Book of the Day – Power and Prediction: The Disruptive Economics of Artificial Intelligence

Today’s Book of the Day is Power and Prediction: The Disruptive Economics of Artificial Intelligence, written by Ajay Agrawal, Joshua Gans, and Avi Goldfarb in 2022 and published by Harvard Business Review Press.

Ajay Agrawal is Professor of Strategic Management and the Geoffrey Taber Chair in Entrepreneurship and Innovation at the University of Toronto’s Rotman School of Management. He is founder of the Creative Destruction Lab and the Metaverse Mind Lab and cofounder of NEXT Canada and Sanctuary.

Joshua Gans is the Jeffrey S. Skoll Chair of Technical Innovation and Entrepreneurship and Professor of Strategic Management at Toronto’s Rotman School of Management. He is Chief Economist of the Creative Destruction Lab, department editor (Strategy) at Management Science, and cofounder and managing director of Core Economic Research.

Avi Goldfarb is the Rotman Chair in Artificial Intelligence and Healthcare and Professor of Marketing at Toronto’s Rotman School of Management. He is also Chief Data Scientist at the Creative Destruction Lab, a fellow at Behavioral Economics in Action at Rotman, and a faculty affiliate at the Vector Institute for Artificial Intelligence.

Power and Prediction, by Ajay Agrawal, Joshua Gans, and Avi Goldfarb

I have chosen this book because it deals with Artificial Intelligence in a business context and it has been rated as one of the 10 Best Business Books of 2022 by Forbes. Furthermore, I have read Prediction Machines, the authors’ first book on the same subject so I wanted to see if the second book of the series was also worth reading.

Artificial intelligence (AI) today is a trend, and it finds several applications in key industries, from banking and finance to manufacturing, from pharma and medical appliances to automotive, and from market analysis to writing, just to cite a few examples.

The reason for such a broad series of different applications is that AI is proving to be effective, with caveats, in making predictions that can help managers, boards, and investors in making key strategic choices and steering the future of their businesses.

In Prediction Machines, the first book of the authors on the topic, the readers were given a detailed description of the economic impact of AI on companies and businesses. Now, in this Power and Prediction, the three experts aim at explaining to a public of readers who are not into the topic how AI helps in taking key decisions.

The authors start with what they consider to be the two key elements in decision-making: prediction and judgment. As humans, every time we take a decision we use both these elements, often without being even aware of the process itself.

From this point of view, the huge calculation power of Artificial Intelligence, based on a vast amount of data to be analyzed, improves this process by reducing the effort on the human side, reducing its length, and offering more accuracy in the final results.

For a company, that works in an economic environment, decision-making brings power, responsibility, control, and opportunities. Of course, as with every choice, there are risks to be taken, that can bring an increase in profit or painful losses. So, decisions are a key element in a business environment, and having an effective tool such as Artificial Intelligence can become a vital support for the management.

Power and Prediction is a book full of advice, insights, and practical tools, all written in an easy-to-read way, that allows even readers with no experience to gain trust and knowledge about the potential, the power, and the risk associated with the use of AI.

The authors hope that the transformative impact AI can have on companies, industries, educational institutions, governments, and more can be driven by proper research, study, and investments.

The only point that, in my opinion, could have been better developed in the book is the description of how a company can start to adopt and train its own Artificial Intelligence, so as to avoid the common pitfalls of generically trained models.

Overall, Power and Prediction is a good and smart read for anyone interested in learning about the possible outcomes of AI applied to economics and society.

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