Irving Wladawsky-Berger

The Evolution of Global Supply Chains

“The central purpose of supply chains is to fulfill the needs and wants of humanity — delivering all the food, medicine, energy, apparel, and other worldly goods needed by the eight billion people in the planet,” wrote MIT professor Yossi Sheffi in the preface of his 2023 book, The Magic Conveyor Belt: Supply Chains, A.I. and the Future of Work. “The societal and economic spasms of the early 2020s highlighted the crucial role of world-spanning supply chains in the modern global economy, as well as the growing role of digital technology, including A.I. and automation, in the future economy.”

Lately, I’ve been thinking a lot about supply chains. Not only are global supply chains among the most complex of man-made systems, but supply chains are nowhere near ready to be transformed because many of the tasks and processes involved in supply chains are still in the early stages of digitalization. As I think about my personal experience in the evolution of the IT industry, the successful collaboration around standards spurred a new era of productivity and growth. We have yet to see a similar catalyst in the supply chain ecosystem.

I’ve been following the evolution of global supply chains for the past three decades. The 1990s ushered in a golden age of globalization, when the world seemed to be coming together. Thomas Friedman’s The World is Flat became an international best-seller in 2005, nicely explaining what globalization was all about, including the key forces that contributed to flattening the world, from the explosive growth of the Internet to the rise of just-in-time global supply chains. The very nature of the global organization was transformed, with IBM CEO Sam Palmisano declaring in a 2006 Foreign Affairs article that “The Globally Integrated Enterprise” was destined to become the corporate model of the future.

My interest in global supply chains increased significantly in the mid 2010s, fueled by my fascination with enterprise blockchain technologies. In 2016, the World Economic Forum (WEF) included blockchain in its annual list of Top Emerging Technologies. The WEF report compared blockchain to the Internet, noting that “Like the Internet, the blockchain is an open, global infrastructure upon which other technologies and applications can be built. And like the Internet, it allows people to bypass traditional intermediaries in their dealings with each other, thereby lowering or even eliminating transaction costs.”

What Industries Are Most Likely to Reshape the Global Economy by 2040?

“The next big arenas of competition,” a recently published report by the McKinsey Global Institute (MGI), “identifies and describes a category of industries that could account for much of the future change in the business landscape and transform the world. We call these industries arenas of competition,” said the report.

Arenas of competition are defined by two characteristics: “they capture an outsize share of the economy’s growth, and market share within them changes hands to an outsize degree. The presence of those two attributes indicates that a new competitive game has begun, usually prompted by a new bundle of technologies and business models.” To identify the key arenas of the future, the report looked back at the arenas of today to see how they evolved.

The Arenas of Today

The arenas of today include 12 industries that showed outsize growth between 2005 and 2020. These 12 industries had a compound annual growth rate (CAGR) of 10%, a market capitalization of 16%, and tripled their global GDP share from 3% to 9% over that period. By contrast, non-arenas had only a 4% revenue annual revenue growth and a 6% market cap growth over the same period.

The Breakthroughs AI Needs

A recent issue of The Economist featured a technology focus on “The breakthrough AI needs” with eight articles on the topic. “Two years after ChatGPT took the world by storm, generative artificial intelligence seems to have hit a roadblock,” said the issue’s lead article. “The energy costs of building and using bigger models are spiralling, and breakthroughs are getting harder. Fortunately, researchers and entrepreneurs are racing for ways around the constraints. Their ingenuity will not just transform AI. It will determine which firms prevail, whether investors win, and which country holds sway over the technology.”

This is frightening for investors who’ve bet big on AI, but there is no reason to panic, said the article. “Plenty of other technologies have faced limits and gone on to prosper thanks to human ingenuity,” it added. “Already, developments in AI are showing how constraints can stimulate creativity.” In particular, The Economist mentions two such major innovations: the development of chips with the special purpose architectures needed to train and run AI models as fast and energy efficient as possible, and the development of smaller, more specialized domain specific models that consume a lot less energy than the very large models that rely on brute force computational power.

Let me discuss each of these two innovations.

An Open Architecture for Health Data Interoperability

I’ve been a member of the Linux Foundation (LF) Research Advisory Board for the past three years. At a September, 2023 meeting of the Advisory Board, we discussed that one of the few industry sectors in which the LF doesn’t have projects is healthcare, — despite the size and importance of healthcare around the world. The LF had launched open source healthcare initiatives in the past, but they all eventually failed.

A paper on Digital Health in the 21st Century published in June of 2022 by the US National Academy of Medicine noted that “Revolutionary advances in digital health are transforming health, medicine, and biomedical science, and redefining and re-engineering the tools needed to create a healthier future,” including artificial intelligence, cloud computing, and the increased adoption of electronic health records (EHRs). 

So, perhaps it’s time to try again, and LF Research made the decision to launch a healthcare study, led by Anna Hermansen, Researcher and Ecosystem manager in LF Research, to understand the obstacles for open source adoption and interoperable data standards in the healthcare sector. A year later, in October of 2024, Hermansen released the study’s findings and recommendations in a report, “An Open Architecture for Health Data Interoperability: How Open Source Can Help the Healthcare Sector Overcome the Information Dark Ages.”

Who Will Be Proved Right? The Bullish or the Skeptic AI Camp?

A few weeks ago I posted “AI Advances Aren’t Likely to Occur Nearly as Quickly as Many Believe,” a blog focused on a research paper, “The Simple Macroeconomics of AI,” by MIT professor Daron Acemoglu, — a co-recipient of the 2024 Nobel Memorial Prize in Economic Sciences. The blog referenced a  NY Times article, “What if the A.I. Boosters Are Wrong?,” which discussed Acemoglu’s skeptical views that AI will supercharge economic productivity by the end of this decade, as well as “Gen AI: Too Much Spend, Too Little Benefit?, a report by Goldman Sachs Research senior strategist Allison Nathan, which included a number of insightful interviews, including one with Professor Acemoglu.

As I wrote in the blog, Nathan started her interview by asking why his paper argued that the upside to US productivity and GDP growth from GenAI will likely prove more limited that those of other predictions, including some from Goldman market analysts. “Why are you less optimistic on AI’s potential economic impacts?,” she asked him.

Acemoglu replied that the forecast differences are primarily about the timing of AI’s economic impacts rather than about the ultimate promise of the technology. “Generative AI has the potential to fundamentally change the process of scientific discovery, research and development, innovation, new product and material testing, etc. as well as create new products and platforms.” But the economic impact of historically transformative technologies like AI take time to play out.

I’d like to now discuss another recent NYT article, “Will A.I. Be a Bust?,” which was focused on the views of Jim Covello, Goldman Sachs’ head of stock research, one of Wall Street’s leading AI skeptics. “Three months ago, he jolted markets with a research paper that challenged whether businesses would see a sufficient return on what by some estimates could be $1 trillion in A.I. spending in the coming years,” said the article.

The 2024 State of Open Source in Financial Services

“For the financial services industry, open source collaboration is a strategically relevant practice” said “The 2024 State of Open Source in Financial Services,” the fourth annual research report by the Fintech Open Source Foundation (FINOS) in partnership with Linux Foundation Research. Over the past four years, this study has aimed to provide concrete industry-wide trends about the state of open source adoption in the financial services industry. “Even in the relatively short time since studying sector trends in open source began, we’ve seen encouraging signals for the financial services industry that there are numerous benefits to realize through increased collaboration at the precompetitive level of technology stacks and that more participants in the sector are coming on board.”

As in prior years, the report is based on empirical evidence, including a global survey, industry data, and insights from interviews with senior finance and IT leaders.

The global survey was conducted in May and June of 2024 and received responses from 249 qualified individuals, — 39% from North America, 28% from Europe, and 29% from Asia-Pacific countries. 58% of respondents worked in financial institutions, and 35% were employed by providers of financial and IT services.

“Altogether, the data and the trends collectively underscore the growing importance of open source in driving innovation, enhancing efficiency, and fostering collaboration. Our findings reveal that financial services organizations are not only consuming open source software at increased levels to achieve a variety of objectives but also contributing back to the community in meaningful ways … For stakeholders from capital markets, retail or private banking, asset management, insurance, or for those fintech leaders delivering innovative solutions for the sector, there’s more reason than ever to participate in open source ecosystems.”

