Skip to content

Marketing Thought

Clarifying management/marketing theory

Menu
  • Neil Bendle
  • Popular Marketing Metrics: How Not To Mess Them Up
  • Marketing Metrics 4th Edition Book
  • Marketing PhD Applications
  • Advice For The Marketing Academic Job Market
  • Marketing Strategy
  • Public Policy, Behavioral Economics and Marketing
Menu

How Might AI Change Business?

Posted on September 21, 2018September 22, 2021 by neilbendle

In the excellent Prediction Machines Agrawal, Gans and Goldfarb take an economics-based view of the changes that will be brought on by Artificial Intelligence (AI). Essentially some basic economic principles can help us see what will change. Given this: How Might AI Change Business?

AI Prediction Is Becoming Cheaper

The argument is that AI can predict. Such prediction will become cheaper with increasingly effective machines. This will have knock on effects.

“The drop in the cost of prediction will impact the value of other things, increasing the value of complements (data, judgment and action) and diminishing the value of substitutes (human prediction)

Agrawal, Gans, and Goldfarb, 2018, page 19-20

Those things that allow you to get the best out of the cheap AI, such as the data AI needs to generate a decent prediction, will become more valuable. On the other hand some things will become next to useless. Who needs a person to predict what will happen? An AI can do this much better by faithfully mapping to patterns seen previously without the mistakes made by human beings when we try and concentrate for too long.

Trending
Audio Mining And Marketing: Great Potential

The example of “anticipatory shipping” is an interesting one. At some point it’ll generate more profit for Amazon to ship what it thinks you want and need. (Amazon will accept that this will generate greater return costs.) They won’t wait for you to ask for an item. I think this is great but I can imagine some people might find it a little creepy.

Prediction Is What Matters

The authors suggest that AI is really about prediction. This is where it benefits business.

“At the center of the AI canvas is prediction. You need to identify the core prediction at the heart of the task.”

 Agrawal, Gans, and Goldfarb, 2018, page 140

Doing so forces you to clarify what you mean. A business school needs to specify (i.e. to do this the school must decide in advance) what they mean by “the best student”. Only then can the school benefit from using a prediction machine in recruiting. Do you want students who are great in class? Donate more after graduation? Get high-profile jobs that bring kudos to the school? The machine needs to know what you want in order to know what to recommend.

Prediction Machines
Prediction Machines: Are The Eyes A Little Creepy?

How Might AI Change Business For The Humans In It?

But humans will still be needed. Spreadsheets made those who could use them more efficient and so increased the value of such people (rather than stealing their jobs). Some jobs will go away, others will become more valuable depending upon whether they can be replaced by, or are enhanced by, the availability of cheap effective prediction machines. I’m just hoping marketing academics are in the later category.

Read: Ajay Agrawal, Joshua Gans, and Avi Goldfarb (2018) Prediction Machines: The Simple Economics of Artificial Intelligence, Harvard Business Review Press

For more on this book see here.

Prediction Machines
Share on Social Media
twitter facebook linkedin reddit

  • Internal Measurement Of Brand Value
  • Regulation And Business Responsibility
  • Leadership, Power, And Morality
  • Gaining And Using Power

MASB’s Common Language Dictionary

Need a marketing definition? Use MASB’s Common Language Marketing Dictionary. Click for the MASB Common Language Marketing Dictionary

Pages in Marketing Thought

  • A Plea About Language Used In Marketing
  • Advice For The Marketing Academic Job Market
  • Behavioral Econ For Kids: The Cartoon Book
  • Data Visualization Advice
  • Machine Learning (ML) And Marketing: What Should You Know?
  • Marketing In The Movies
  • Marketing Metrics 4th Edition Book
    • Chapter of Marketing Metrics 4th Edition, Free Sample
  • Marketing PhD Applications
  • Marketing Strategy
    • Measuring Culture Is A Challenge, But Don’t Be Silly
    • Rationality And Marketing Strategy
    • Segmentation, Targeting and Positioning
    • Strategy And Evolutionary Thinking
  • Neil Bendle
  • Popular Marketing Metrics: How Not To Mess Them Up
    • Brand Valuation: Progress But Lots More Needed
    • Customer Equity: Nice Idea, Bit Of A Mess In Execution
    • How To Use, And Misuse, Customer Lifetime Value (CLV)
    • Is ROI The Most Abused Term In Marketing?
    • Market Share: Always An Indicator Never A Target
    • Marketing Accounts: A Better Way To Measure Marketing Performance
    • Measuring Competition With The Bendle Panda Index
    • Net Promoter Score: Sadly Not As Magical As Supporters Suggest
    • Profit Measurement: Choose Your Own Level Is Problematic
    • Tobin’s Q: Why Academics Should Listen To Managers
    • Total Q, A New Improved Tobin’s Q? Not By Much
    • Value Of A Like: Do Not Use For Budgeting
  • Public Policy, Behavioral Economics and Marketing
  • Recommended Books
©2022 Marketing Thought | Built using WordPress and Responsive Blogily theme by Superb
Go to mobile version