global Managing Partner, McKinsey & Company--
"Prediction Machines achieves a feat as welcome as it is unique: a crisp, readable survey of where artificial intelligence is taking us separates hype from reality, while delivering a steady stream of fresh insights. It speaks in a language that top executives and policy makers will understand. Every leader needs to read this book."

Kevin Kelly, founding executive editor, Wired; author, What Technology Wants and The Inevitable--
"This book makes artificial intelligence easier to understand by recasting it as a new, cheap commodity--predictions. It's a brilliant move. I found the book incredibly useful."

From the Publisher