The Top 10 Emerging Technologies of 2024

Since 2011, the World Economic Forum (WEF) has published an annual list of the Top Ten Emerging Technologies that are likely to be disruptive within three to five years. The Top 10 Emerging Technologies of 2024 was released by the WEF in June. The report is based on the insights of over 300 world-leading academics and researchers from the WEF’s Network of Global Future Councils and University & Research Network, and from the Frontiers network of over 2,000 chief editors from top global institutions.

A survey was distributed to members of these various networks asking them to propose technologies for the 2024 Top 10 list. The survey received over 300 valid technology nominations from 29 countries. After an initial screening, the Top 10 Emerging Technologies Steering Group was presented with a curated list of 70 technologies from which the final ten were selected based on four criteria:

• Novelty: The technology is emerging and at an early stage of development but is not yet widely used.
• Applicability: The technology is potentially of significant use and benefit to societies and economies.
• Depth: The technology is attracting increased development, investment, and excitement.
• Power: The technology is potentially game-changing to established ways and industries.

AI Advances Aren’t Likely to Occur Nearly as Quickly as Many Believe

“What if the A.I. Boosters Are Wrong?,” asked a recent NY Times article in its title. “A skeptical paper by Daron Acemoglu, a labor economist at M.I.T., has triggered a heated debate over whether artificial intelligence will supercharge productivity,” it added. “The bullish camp has great  hopes for AI,” such as whether the technology will usher the next industrial revolution which could help wipe out poverty around the world. “But if the boosters are wrong, it could be trouble for the developed world, which is in desperate need of a productivity breakthrough as its work force ages and declines.”

(Before continuing with the blog, let me mention that on October 14, 2024, Professor Acemoglu was awarded the 2024 Nobel Memorial Prize in Economic Sciences along with his MIT colleague Simon Johnson, and University of Chicago economist James Robinson.)

“Artificial intelligence (AI) has captured imaginations,” wrote Acemoglu in “The Simple Macroeconomics of AI,” the skeptical paper referenced in the NYT article. “Promises of rapid, even unparalleled, productivity growth as well as new pathways for complementing humans have become commonplace. There is no doubt that recent developments in generative AI and large language models that produce text, information and images — and Shakespearean sonnets — in response to simple user prompts are impressive and even spellbinding.”

“AI will have implications for the macroeconomy, productivity, wages and inequality, but all of them are very hard to predict,” he added. “This has not stopped a series of forecasts over the last year, often centering on the productivity gains that AI will trigger. Some experts believe that truly transformative implications, including artificial general intelligence (AGI) enabling AI to perform essentially all human tasks, could be around the corner.” But, according to Acemoglu, AI will contribute only modest improvements to worker productivity and will add no more than 1 percent to U.S. economic output over the next decade.

Large Language Models (LLMs): Mistaking Engineering Achievements for Human Linguistic Competence

“Mistaking the impressive engineering achievements of LLMs for the mastering of human language, language understanding, and linguistic acts has dire implications for various forms of social participation, human agency, justice and policies surrounding them,” wrote cognitive scientists Abeba Birhane and Marek McGann in a recent paper, “Large models of what? Mistaking engineering achievements for human linguistic agency.” “Hyperbolic claims surrounding LLMs often (mis)uses terms that are naturally applied to the experiences, capabilities, and characteristics of human beings.”

LLMs impressive abilities to respond to, and generate natural language are based on their training using massive language data sets generally sourced from the World Wide Web. The training involves breaking down text or speech into tokens, typically a few characters in length, to develop a statistical model of language. Powerful statistical techniques and lots of computational power are then used to analyze the relationship between billions of tokens in order to generate grammatically valid sequences of token concatenations in response to a question or prompt.

Birhane and McGann note that “the processing of datasets and the generation of output are engineering problems, word prediction or sequence extension grounded in the underlying distribution of previously processed text. The generated text need not necessarily adhere to ‘facts’ in the real world,” which is why LLMs are prone to hallucinations, a response generated by its algorithms that, while statistically and grammatically correct, is actually false or misleading real-world information.

Will AI Devour Software Engineering (SE)?

“Social media provide a steady diet of dire warnings that artificial intelligence (AI) will make software engineering (SE) irrelevant or obsolete,” wrote CMU computer scientists Eunsuk Kang and Mary Shaw in their September, 2024 paper, “tl;dr: Chill, y’all: AI Will Not Devour SE.” [tl;dr: a summary of a longer text]. “To the contrary, the engineering discipline of software is rich and robust; it encompasses the full scope of software design, development, deployment, and practical use; and it has regularly assimilated radical new offerings from AI.”

“Current AI innovations such as machine learning, large language models (LLMs) and generative AI will offer new opportunities to extend the models and methods of SE. They may automate some routine development processes, and they will bring new kinds of components and architectures. If we’re fortunate they may force SE to rethink what we mean by correctness and reliability. They will not, however, render SE irrelevant.”

“What’s with the cries of alarm about AI’s threats to SE?,” asked Kang and Shaw. Social media is full of “angst about the imminent demise of SE at the hands of AI.” Their paper referenced a few recent articles about AI’s potential threat to SE: “The End of Programming,”which noted that “The end of classical computer science is coming, and most of us are dinosaurs waiting for the meteor to hit”; “ChatGPT Will Replace Programmers Within 10 Years”; and “NVIDIA CEO says the future of coding as a career might already be dead in the water with the imminent prevalence of AI.”

“It seems that either AI systems are so different from ‘regular’ software systems that SE knowledge has become obsolete or irrelevant, or else AI will soon take over programming, and by extension software development.” I found this last comment very telling, because, as I read related articles, — like “The rise — and fall — of the software developer” and “Tech Jobs Have Dried Up—and Aren’t Coming Back Soon,” it became clear that software engineering is not a well understood discipline and is often confused and used interchangeably with computer programming and software development, important tasks whose scope is significantly more limited than software engineering.

Digital Twins Are Changing the World

“Digital twins are fast becoming part of everyday life,” said the lead article in the August 31 issue of The Economist. A Digital Twin is essentially a computerized companion to a real-world entity, be it an industrial physical asset like a jet engine, an individual’s health profile, or a highly complex system like a city.

“Digital twins began as basic computer models of physical objects and systems,” explained The Economist. “As computers have become more powerful, twins have become more sophisticated. Complex design and modelling software means many physical objects initially take shape in the virtual world. Small sensors, capable of measuring all sorts of things, feed twins with real-time data, ensuring that they mirror their physical counterparts.”

Digital Twins help bring the physical and digital worlds closer to each other. Digital technologies, internet connectivity, and other innovations are designed right into the products, creating a new era of smart connected products. Massive amounts of product-usage data can now be gathered, stored and analyzed by applications in the product’s cloud counterpart. The use of AI takes all this much further, allowing virtual models to both simulate and optimize activities in the real world.

AI: The Industrial Revolution of Knowledge Work

“AI is the Industrial Revolution of knowledge work, transforming how all workers can apply information, create content, and deliver results at speed and scale,” said the “2024 AI Jobs Barometer,” a report from the professional services firm PwC. With the AI Jobs Barometer, PwC set out to find empirical evidence of the impact of AI on jobs.

PwC analyzed over half a billion job ads from 15 advanced economies, including the US, Canada, Singapore, Australia, New Zealand, and 10 Western Europe countries, as it looked for concrete evidence of AI’s impact on jobs, skills, wages, and productivity. It tracked the growth of jobs that demand specialist AI skills across countries and sectors to figure out the degree of AI penetration.

Overall, PwC found that AI penetration is accelerating and that workers with strong AI skills command significant wage premiums. Moreover, AI’s impact isn’t limited to only those workers who have specialist AI skills.

“Many, if not most, workers who use AI tools in their work do not have or need these specialist skills. For example, a limited number of workers with specialist AI skills may design an AI system or tool for a company that is then used by hundreds or thousands of the company’s customer service agents, analysts, or lawyers — none of whom have specialist AI skills.” In fact, one of the major features of generative AI applications is that they can typically be operated using simple everyday language with no technical skills required.

The Three Laws of Robotics

Earlier this year, MIT professor emeritus Rodney Brooks gave the closing keynote at the 2024 MIT Sloan CIO Symposium. Professor Brooks was director of the MIT AI Lab from 1997 to 2003, and was the founding director of MIT’s Computer Science and Artificial Intelligence Laboratory (CSAIL) from 2003 until 2007. A robotics entrepreneur, he’s founded of a number of companies, including iRobot, Rethink Robotics, and Robust.AI.

