Innovations and the impact on the U.S. economy

The U.S. has a history of a country of entrepreneurship and innovation. Recent innovations are linked to phone technology and associated usage such as music and payments and social media with core technology companies such as Apple, Microsoft, Google and Amazon leading the way. In the past, the U.S. has a string of innovation that has transformed the economy by driving efficiencies and growth. Some examples are the internet, MRIs, used for medical diagnoses, microchips, barcodes, and advanced solar cells and wind turbines, making renewable energy more efficient and cost-effective. The list can go on and on.

At a recent Monday Club event in New York, the topic was innovations and the impact on the U.S. economy and the discussion quickly turned to the developments in the artificial intelligence (AI) area. AI is a broad field of science that involves building machines and computers that can perform human-like tasks in a variety of areas such as data management, learning, reasoning, problem-solving of complex problems by analyzing data and identifying patterns. At the event, there were three panelists discussing this interesting topic: Roos Hofland, Head of Emerging Business, Black Swan Data, Darlene Newman, Strategic Emerging Technology Advisor, Ivy CapTech Inc., former Head of Internal IT Research and Innovation, DTCC and Shafi Rehman, Director, AI Strategy, Dotdash Meredith.

Artificial intelligence is rapidly increasing in importance as it’s use spans across many business and functions such as manufacturing and production by robotics use, image recognition, virtual assistants, AI-powered voice assistants like Siri and Alexa can respond to human conversations, customer service chatbots, search engines, customers navigate websites, and in particular business operations, where AI can analyze data from various sources to help businesses make predictions, recommendations, and decisions.

The industries impacted by AI are more or less all, but there are some industries that will benefit quickly and with significant impact such as healthcare, where AI can help improve the accuracy of diagnoses, treatments, and disease progression predictions. It can also help identify new treatments and diagnostic methods. Banking and financial services can utilize AI to personalize user experiences, reduce costs, and speed up operations as well as automate procedures like claims processing, mortgage lending, and accounts receivable. Banks and lenders are also struggling with cybersecurity issues and AI automation can help ensure a proactive approach to cybersecurity and can lead to significant savings. In terms of manufacturing and logistics, AI can help manage inventory levels and predict demand by using real-time information gathered through sensors.

AI is also a key factor in consumer service business including E-commerce, and will predict behaviors to create a more personalized, and seamless shopping experience for online shoppers. Agriculture is expected to save billions using AI helping with the early diagnosis of leaf diseases and solve other common agricultural issues. The list can go on and is also used in warfare and is prevalent in drone usage in the conflict in Ukraine. The benefits are many and will grow as the technological advances rapidly and billions are spent to invest in advancing technologies.

The panel also discussed the potential risks of AI. There are several, even though the panel seems to be positive about the prospects of more advanced technology solutions. The risks that were mentioned in the discussion were among others lack of transparency, privacy violations and security risks related to sensitive data, biased algorithms, which has been seen in search engines and used for political purposes to support and benefit the democratic party, job displacement as AI has the potential to automate many tasks, which could lead to job loss and unemployment in some industries.

There is also a risk for more domestic policy risks as the government can regulate in a certain direction, the intelligence community use data for surveillance and manipulation, search engines can guide users in a certain direction. The AI is perfect for a country like China with a need to control and supervise its citizens. It is unclear if that is really a desire for a democratic country. The only way to avoid this would be to never use a smart phone or social media and pay mostly in cash.

Another discussion was focused on global implications and the ongoing AI race between several countries, primarily China and the U.S. One effect that is already noted because of AI is increased technology protectionism, where government policies and regulations are trying to limit foreign competition and protect a country’s interests in the digital space. It can include trade barriers, foreign investment restrictions, data localization and storage rules, intellectual property regulations, web censorship, and giving the government more control over internet service providers. There is a certain lag in development due to legacy systems, and China has less of those systems than the U.S., benefitting China.

There are other geopolitical changes due to AI and aligned transparency, controls, and reliability. Digital currencies will grow in usage, and it is only a matter of time before central banks will prefer digital solutions and currencies. It is quicker, safer, and more efficient. This could impact the leading role of the U.S. dollar as the dominating foreign reserve currency. China and countries associated with China are pivoting away from the U.S. dollar and this trend will likely accelerate with safer digital solutions. As this foreign reserve conflict is brewing, there is always gold, which is the most stable and reliable and non-political of all reserves.

A mix of digital currencies and gold is likely the solution in the future as more uncertainty is likely to grow in the foreign exchange area. This trend is also a result of increased U.S. sanctions globally and the recipients or U.S. actions are developing alternative solutions. Why keep U.S. dollar in their foreign reserves when the U.S. is sanctioning them? There are alternatives in other currencies, digital solutions, and gold. As has been evident, because of the U.S. and its allies’ prohibited transactions with Russia’s central bank and finance ministry, blocking around $300 billion of sovereign Russian assets in the West, Russia, and its many allies as well as neutral countries have decided to turn away from the U.S. dollar to other alternatives. It seems that blocking foreign reserves has the biggest negative impact on the dollar globally.

Customers are also more inclined to leave established banks and keep their money in digital portfolios. It is cheaper, more transparent and the transactions are quicker and more effective. The banks are definitely at risk as they have huge legacy systems and are not adapting quickly enough to the new digital AI reality.

Truly an interesting Monday Club event and there will be more to follow. The prime focus areas are financial services, energy and innovations and the impact both domestically and globally.