The Overlooked Gift to Our Economy

by Pierre G. Villere

Just a couple of months ago, I wrote about the outlook for a strong economy for the foreseeable future, and I cited the confluence of events that is apparent around us: Inflation that is falling, the outlook for interest rate cuts later this year, and the robust performance of the stock markets that is bolstering everyone’s 401(k) account. All are stimulating consumer sentiment is a positive direction. And most importantly, the misguided predictions of a recession are in the rearview mirror (and remember, I was the lone voice in the woods and predicted from the beginning: no recession).

Last year marked the 50th anniversary of my business career. I mused on three of the seminal events of those 50 years, tectonic shifts in our economy that all stimulated productivity to new levels and changed the world around us in every conceivable way. The first was the advent of the personal computer in the 1980s; while Steve Jobs often gets the credit for this invention, it was really the Compaqs, Gateways, Commordores, and other small pioneers, all of whom embraced the Microsoft operating systems, which became ubiquitous and drove us to new levels of productivity.

The invention of the cellular telephone launched us even further to new heights of productivity. Originally built as car console-mounted units, then followed by the famous “bag phones,” they marked the slow and early adoption of cellular phones. But the technology took yet another quantum leap forward in the 2000s with the introduction of the iPhone and all the smartphone advancements that followed. Again, productivity rose to new levels, fueling strong growth in our economy and those around the globe.

Finally, the Internet and the attendant rollout of broadband acted to connect our computers and became a platform that made our smartphones possible, and ultimately turned entertainment on its ear. No one can dismiss the tsunami that streaming has washed over our lives, to the detriment of cable television, which is about to go the way of dirigibles and paddle-wheelers.

Well, there is now a fourth technology leap, easily as big as those three quantum leaps that moved our economy into an ever-more modern age: Artificial Intelligence, or AI. And the impact it will have over the next several years is almost impossible to measure, as improvements and gains build on each other. Think of the flip phones of 15 years ago, and how they evolved into the smartphones of today.

But let me be clear: AI today is in the bag phone era, and the promise of this evolving technology is almost impossible to fathom. It is a huge, but very quiet, positive influence on our economy and will be for years to come, offering the prospect of fueling a long stretch of economic growth as we witness the productivity gains this technology promises.

History is instructive. In the 1990s, the World Wide Web was coming into widespread use. The tools ultimately streamlined many types of work, and many credit the 1990s boom on a combination of efficient computer manufacturing and increased information technology use, which accounted for about two-thirds of the era’s productivity pickup. Another driver of the 1990s productivity boom was that companies were making big logistical improvements, as large retailers like Walmart grew rapidly during the decade, bringing with it strong supply chain management that allowed it to efficiently stock shelves with cheap products from around the world.

A challenge pre-AI is that such gains are hard to win twice; now that firms have become more efficient, it may be difficult for them to improve drastically. AI offers the opportunity to advance productivity gains to new levels.

AI is a little-touted gift to our economy that is quietly weaving its way into our lives. While many economists say it is probably too early to see the benefits of AI showing through in full force, some proponents think it could prove transformative, and the power and impact of it will fuel economic growth for many years to come.

Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at [email protected]. Follow him on Twitter – @allenvillere.