Given that AI was the overall theme of this year’s MIT Symposium, Brooks focused his keynote on “What Works and Doesn't Work with AI.” He reminded the audience that “AI has been on the verge of changing everything” ever since the field was founded in the 1950s, and explained why so many AI predictions have turned out so wrong.

I wrote about his excellent presentation in “Artificial Intelligence: Realistic Expectations vs. Irrational Exuberance,” and concluded the blog with what Brooks called “My Three Laws of Artificial Intelligence”:

• When an AI system performs a task, human observers immediately estimate its general competence in areas that seem related. Usually that estimate is wildly overinflated.
• Most successful AI deployments have a human somewhere in the loop (perhaps the person they are helping) and their intelligence smooths the edges.
• Without carefully boxing in how an AI system is deployed there is always a long tail of special cases that take decades to discover and fix. Paradoxically all those fixes are AI-complete themselves.

At the end of July, Brooks posted two new essays in his website. One was “Rodney Brooks’ Three Laws of Artificial Intelligence,” where he elaborated on his Three Laws of AI. I’d like to now discuss his second essay, “Rodney Brooks’ Three Laws of Robotics.”

Is the AI Revolution Already Losing Steam?

“It sure seems like the AI hype train is just leaving the station, and we should all hop aboard,” said “The AI Revolution Is Already Losing Steam,” a recent WSJ article by technology columnist Christopher Mims. “But significant disappointment may be on the horizon, both in terms of what AI can do, and the returns it will generate for investors. The rate of improvement for AIs is slowing, and there appear to be fewer applications than originally imagined for even the most capable of them. It is wildly expensive to build and run AI. New, competing AI models are popping up constantly, but it takes a long time for them to have a meaningful impact on how most people actually work.”

As we’ve learned since the advent of the Industrial Revolution, there’s generally been a significant time lag between the broad acceptance of a major new transformative technology and its ensuing impact on industries and economies. After transitioning from the R&D labs to the marketplace, it takes considerable time, — often decades, — for the products, services, and business models based on the new technologies to be widely embraced across economies and societies, and for their full benefits to be realized.

The reason, explained economists  Erik Brynjolfsson, Daniel Rock, and Chad Syverson in “The Productivity J-Curve,” a 2018 NBER working paper, is that while historically transformative technologies have the potential to radically change the economic environment, “realizing that potential requires larger intangible and often unmeasured investments and a fundamental rethinking of the organization of production itself.”

Their paper identifies two phases, investment and harvesting, in the life cycle of a historically transformative technology. In general, these technologies require massive complementary investments, such as business process redesign, co-invention of new products and business models, and the re-skilling of the workforce. Moreover, the more transformative the technologies, the longer it takes for them to reach the harvesting phase when they are widely embraced by companies and industries across the economy. Such an evolution has been has been pithily captured in what’s become known as Amara’s Law: We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

The Geek Way: A Better Way to Run a 21st Century Company

“Have you recently heard the CEO or other senior executive of a company say something like, we’re a technology company now?” asked Andrew McAfee ealier this year in his keynote at the 2024 MIT IDE Annual Conference. McAfee is a Principal Research Scientist at the MIT Sloan School of Management, and co-founder and co-director of MIT’s Initiative on the Digital Economy. “And in particular, when you heard that person say that, did you think to yourself that’s really not a technology company at all?”

He explained that what CEOs are trying to convey when they say that they run a technology company is that their company needs to be managed very differently now. The pressure to innovate, remain agile and execute at the very high level that technology companies have felt for the past two decades has actually been getting more intense and now applies to their own companies, regardless of the industry they are in.

McAfee’s keynote is based on his November, 2023 best seller The Geek Way: The Radical Mindset That Drives Extraordinary Results. The book’s thesis is succinctly articulated in its introduction: “A bunch of geeks have figured out a better way to run a company. As a result, they’re taking over the economy. And they’re just getting started.”

The 2024 State of Talent in the IT Sector

A few months ago the Linux Foundation (LF) published the “2024 State of Tech Talent Report,” a comprehensive analysis of talent management practices in the IT sector. The study is based on a web survey conducted by the LF and its partners earlier this year. The survey reached out to individuals responsible for hiring and training IT professionals around the world to better understand the current state of talent acquisition, retention, and management.

The survey analyzed data from 418 respondents carefully chosen to eliminates sample bias and ensure high data quality. Respondents came from companies of different sizes across a variety of vertical industries: 17% worked in organizations with less that 250 employees, 57% worked in organizations from 250 to 4,999 employees, and 26% in organizations with more than 5,000 employees.

 Respondents included IT vendors, service provides, nonprofits, academic institutions, and government organizations from around the world: 30% came from organizations headquartered in the US and Canada, 19% from Japan, 18% from Western Europe, 8% from India, 8% from other Asian countries, 4% from Eastern Europe, and 4% from Latin America.

The Foundation Model Transparency Index

“Foundation models are the epicenter of artificial intelligence (AI) as AI begins to shape how the economy and society function,” begins “The Foundation Model Transparency Index v1.1 (FMTI v1.1),” a May, 2024 paper by a group of researchers from Stanford, MIT, and Princeton under the auspices of Stanford’s Center for Research on Foundation Models (CRFM). “For such a high-impact technology, transparency is vital to facilitate accountability, competition, and collective understanding. As an illustrative example, the current lack of transparency regarding the data used to build foundation models makes it difficult to assess what copyrighted information is used to train foundation models. Governments around the world are intervening to increase transparency.”

In October of 2023, CRFM introduced the Foundation Model Transparency Index (FMTI), a scoring system designed by a multidisciplinary research team to score the transparency of foundation models in order to promote responsible business practices and greater public accountability. The FMTI features three top-level domains, which in turn aggregate 23 subdomains and 100 transparency indicators:

• Upstream domain — the 32 indicators and 6 subdomains used to build the model, including data size and composition, human labor used, training methods, hardware and energy used, and environmental impacts;
  
• Model domain — the 33 indicators and 8 subdomains that identify the properties and function of the foundation model itself, including size, capabilities, limitations, risks, and trustworthiness; and
  
• Downstream domain — the 35 indicators and 9 subdomains that identify how the model is used, including release process, distribution channels, user interface, data protection, feedback mechanisms, and documentation.
  

The Rise of the Chief Data Officer (CDO) in the AI Era

After decades of promise and hype, artificial intelligence has finally become the defining technology of our era. Over the past few decades, the necessary ingredients have come together to propel AI beyond universities and research labs into the broader marketplace: powerful, inexpensive computer technologies; advanced algorithms, models, and systems; and, most important, huge amounts of all kinds of data.

The data-centric AI era started about 25 years ago when the explosive growth of the internet led to the emergence of what became known as big data, that is, very large amounts of digital data, including text, voice, and images. Digital data has continued to grow exponentially, and is now estimated to have reached around 150 zettabytes (10²¹ bytes).

“Collecting data, transforming it, and putting it to use is essential to remain competitive today,” wrote Thomas Davenport, Randy Bean, and Richard Wang in “CDO Agenda 2024: Navigating Data and Generative AI Frontiers,” a report sponsored by AWS for Data. “Virtually every organization is actively pursuing the goal of becoming more data-centric, enabling them to swiftly uncover and respond to valuable insights. With generative AI, the power and potential of organizational data is bigger than ever before. Organizations often appoint chief data officers (CDOs) to lead them toward data-driven success.”

The 2024 AI Index Report: AI’s Influence on Society Has Never Been More Pronounced

Earlier this year, the Stanford Institute for Human-Centered Artificial Intelligence released the 2024 AI Index Report, its seventh annual edition of the impact, progress, and trends in AI. At over 500 pages and 9 chapters, the report aims to be the world’s most authoritative source for data and insights about AI in order to help develop a more thorough understanding of the rapidly advancing field of AI.

Last year’s report concluded that AI had now moved into its era of deployment, with new large-scale models being released every month. While these systems demonstrated capabilities unimagined a decade ago, they were prone to so called hallucinations, that is, they sometimes generate responses which contain false or misleading information presented as facts, as well as being prone to bias and to their use for negative purposes.

