Power and Prediction

This week’s review suggests ways to conceptualize and implement AI in business systems and industries.

Power and Prediction: The Disruptive Economics of Artificial Intelligence

Agrawal, Ajay. ed. by Ajay Agrawal, Joshua Gans, and Avi Goldfarb Harvard Business Review Press, 2022
288p index, 9781647824198 $30.00, 9781647824204

Power and Prediction book cover.

How is AI as an innovation similar to electricity? Both took decades to catch on, had many disappointments along the way, and triggered innovation when firms designed their businesses completely around them. The authors of this book argue that managers struggle to understand how best to employ AI. They identify three levels of AI: point system (automating an existing task), application solution (designing devices around AI), and systems solution (redesigning the entire organization). The authors illustrate these differences by explaining how Henry Ford redesigned the automobile manufacturing system, but could not do so without reliable electrical motors. AI has the same potential to redesign business systems, especially in its powerful predictive and decision-making capacities. The challenge lies in industries such as health care, where simply inserting AI into the existing system will not increase doctors’ incomes, for instance. A new industry system is necessary to put the right incentives in place. This book offers an excellent guide for thinking through the problems of artificial intelligence and finding ways of making it work for businesses and industries.

Summing Up: Highly recommended. Advanced undergraduates, graduate students, and professionals.
: J. J. Janney, University of Dayton
Subject: Social & Behavioral Sciences – Business, Management & Labor
Choice Issue: May 2023

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