Generative AI Breakthroughs Forecasted to Drive Global Economic Transformation
A recent report by Goldman Sachs Research suggests that generative artificial intelligence (AI) has the potential to revolutionize the global economy. By leveraging advancements in natural language processing, these AI tools could potentially contribute to a staggering 7% increase in global GDP, amounting to nearly $7 trillion, over a decade. Furthermore, they could boost productivity growth by 1.5 percentage points during the same period.
Goldman Sachs economists Joseph Briggs and Devesh Kodnani highlight the transformative nature of generative AI in their report. They emphasize its capability to generate content indistinguishable from human output and break down communication barriers between humans and machines, which could have substantial macroeconomic effects.
The adoption of new AI systems is also expected to significantly impact employment markets worldwide. According to Briggs and Kodnani, around 300 million full-time jobs, equivalent to two-thirds of U.S. occupations, may be exposed to some degree of automation. They estimate that up to 50% of the workload in these exposed occupations could be replaced. However, the report suggests that not all automated work will lead to job losses. Most jobs and industries are likely to be complemented rather than substituted by AI, leading to shifts in job functions and requirements.
The report emphasizes that historical evidence shows that jobs displaced by automation have been offset by the creation of new positions. Over the past 80 years, more than 85% of employment growth has been attributed to the creation of new occupations driven by technology innovations. These innovations have given rise to entirely new fields, such as webpage designers, software developers, and digital marketing professionals, and have generated secondary effects by driving demand in service sectors like healthcare, education, and food services.
Furthermore, Goldman Sachs Research highlights the far-reaching implications of AI advancements in the global enterprise software, healthcare, and financial services industries. The development of generative AI tools by tech giants is anticipated to initiate the next wave of innovation in the enterprise software industry, following the transformative effects of the internet, mobile, and cloud computing.
Kash Rangan, a senior U.S. software analyst in Goldman Sachs Research, emphasizes that generative AI has the potential to streamline business workflows, automate routine tasks, and introduce a new generation of business applications. The technology is already improving the efficiency of knowledge workers, aiding drug development, accelerating software code creation, and benefiting various other sectors. Software companies are actively incorporating generative AI into their product portfolios, enabling opportunities for upselling, cross-selling, and enhancing customer retention and expansion.
The report estimates that the total addressable market for generative AI software is valued at $150 billion, compared to $685 billion for the global software industry. As generative AI tools become more widespread, integrated into existing software packages and technology platforms, businesses across the economy are expected to benefit. These benefits range from increased office productivity and improved sales efforts to advancements in design and diagnostics in sectors such as architecture, manufacturing, healthcare, and cybersecurity.
While the full extent of generative AI's impact on the global economy and society remains uncertain, it is clear that the potential effects could be profound. The report acknowledges the need for further exploration and time for these developments to unfold.