“The 2024 Index is our most comprehensive to date and arrives at an important moment when AI’s influence on society has never been more pronounced,” said this year’s report. “As AI has improved, it has increasingly forced its way into our lives. Companies are racing to build AI-based products, and AI is increasingly being used by the general public. But current AI technology still has significant problems. It cannot reliably deal with facts, perform complex reasoning, or explain its conclusions.”

Regulation by Design: Embedding Regulatory Objectives into the Design of AI Systems

In its early decades, IT helped companies become significantly more productive by automating many of their processes, reengineering their overall operations, and reaching out beyond the boundaries of the enterprise. But, their actual products were largely unaffected. This has all been changing in the 21st century with the rise of the Internet of Things (IoT), Big Data, and Artificial Intelligence, whose combined impact is driving a new era of smart connected products.

As the world’s digital and physical infrastructures converge, digital technologies are designed right into complex products, — e.g., jet engines, power generators, medical equipment, energy pipelines. Massive amounts of usage data can now be gathered over the internet, stored and analyzed by sophisticated applications to help monitor the product and anticipate potential problems. This is particularly important in industries where safety by design can have a significant economic impact and in some cases, literally save lives. Safety by design features are now in widespread use in all kinds of mechanical, electronic, and other complex physical systems.

What if we could similarly embed regulatory objectives directly into the technical design of AI systems?, asked Robert Mahari in  his keynote on Regulation by Design at the recent 2024 MIT IDE Annual Conference. Mahari is pursuing a joint JD-PhD degree. He received a JD at the Harvard Law School in 2022 and is now a PhD candidate in the MIT Media Lab research group led by professor Alex ‘Sandy’ Pentland.

“Compliance and regulation by design represent a risk-management paradigm that’s uniquely suited for AI,” Mahari said. “Intelligent technology design can proactively prevent failures and risks.”

AI systems are the result of a very complex supply chain, including the choice of the large amounts of data needed to train AI models, and the difficulty of testing, predicting, and explaining the models’ expected behavior. As a result, compliance with regulatory and ethical objectives is very hard for the users of AI-based applications who have little control or understanding of how the AI system works. Instead, as is the case with advanced engineering systems, can an AI system monitor how it’s used, identify high risk sessions, alert its developers and overseers, and thus ensure compliance?

Language is a Tool for Communication, Not for Thinking

I often look to biology and evolution for inspiration when thinking about highly complex systems. So I was very intrigued when several weeks ago I learned about the work being done by Elemental Cognition, a company founded in 2015 by my former IBM colleague David Ferrucci. Ferrucci led the team that developed the Watson computer system, which in 2011 won the television quiz show Jeopardy! against two of the world’s top Jeopardy champions. Let me explain.

Large language models (LLMs), chatbots, and generative AI have introduced technologists like me to the fascinating world of human language and cognition. Last year, for example, I learned the difference between four important linguistic concepts in a 2020 research paper by linguistic professors Emily Bender and Alexander Koller.

• Form is any observable expression of language, whether written, spoken, or signed.
• Communicative intent is the purpose a speaker intends to achieve through language, such as to convey some information or just to socialize.
• Meaning is the relation between the form in which the language is expressed and the communicative intent it’s being used to evoke in the listener or reader.
• Understanding is the listener’s ability to capture the meaning that the speaker intends to convey.

The authors wrote that while the success of LLMs and chatbots on many natural language tasks is very exciting, “these successes sometimes lead to hype in which these models are being described as understanding language or capturing meaning.” However, “a system trained only on form has apriori no way to learn meaning.” Research on language acquisition has found that “human language learning is not only grounded in the physical world around us, but also in interaction with other people in that world. … Human children do not learn meaning from form alone and we should not expect machines to do so either.”

Embracing Beneficial Friction for Human-Centered AI

Psychological studies have shown that our judgement is affected by the many decisions we make every day and the friction-based paint points of making these decisions. So, not surprisingly, we look to technology and algorithms to help us make our decisions as frictionless as possible, said Renee Gosline in her keynote at the 2024 MIT IDE Annual Conference. Gosline is a Research Scientist and Senior Lecturer at the MIT Sloan School of Management, and the head of the Human-First AI group at MIT's Initiative on The Digital Economy. “But when AI is involved, sometime we need to add beneficial friction. Sometimes it’s useful for us to engage System 2,” she added, referencing the pioneering behavioral research on human judgment and decision-making by Daniel Kahneman, for which he was awarded the 2002 Nobel Prize in Economics.

In his 2011 bestseller Thinking, Fast and Slow, Kahneman wrote that our mind is composed of two very different systems for reasoning and making decisions, which he called System 1 and System 2.  System 1 is the intuitive, fast and emotional part of our mind. Thoughts come automatically and very quickly to System 1, without us doing anything to make them happen. System 2 is the slower, logical, more deliberate part of the mind. It’s where we make complex decisions by evaluating and choosing among multiple options.

Gosline’s human-first AI research group aims to “add beneficial friction in AI-mediated systems to ensure that humans are in the loop,” as well as to reduce bad friction. When a choice is being made, “we might want to remove friction so that we can make the best choice with AI’s help. But there may be circumstances when we want to add friction to reduce harm.”

How Does the Linux Foundation Work and What Does It Do?

I have long been involved with the Linux Foundation (LF). In 2000, a consortium of companies, including IBM, HP, and Intel, founded the Open Source Development Labs (OSDL), a non-profit organization to support the continued development of Linux and promote its use in enterprise computing. A few years later, in 2007, the OSDL merged with the Free Standards Group to become the Linux Foundation. At the time, I was leading the Linux initiative that IBM had launched in January of 2000 to embrace Linux across all the company’s products and services. In 2011, when the LF marked the 20th anniversary of Linux at its annual Linux conference, I had the privilege of giving a keynote presentation where I recounted my personal involvement with Linux and open source.

Over the past decade, the LF has undergone  a major expansion, as open source became widely accepted as a paradigm for innovation across a full suite of technologies, proving its utility beyond the collaborative development of the Linux operating system. Its impact has been felt across just about all industry sectors in our fast growing digital economy. Consequently, its annual conferences were rebranded Open Source Summits to be more representative of the LF’s expanded open source mission beyond Linux. In April of 2021, the LF announced the formation of Linux Foundation Research to broaden the understanding of open source projects and to explore new opportunities for open source initiatives. Later that year, Hilary Carter, LF’s then VP of Research, invited me to become a member of the LF Research Advisory Board.

I am truly impressed by the current scope of the Linux Foundation. The LF now includes over 1,400 company members, supports over 1000 open source projects in a variety of vertical and horizontal industry sectors, holds over 70 events around the world every year, and provides training and certification programs to equip developers with essential skills, not just for coding, but to support the management and best practices the projects themselves. The mission of the LF was quite easy to explain when it was mostly focused on Linux, but it’s quite a bit more complicated now.

LF’s Executive Director Jim Zemlin recently addressed the difficulty of explaining what the LF does and how it works in his June 13 weekly newsletter to the LF board and team members. Zemlin wrote that beyond the technical community, many don’t understand much about how the LF operates, such as the important role of the LF’s company members in sponsoring open source projects, and that generally, the key maintainers of LF’s largest projects are not volunteers but full-time employees of member companies.

The Emerging Data-Centric AI Era: Where Will All the Data Come From?

The data-centric AI era started about 25 years ago when the explosive growth of the internet led to what’s become known as big data, that is, the availability of huge amounts of digital data, including text, voice, and images. The 2010s saw major innovations in multi-layered deep learning algorithms, followed in the past few years by the advent of foundation models, including generative AI, large language models, and chatbots.

Given the explosive growth of interest in AI, the demand for data keeps increasing. No matter what an organization hopes to achieve, success is impossible without ready access to high-quality data. But, as data becomes increasingly critical for business success, how are enterprises adjusting to the increasing importance of data? Where is all the data needed to train AI models going to come from? And what are the potential legal and ethical issues that companies need to watch out for?

To explore these important questions, I moderated a panel on The Data Provenance Dilemma at the 2024 MIT Sloan CIO Symposium on May 14. “Generative AI models are highly dependent on the quality and quantity of data used in their training. But, many of these models are being trained on vast, diverse, and inconsistently documented datasets that have been raising serious concerns about the legal and ethical risks involved,” notes the brief for the panel in the Symposium agenda. “The panel will discuss the complexities of using large, diverse datasets in the training of generative AI models, the difficulties involved in understanding the provenance of the data being used, and the kinds of tools and standards needed for the responsible use of these powerful models.”

