rewrite this title The AI Economic Boom is Just Getting Started

Last year at Banyan Hill’s Total Wealth Symposium at the Ritz Carlton in Orlando, Florida, I presented my thesis on AI’s economic impact.

As a staunch techno-optimist, I hold strong to what the futurist Buckminster Fuller said nearly a century ago:

“Technology lets you do more and more with less and less until eventually you can do everything with nothing.”

Economists measure the way we do more and more with less and less by tracking long-term productivity growth, which means getting more done with the same effort over many years, which helps the economy grow and improves the way we live.

Here’s an example:

Imagine a farmer in 1900 who grows wheat by hand — planting, harvesting and processing it manually. He produces 10 bushels a day.

Fast forward to today: a modern farmer uses tractors, automated irrigation, GPS-guided combines and advanced fertilizers.

That same farmer might now produce 1,000 bushels a day — with the same or even less physical effort.

That 100X increase in output per person is long-term productivity growth.

It didn’t happen overnight — it happened over many decades as tools, skills and technology improved.

The result? More food, lower prices and higher incomes.

But AI has the potential to compress what were once decades-long timelines into just a few years.

And that ability could rapidly change what we once considered ‘normal’ productivity growth.

What Is AI Already Doing for Productivity?

In a previous issue of the Daily Disruptor, we talked about how AI is helping to supercharge the productivity of scientists in the materials science field.

And its benefits are spreading to most industries.

A 2023 study found that AI tools helped customer service reps resolve 14% more inquiries per hour.

In other tests, AI helped business professionals write nearly 60% more documents per hour, and it helped coders complete over twice as many projects per week.

But here’s the thing…

The biggest productivity gains aren’t coming from elite performers.

Instead, they’re coming from people in the middle or lower skill range. That means AI raises both the floor and the ceiling of what’s possible for workers.

Think about what this means more broadly…

If AI tools can automate or assist with 60% to 70% of knowledge workers’ daily tasks — things like writing reports, handling email, researching topics and summarizing meetings — that frees people up for higher-value work.

Things like strategic thinking and creative problem-solving that often lead to innovation.

It can also shorten the time it takes for new hires to become fully productive.

For example, in one case, customer service agents using AI hit “experienced” performance levels four times faster than those without it.

This proves that AI has the potential to drastically increase the productivity curve.

During my talk at our Total Wealth Symposium, I shared a slide showing two potential paths for long-term productivity:

McKinsey predicts that increased productivity due to AI could add $10 trillion in cumulative GDP by 2030.

That’s higher than Goldman Sachs, which predicts generative AI could boost global GDP nearly $7 trillion by 2033.

But both numbers still represent a massive economic boom.

Of course, the valid counterargument is: “We’ve seen hype like this before with other technologies, but we didn’t see an increase in productivity.”

And there is truth to that.

Despite the rise of smartphones, cloud computing and other major tech advances, productivity growth in the U.S. has been sluggish since the early 2000s.

Aggregate Productivity Growth: 1930-2000 and 2000-2019

SOURCES: Bureau of Labor Statistics and authors’ calculations.

So why should we believe things will be different with AI?

I can give you three reasons.

First, the diffusion curve of AI is much steeper.

It took decades for computers to make their way into most homes and workplaces. But ChatGPT hit 100 million users within two months.

That’s because AI is delivered through the cloud, and it’s instantly accessible through existing technology. Unlike previous tech waves, you don’t need any special hardware. All it takes is an internet connection and a browser.

Second, AI isn’t just another handy office tool like Word or Excel.

Generative AI is what economists call a general-purpose technology, putting it in the same category as electricity or the internet.

It can be used across many industries, it keeps rapidly improving and it enables other innovations.

And there’s one final factor in AI’s favor…

Right now, it’s targeting the white-collar knowledge work that powers everything from the $6.2 trillion finance and insurance sector to the $4.9 trillion healthcare sector.

Here’s My Take

According to a recent McKinsey report, 92 percent of companies plan to increase their AI investments over the next three years.

That means we’re going to continue to see a rapid diffusion of AI in the workplace.

Let’s say AI makes knowledge workers 30% more productive. Let’s also assume that knowledge work accounts for roughly 60% of economic output.

That gives us an 18% bump in aggregate productivity over time.

But that’s just the immediate bump. The secondary effect of AI is that it helps us innovate faster, like it’s already doing in the materials science field.

And that means our productivity growth rate could speed up too.

Even a small acceleration — say, bumping productivity growth from 1.5% to 2.4% annually — could double economic output over two decades with the power of compounding.

And that’s still before taking into account AI’s ability to self-improve.

If AI starts helping us build better versions of itself — as we’re already seeing with tools like AutoGPT or open-source model tuning — then this compounding could accelerate even more.

That’s why I believe the real risk with AI isn’t too much hype, it’s underinvestment.

I’m on record that I believe we’re in a critical race with China to achieve artificial superintelligence (ASI) first…

And that every penny we spend on winning this race is money well spent.

But if we want to experience the full upside of AI, then we also need to invest in human capital just as aggressively as we’re investing in model training.

Today, the U.S. spends less than 0.1% of its GDP on workforce training.

That tells me we’re not investing enough in teaching folks about the benefits of AI. And that’s a recipe for missed opportunities.

Because I believe AI has the potential to prove Buckminster Fuller right. It could unlock the greatest productivity growth in human history…

And eventually let us do everything with nothing.

Regards,

Ian KingChief Strategist, Banyan Hill Publishing

Editor’s Note: We’d love to hear from you!

If you want to share your thoughts or suggestions about the Daily Disruptor, or if there are any specific topics you’d like us to cover, just send an email to dailydisruptor@banyanhill.com.

Don’t worry, we won’t reveal your full name in the event we publish a response. So feel free to comment away!