The panel included Mike Mason, chief AI officer of the technology consultancy Thoughtworks; Shayne Longpre, a doctorate candidate at the MIT Media Lab; and Robert Mahari, who’s pursuing a joint JD-PhD degree at the Harvard Law School and MIT’s Media Lab. Let me summarize the key points we discussed in the panel.

Advancing Global Trade through Open-Source, Digital Bill of Lading

“Imagine you’re a cargo owner in the year 1450,” begins “The multi-billion-dollar paper jam: Unlocking trade by digitalizing documentation,” a McKinsey article published in October of 2022. “You hand over your goods to the ship that will carry them across the world, and are presented with a bill of lading — a piece of paper stating what you’re shipping, where it comes from, and where it’s heading. Fast forward to the year 2022: The world has changed dramatically, but the bill of lading remains relatively unchanged. Today, the bill of lading process is still reliant on the physical transfer of paper records and applies to roughly 40 percent of all containerized trade transactions.”

“Current trade documentation spans many documents and processes, and is a manual, time-consuming, and resource-intensive process for all stakeholders. Documentation for a single shipment can require up to 50 sheets of paper that are exchanged with up to 30 different stakeholders. The bill of lading, issued by carriers to acknowledge receipt of cargo from the shipper, is one of the most important trade documents required for shipping.”

According to McKinsey, the bill of lading accounts for between 10 and 30 percent of total trade documentation costs; adopting an electronic bill of lading could save $6.5 billion in direct costs and enable between $30 billion and $40 billion in new global trade volume. “While the banking and aviation industries have implemented digital standards enabling automated trade systems, shipping has not matured far beyond where it was in the 1400s.”

In a recent article, “Advancing Global Trade through Open-Source Electronic Bill of Lading,” the Digital Supply Chain Institute (DSCI) explained the role of bill of lading in global supply chains. “The bill of lading (B/L) functions as an important role in global trade, providing a tangible record of cargo ownership, conditions, and delivery obligations,” according to the article. “While deeply entrenched in trade practices, the traditional paper-based bill of lading has its shortcomings: inefficiencies stemming from manual processes have led to delays, errors, and a higher susceptibility to loss and fraud.”

The Critical Value of Data to Business Success in the Emerging AI Era

“Data has become an increasingly critical component to business success,” said “Modernizing Data with Strategic Purpose,” a recently published report by the technology consultancy Thoughtworks and MIT Technology Review Insights. “The ability to make timely and informed decisions, create tailored customer experiences, and identify new opportunities has enabled the rise of today’s leading digital companies. And with the recent explosion of interest in AI, the demand for data has only increased. No matter what an organization hopes to achieve, success is impossible without ready access to high-quality data. Despite advances in technologies, extracting and transforming enterprise data into a usable asset remains a tremendous challenge for most organizations.”

The report is based on a survey conducted in early 2024 of 350 senior data and technology executives from organizations in the US, the UK, Germany, Singapore, and Australia that earn $500 million or more in annual revenue, with almost half (47%) having revenue of $10 billion or more. Eight industries are represented in the survey: financial services, energy, health care and life sciences, manufacturing, public sector, publishing and media, retail, and travel and transport.

The survey sheds light on how enterprises are adjusting to the increasing importance of data in our emerging data-centric AI era. The data-centric AI era started about 25 years ago when the explosive growth of the internet led to what’s become known as big data, that is, the availability of huge amounts of digital data, including text, voice, and images. Digital data has continued to grow exponentially, and is now estimated to have reached around 150 zettabytes (10²¹ bytes). All these data has enabled AI to make great strides in the 2010s with multi-layered deep learning algorithms, and more recently with foundation models, including generative AI (GenAI), large language models, and chatbots.

“As AI pushes data modernization to the top of more organizations’ agendas, it will also become increasingly important to ensure that the data strategy is closely aligned to the broader business strategy and data leaders are able to clearly articulate how data and analytics can help business units achieve their objectives,” notes the report. “This will not only ensure critical buy-in, but also put the organization in the best position to achieve its goals and lay a solid foundation for continuous improvement, evolution, and value creation.”

Artificial Intelligence: Realistic Expectations vs. Irrational Exuberance

The 2024 MIT Sloan CIO Symposium took place on Tuesday, May 14 at the Royal Sonesta, a hotel overlooking the Charles River a short walk from the MIT campus in Cambridge, MA. Not surprisingly, AI was the dominant theme in this year’s Symposium, with a number of keynotes and panels on the topic. In addition, a pre-event program was added on the day before the Symposium, which included a number of more informal roundtable discussions on various aspects of AI, such as legal risks in AI deployment, AI as a driver for productivity, and human’s role in AI-augmented workplaces.

The Symposium’s closing keynote, What Works and Doesn't Work with AI, was delivered by MIT professor emeritus Rodney Brooks. Professor Brooks was director of the MIT AI Lab from 1997 to 2003, and was then the founding director of MIT’s Computer Science and Artificial Intelligence Laboratory (CSAIL) from 2003 until 2007. A robotics entrepreneur, he’s founded of a number of companies, including iRobot, Rethink Robotics, and Robust.AI.

“There is a lot of AI and robotics hype right now,” said the blurb describing Brooks’ keynote in the Symposium agenda. “Amongst it are a few important innovations that may help many businesses. The trick is to figure out what is close to deployable and what is off in an uncertain distant future. This keynote will talk both about the traps all of us fall in to evaluating AI claims and demonstrations, and what to look for specifically which will get you to a solid understanding of the time frame for if and when technology will be ready to deploy.”

Let me summarize his keynote.

An Open Source, Standards-Based Approach for the Future of Supply Chains

In 2018 I participated in a blockchain panel at a conference of senior supply chain executives representing a variety of industries and companies. I welcomed the opportunity to learn how these supply chain executives felt about the potential impact of blockchain technologies in complex supply chains.

At the time, I was convinced that blockchain technologies would be a major next step in the evolution of the internet. Two years earlier, for example, the World Economic Forum (WEF) had named The Blockchain as one of the Top Ten Emerging Technologies for 2016 in its annual list. The WEF report compared the blockchain to the internet, noting that “Like the Internet, the blockchain is an open, global infrastructure upon which other technologies and applications can be built.  And like the Internet, it allows people to bypass traditional intermediaries in their dealings with each other, thereby lowering or even eliminating transaction costs.”

I also believed that supply chain applications would emerge as the killer app for blockchain technologies, that is, an IT application whose value is simple to explain, its use is fairly intuitive, and the application turns out to be so useful that it helps propel the success of new technologies or products. For example, spreadsheets and word processing played a major role in the 1980s adoption of personal computers, as did e-mail and the World Wide Web in the 1990s mainstream success of the internet.

But, it hasn’t quite worked as expected, either for blockchain technologies or for their applications in supply chains. “Blockchain, the technology underpinning bitcoin and other cryptocurrencies, for years has been viewed by some companies as a way to drive industry-transforming projects, among them the tracking of assets through complex supply chains,” according to “Blockchain Fails to Gain Traction in the Enterprise,” an article published in the Wall Street Journal (WSJ). “So far that hasn’t happened.”

Health and AI

The March 30, 2024 issue of The Economist includes a special  section on Health and AI, with six articles on the topic. “Artificial intelligence (AI) is generating excitement and hyperbole everywhere, but in the field of health care it has the potential to be transformational,” said the lead article, “The AI doctor will see you … eventually.” “In Europe analysts predict that deploying AI could save hundreds of thousands of lives each year; in America, they say, it could also save money, shaving $200bn-360bn from overall annual medical spending, now $4.5trn a year (or 17% of GDP).”

Healthcare is a system of coupled systems, encompassing medical and pharmaceutical research; the delivery of healthcare to patients by a variety of practitioners, including hospitals, physicians, nurses, and pharmacists; and the insurance companies and governments that pay for healthcare. It’s a highly regulated industry, which creates major barriers for the sort of innovative start-ups that have been the engine of transformation in other sectors. In advanced economies, a handful of companies, — e.g., Cerner, Epic, Athena, — support large healthcare providers with proprietary platforms that don’t interoperate with each other, making it difficult for smaller companies and startups to develop innovative AI tools and applications as has been the case in other industries.

There’s considerable hope that AI could help us better deal with the inherent complexity of the healthcare sector. “AI systems can enhance diagnostic accuracy and disease tracking, improve the prediction of patients’ outcomes and suggest better treatments,” notes The Economist. “It can also boost efficiency in hospitals and surgeries by taking on tasks such as medical transcription and monitoring patients, and by streamlining administration. It may already be speeding the time it takes for new drugs to reach clinical trials. New tools, including generative AI, could supercharge these abilities.”

However, “although AI has been used in health care for many years, integration has been slow and the results have often been mediocre.” Among the major reasons for the slow progress are the concerns about accuracy and trust necessary to protect patients’ safety. “Improving accuracy and reducing bias in AI tools requires them to be trained on large data sets that reflect patients’ full diversity.” But, while there’s lots of available health data, the data is highly fragmented making it difficult to use properly.

An Economic Framework for Understanding AI

“Artificial intelligence (AI) systems touch the lives of virtually every American,” said “An Economic Framework for Understanding Artificial Intelligence,” an overview of the economic potential of AI which was recently released by the White House Council of Economic Advisors (CEA) as part of their “2024 Economic Report of the President.” “In recent years, AI systems have advanced rapidly as recent developments in computing, data availability, and machine learning models have simultaneously come together to produce rapid improvements.”

“Still, much remains unknown,” the CEA added. “While AI’s capabilities will depend in part on the technology itself, its effects will be shaped by economic, regulatory, and social pressures. How society deploys this technology and what technology-specific guardrails are implemented will be critical factors in determining both the breadth and magnitude of its effects.”

“An economic framework, combined with a basic understanding of AI technology, allows us to make predictions about when, how, and why AI may be adopted. While such a framework can also tell us what broader effects AI adoption may have, applying economic insights to an evolving and proliferating technology like AI is especially challenging. However, it is also especially valuable, because decisions made at the onset of a new technology have a greater influence on its eventual impact.”

The AI Economic Framework is a rather long and comprehensive document. Let me briefly discuss a few of the its key points.

Who Still Works from Home?

Remote work, — aka work from home (WFH), — has been around for decades, but took off in the mid-late 1990s with the explosive growth of the internet. Some even predicted that the internet would lead to the decline of cities, because it would enable people to work, be in touch with friends and colleagues, and shop from home. Why would anyone choose to live in an expensive and crowded metropolitan area, when they could live in a more affordable, less stressful, potentially healthier location? Instead of declining, superstar cities continued to generate the greatest levels of innovation and good jobs, thus attracting a disproportionate share of the world’s talent.

But, everything changed when the COVID-19 pandemic spread worldwide in early 2020. “The coronavirus crisis is forcing white-collar America to reconsider nearly every aspect of office life,” wrote a June, 2020 NY Times Magazine article. “Some practices now seem to be wastes of time, happily discarded; others seem to be unexpectedly crucial, and impossible to replicate online. For workers wondering right now if they’re ever going back to the office, the most honest answer is that even if they do, the office might never be the same.”

The article cited the experience of Accenture, which at the time had around 500,000 employees in more than 200 cities in 120 countries. Before the pandemic, no more than 10% worked remotely on any given day. But, by the middle of March, nearly all were asked to work from home. Employees adapted quickly, said Accenture’s CTO. The volume of video calls went up by a factor of six while audio calls tripled. Despite having to switch from face-to-face to audio and video interactions, overall productivity actually went up as measured by several metrics.”

A Deteroriating Global Risk Outlook

“Last year’s Global Risks Report warned of a world that would not easily rebound from continued shocks,” wrote Saadia Zahidi, managing director of the World Economic Forum (WEF), in the Preface of The Global Risks Report 2024. “As 2024 begins, the 19th edition of the report is set against a backdrop of rapidly accelerating technological change and economic uncertainty, as the world is plagued by a duo of dangerous crises: climate and conflict.”

“Underlying geopolitical tensions combined with the eruption of active hostilities in multiple regions is contributing to an unstable global order characterized by polarizing narratives, eroding trust and insecurity,” she added. “At the same time, countries are grappling with the impacts of record-breaking extreme weather, as climate-change adaptation efforts and resources fall short of the type, scale and intensity of climate-related events already taking place.”

The Global Risks Report 2024 is based on two complementary surveys: the Global Risks Perception Survey (GRPS), the WEF’s source of original risk data, which includes the insights and opinions of over 1,500 leaders from academia, business, government, the international community and civil society; and the Executive Opinion Survey (EOS) of over 11,000 leaders from 113 countries who were asked to identify risks that pose the most severe threat to each of their countries over the next two years. In addition, the report includes insights from over 200 risk specialists.

The WEF report analyzed global risks and presented its findings along three distinct timeframes:

• The current term are the risks most likely to present a material crisis on a global scale in 2024.
• The short term considers global risks which are likely to play out over the next two years.
• The long term considers global risks that are likely to be most severe over the next ten years.

What’s the Value of Open Source Software Based on Actual Usage Data?

“The value of a non-pecuniary (free) product is inherently difficult to assess,” wrote Manuel Hoffmann, Frank Nagle, and Yanuo Zhou in their recent working paper, “The Value of Open Source Software.” “A pervasive example is open source software (OSS), a global public good that plays a vital role in the economy and is foundational for most technology we use today.” The paper reminded us that in 2011, VC Mark Andreessen famously argued that software is eating the world. Then two years ago, VC Joseph Jacks added that open source is eating software FASTER than software is eating the world.

“Other recent studies have come to similar conclusions showing that open source software (OSS) — software whose source code is publicly available for inspection, use, and modification and is often created in a decentralized manner and distributed for free — appears in 96% of codebases, and that some commercial software consists of up to 99.9% freely available OSS,” said the paper. “Although in its early days OSS frequently copied features from existing proprietary software, OSS today includes cutting edge technology in various fields including artificial intelligence (AI), quantum computing, big data, and analytics.”

But, despite the increasing importance of OSS to the economy, its overall impact has been difficult to quantify. The reason is that the value created by a good or service is traditionally measured by multiplying the price p times the quantities sold q, but with OSS, the p is generally zero since open source code is publicly available, and its actual usage q has been very hard to measure.

The Case for Open Healthcare Systems

As we’ve learned since the advent of the Industrial Revolution, major technological advances have the potential to radically transform a whole industry, but realizing that potential generally requires large intangible investments and a fundamental rethinking the industry being transformed. So, it’s not surprising that there’s much hope and excitement that the advent of AI as a major 21st century technological advance might, over time, help to radically transform our highly complex and expensive healthcare industry. 

Healthcare is a system of coupled systems, encompassing medical and pharmaceutical research; the delivery of healthcare to patients by a variety of practitioners, including hospitals, physicians, nurses, and pharmacists; and the insurance companies and governments that pay for healthcare. Healthcare costs have continued to rise across the world, especially in the US. Total healthcare spending in 2023 was approximately $4.7 trillion, accounting for 18% of US GDP, and is projected to grow at an average of 5.5% per year to over $7 trillion in 2031, roughly 20% of US GDP.

The potential evolution of healthcare brings to mind my personal experience in the information technology (IT) industry for the past 50 years.

The Uncertain Impact of AI on Economies and Societies

“Artificial intelligence (AI) promises to boost productivity and growth, but its impact on economies and societies is uncertain, varying by job roles and sectors, with the potential to amplify disparities,” said “GenAI: Artificial Intelligence and the Future of Work,” a recently published report by the International Monetary Fund (IMF). “As a positive productivity shock, AI will expand economies’ production frontiers and will lead to reallocations between labor and capital while triggering potentially profound changes in many jobs and sectors. AI offers unprecedented opportunities for solving complex problems and improving the accuracy of predictions, enhancing decision-making, boosting economic growth, and improving lives. However, precisely because of its vast and flexible applicability in numerous domains, the implications for economies and societies are uncertain.”

“The impact of AI is also likely to differ significantly across countries at different levels of development or with different economic structures,” adds the IMF report. “Advanced economies, with their mature industries and service-driven economies, typically have a higher concentration of jobs in sectors that require complex cognitive tasks. These economies are therefore both more susceptible to, yet better positioned to benefit from, AI innovations.”

“Conversely, emerging market and developing economies, often still reliant on manual labor and traditional industries, may initially face fewer AI-induced disruptions. However, these economies may also miss out on early AI-driven productivity gains, given their lack of infrastructure and a skilled workforce. Over time, the AI divide could exacerbate existing economic disparities, with advanced economies harnessing AI for competitive advantage while emerging market and developing economies grapple with integrating AI into their growth models.”

The Promise of Digital Health in the 21st Century

In 2021 the Linux Foundation (LF) announced the formation of Linux Foundation Research, a new organization to broaden the understanding of open source ecosystems and to explore opportunities for new open source initiatives. Given my long involvement with Linux, the Linux Foundation and open source communities in general, I was invited to become a member of the newly created LF Research Advisory Board (RAB).

At a September, 2023 meeting of the Advisory Board, we discussed that one of the few industry sectors in which the LF does not have projects is healthcare, despite its size and importance around the world. The LF had launched healthcare initiatives in the past, but they all eventually failed. At that meeting, LF Research launched a study to understand what we should be doing in the healthcare sector. I’m involved in the study, and for the past several months, I’ve been learning about the opportunities of digital technologies in healthcare systems by reading a number of articles and talking to key experts.

“The Promise of Digital Health: Then, Now, and the Future,” a discussion paper published in June of 2022 by the US National Academy of Medicine is one of the articles that I found most instructive. The paper is based on the contributions of 25 member of the National Academy of Medicine (NAM), including two of the experts I’ve recently spoken with, John Halamka and Peter Lee.

The Potential Impact of Open Source Generative AI in the Business World

“Generative AI, commonly referred to as GenAI, stands at the forefront of a technological revolution, profoundly altering diverse sectors by synthesizing vast amounts of data and generating new outputs,” said the “2023 Open Source Generative AI Survey Report,” published by the Linux Foundation (LF) in December of 2023. “From creating intricate artworks and composing music to designing novel pharmaceutical compounds and simulating realistic human language, the potential applications of GenAI are vast and transformative.”

“The open source approach, rooted in principles of transparency, collaboration, and shared innovation, holds transformative potential for the advancement of GenAI technologies. By democratizing access to AI algorithms and datasets, open source initiatives allow a broad and diverse pool of developers to contribute to, refine, and critique GenAI systems. This collective intelligence accelerates the pace of innovation and uncovers and rectifies biases or vulnerabilities that might otherwise go unnoticed in closed development environments.”

To help understand the potential impact of open source GenAI on the market, LF Research and LF AI & Data launched a worldwide survey. The survey explored the current state of GenAI technologies in companies, including models, databases, applications, and frameworks.

A Revolutionary Technology Is Not the Same As a Technological Revolution

“Artificial intelligence is almost certainly revolutionary in the sense that it will spawn new technology platforms, transform or eliminate many industries, and create new ones,” wrote British-Venezuelan economic historian Carlota Perez in a recent article, “What Is AI’s Place in History?” “But it must be understood as belonging to a larger, more mature technological revolution that began a half-century ago.”

 In her influential 2002 book, “Technological Revolutions and Financial Capital,” Perez wrote that technological revolutions have long been engines of growth, rejuvenating and transforming economies and societies. Since the advent of the Industrial Revolution, we’ve had a major technological revolution approximately every 60 years. First was the age of machines and factories starting in Britain in the 1770s. It was followed by the age of steam, coal and iron in the1830s; electricity, steel, and heavy engineering in the 1870s;  automobiles, oil and mass production in the 1900s; and the information and communications technology (ICT) and digital revolution in the 1970.

Technological revolutions encompass two different periods, each lasting 20 to 30 years. The installation period is the time of creative destruction, when novel exciting technologies emerge on the market, entrepreneurs launch many new startups based on these promising technologies, and venture capitalists encourage experimentation with new business models and money-making schemes. Inevitably, these speculative behaviors lead to a financial bubble, which eventually crashes and results in a period of economic stagnation.

After the crash, comes the deployment period, a time of institutional recomposition. The now well accepted technologies become the norm. Infrastructures and industries are better defined and more stable, and production capital drives long-term growth and expansion, spreading and multiplying the successful business models. New paradigms emerge for guiding innovation. Over time, these new paradigms transform the economy and everything around it, as well as re-shaping social behavior and the institutions of society.

What’s the State of Income Inequality Around the World?

Over the past few decades, technology advances like the smartphone and wireless internet have significantly improved the quality of life of billions around the world. The economic development brought about by globalization led to the Gintic decline of extreme poverty in China, East and South Asia, and Latin America. Globalization was supposed to boost prosperity, as nations were becoming more economically interdependent, but it’s also led to major dislocations in labor markets, benefiting workers in low-cost developing nations while severely impacting workers in the US and other advanced economies. The promise of technological progress and globalization as drivers of growth and prosperity has been a reality for many, but it’s also created winners and losers within nations, leading to rising economic inequality.

“Across the globe, but especially in the wealthy economies of the West, the gap between the rich and the rest has widened year after year and become a chasm, spreading anxiety, stoking resentment, and roiling politics,” wrote economist Branko Milanovic in “The Great Convergence: Global Equality and Its Discontents,” a recent article in Foreign Affairs. “Globalization, the argument goes, may have enriched certain elites, but it hurt many other people, ravaging one-time industrial heartlands and making people susceptible to populist politics.”

“There is much that is true about such narratives — if you look only at each country on its own,” added Milanovic. “Zoom out beyond the level of the nation-state to the entire globe, and the picture looks different. Global inequality refers to “the income disparity between all citizens of the world at a given time, adjusted for the differences in prices between countries. … At that scale, the story of inequality in the twenty-first century is the reverse: the world is growing more equal than it has been for over 100 years.”

Inequality is commonly measured by the Gini coefficient, a statistical measure of income or wealth inequality within a group, a nation, or the whole world that was first developed over 100 hundred years ago. A Gini score of 0 means perfect equality, where all income and wealth are the same for all members of the group, while a score of 100 means maximal inequality, where a single individual has all the income and all others have none.

Could AI Reshape the Value and Nature of Human Expertise?

“A recent Gallup poll found that 75% of U.S. adults believe AI will lead to fewer jobs,” wrote MIT economist David Autor in a recent article, “AI Could Actually Help Rebuild The Middle Class.” “But this fear is misplaced. The industrialized world is awash in jobs, and it’s going to stay that way. Four years after the Covid pandemic’s onset, the U.S. unemployment rate has fallen back to its pre-Covid nadir while total employment has risen to nearly three million above its pre-Covid peak.”

“Due to plummeting birth rates and a cratering labor force, a comparable labor shortage is unfolding across the industrialized world (including in China),” he added. “This is not a prediction, it’s a demographic fact. All the people who will turn 30 in the year 2053 have already been born and we cannot make more of them. Barring a massive change in immigration policy, the U.S. and other rich countries will run out of workers before we run out of jobs.”

In his article, Autor argues that AI has the potential to transform the labor market by reshaping the nature of human expertise. AI offers us the opportunity to extend the value of human expertise by enabling “a larger set of workers equipped with the necessary foundational training to perform higher-stakes decision-making tasks currently arrogated to elite experts, such as doctors, lawyers, software engineers and college professors.”

How to Diversify Admissions to Elite Private Colleges

“After the Covid pandemic made it difficult for high school students to take the SAT and ACT, dozens of selective colleges dropped their requirement that applicants do so,” wrote David Leonhardt in “The Misguided War on the SAT,” a recent NY Times article. “Colleges described the move as temporary, but nearly all have since stuck to a test-optional policy. It reflects a backlash against standardized tests that began long before the pandemic, and many people have hailed the change as a victory for equity in higher education.”

“Now, though, a growing number of experts and university administrators wonder whether the switch has been a mistake,” added Leonhardt. “Research has increasingly shown that standardized test scores contain real information, helping to predict college grades, chances of graduation and post-college success. Test scores are more reliable than high school grades, partly because of grade inflation in recent years.”

Leonhardt’s article is primarily based on two recent studies published by Opportunity Insights, a not-for-profit organization based at Harvard that conducts data-driven scientific research on how to improve upward mobility. Each of the studies analyzed the value of SAT and ACT standardized test scores in predicting academic success at the 12 so-called Ivy-Plus colleges, — the eight Ivy League colleges plus Chicago, Duke, MIT, and Stanford.

While using different data and analytical methodologies, the overall conclusion of each of these studies was similar: standardized SAT and ACT scores are highly predictive of academic success at the Ivy-Plus colleges regardless of the students’ socioeconomic backgrounds. In addition, the second study also found that standardized SAT and ACT scores are highly predictive of post-college career success, such as attendance at top graduate schools, high earnings, and employment at prestigious firms. Let me discuss each of these studies.

The Digital Trust Framework: How to Implement New Technologies and Services Worthy of Trust

“Digital trust is a necessity in a world where digital technologies support and mediate virtually all economic transactions, social connections and institutions,” said Earning Digital Trust: Decision-Making for Trustworthy Technologies, a report published by the World Economic Forum (WEF) in November of 2022. The report defined digital trust as “the expectation by individuals that digital technologies and services –- and the organizations providing them –- will protect all stakeholders’ interests and uphold societal expectations and values.”

But, the report noted that “trust is significantly eroding on a global scale. In order to reverse this trend, leaders and organizations creating and implementing new technologies and digital services must make decisions that are worthy of trust.” To address this challenge, the WEF launched the Digital Trust Initiative in 2021. The Initiative convened an interdisciplinary group of over 60 experts and leaders in privacy, cybersecurity, law, technology ethics, and other fields. The group was asked to establish a consensus among key stakeholders on the meaning of digital trust, as well as to come up with measurable steps to make better, more trustworthy decisions regarding new technologies and digital services.   

The Origins and Content of New Work

“Broadly speaking, many — perhaps most — workplace technologies are designed to save labor,” wrote MIT economist David Autor in his 2015 paper, “Why Are There Still So Many Jobs? The History and Future of Workplace Automation.” “Given that these technologies demonstrably succeed in their labor saving objective and, moreover, that we invent many more labor-saving technologies all the time, should we not be somewhat surprised that technological change hasn’t already wiped out employment for the vast majority of workers?, asked professor Autor.

The answer, he noted, underlines a fundamental economic reality that’s frequently overlooked: “tasks that cannot be substituted by automation are generally complemented by it.” Automation does indeed substitute for labor. However, automation also complements labor, raising economic outputs in ways that often lead to higher demand for workers. Articles often overstate the extent of machine substitution for human labor “and ignore the strong complementarities between automation and labor that increase productivity, raise earnings, and augment demand for labor.”

Most jobs involve a number of tasks or processes. Some of these tasks are more amenable to automation, while others require judgement, social skills and other human capabilities. But just because some of the tasks have been automated, does not imply that the whole job has disappeared. To the contrary, automating the more routine parts of a job will often increase the productivity and quality of workers, by complementing their skills with machines and computers, as well as enabling them to focus on those aspect of the job that most need their attention.

The advent of automated teller machines (ATMs) in the 1970s is a case in point. By 2010, there were approximately 400,000 ATMs in the US.  But, not only were bank tellers not eliminated, but their numbers actually rose modestly from 500,000 in 1980 to 550,000 in 2010, driven by two major forces. First, as a result of IT advances that  reduced the costs of operating a bank branch, the number of urban bank branches increased significantly by 2010. Second, while most of the routine cash-handling tasks of bank employees were automated by ATM technologies, IT-based innovations enabled a broader range of bank employees to become involved in relationship banking, providing a variety of relationship-based services to customers, including credit cards, personal loans, mortgages, and investment options.  

Open Source AI: Opportunities and Challenges

“Since the 1980s, open source has grown from a grassroots movement to a vital driver of technological and societal innovation,” said “Standing Together on Shared Challenges,” a report published by Linux Foundation Research in December of 2023. “The idea of making software source code freely available for anyone to view, modify, and distribute comprehensively transformed the global software industry. But it also served as a powerful new model for collaboration and innovation in other domains.”

The report is based on the Open Source Congress that was convened by LF Research in July of 2023 in Geneva to discuss the key challenges facing the open source community, such as safeguarding critical open source infrastructures and ensuring that new regulations are compatible with open source principles and practices. In addition, the Open Source Congress explored the opportunities for open source collaborations on important new topics, in particular, artificial intelligence. Given my interest in “How the Original Promises of the Open Source Movement Now Apply to AI Systems,” I’ll focus my discussions below on the report’s section on AI.

“Does AI Change Everything? What is Open?” is the theme of the report’s AI module. “For the OSS community, AI presents an array of opportunities and challenges. The community leaders assembled in Geneva discussed the need to align on a definition of open AI, as well as on the challenges created by AI-enabled code generators for licensing, security, and intellectual property. Finally, Congress participants reflected on the broader societal impacts of AI and the role of the open source community in addressing issues such as bias, privacy, and existential threats to humanity.”

Technologies that Will Drive Business Transformation Over the Next Two Years

In early December, Deloitte released “Tech Trends 2024,” its 15th annual report that “chronicles the growing business imperative to balance today’s tactical needs with tomorrow’s strategic ambitions.” The report is focused on six major technology trends that are likely to be critical to business transformation over the next 18-24 months. Let me discuss each of these trends, starting with:

Genie out of the bottle: Generative AI as growth catalyst.

Not surprisingly, generative AI and its potential impact on business and the world is Deloitte’s overriding trend. “Philosophers have long debated whether machines are capable of thought, but generative AI makes the question moot,” said the report. “Regardless of whether it possesses intelligence in the philosophical sense, it does in a practical sense, creating the opportunity for huge productivity and efficiency gains in enterprise settings. Now that machines can behave, comprehend, and narrate like humans, the question becomes how this will impact business and the world broadly.”

The Current State and Future Trends of Enterprise Blockchain Technologies

“Blockchain is one of the major tech stories of the past decade,” said a December, 2022 McKinsey article, “What is Blockchain.” “Everyone seems to be talking about it — but beneath the surface chatter there’s not always a clear understanding of what blockchain is or how it works. Despite its reputation for impenetrability, the basic idea behind blockchain is pretty simple,” namely: “Blockchain is a technology that enables the secure sharing of information.”

That same month, a WSJ article, “Blockchain Fails to Gain Traction in the Enterprise,” noted that for years, blockchain “has been viewed by some companies as a way to drive industry-transforming projects, among them the tracking of assets through complex supply chains.” But, “So far, that hasn’t happened,” the article added.

I’ve been closely following the evolution of blockchain technologies for a number of years. Between 2016 and 2023, I’ve posted over 50 entries on blockchain and related technologies in my blog. For example, in 2017 I asked Is Blockchain the Major Next Step in the Evolution of the Internet?, based on the fact that the previous year, the World Economic Forum (WEF) had named The Blockchain as one of its Top 10 Emerging Technologies for 2016. In the blog I wrote that “Like the Internet, the blockchain is an open, global infrastructure upon which other technologies and applications can be built. And like the Internet, it allows people to bypass traditional intermediaries in their dealings with each other, thereby lowering or even eliminating transaction costs.”

The Coming AI Revolution

“The Coming AI Economic Revolution: Can Artificial Intelligence Reverse the Productivity Slowdown?” was recently published in Foreign Affairs by James Manyika and Michael Spence, two authors I’ve long admired. James Manyika is senior VP of research, technology and society at Google, after serving  as chairman and director of the McKinsey Global Institute from 2009 to 2022. Michael Spence, a co-recipient of the 2001 Nobel Prize in Economics, is professor in economics and business at NYU’s Stern School of Business, and was previously professor of management and dean of the Stanford Graduate School of Business.

“By the beginning of the next decade, the shift to AI could become a leading driver of global prosperity,” wrote the authors. “The prospective gains to the world economy derive from the rapid advances in AI — now further expanded by generative AI, or AI that can create new content, and its potential applications in just about every aspect of human and economic activity. If these innovations can be harnessed, AI could reverse the long-term declines in productivity growth that many advanced economies now face.”

“This economic revolution will not happen on its own,” they added. Unleashing an AI-powered economy will require a new policy framework that fosters AI’s most productive uses and enhance human potential and ingenuity. “These policies must promote technologies that augment human capabilities rather than simply replace them; encourage AI’s widest possible implementation, both within and across different sectors, especially in areas that tend to have lower productivity; and ensure that firms and sectors undergo necessary process and organizational changes and innovations to effectively capitalize on AI’s potential.”

Taking the Pulse of AI in Medicine

“AI explodes: Taking the Pulse of artificial intelligence in medicine,” is the title of the latest issue of the Stanford Medicine Magazine. The issue includes a number of articles that explore the promise of AI in medicine, ranging from What’s driving this tumor, — which discusses the efforts to stymie breast cancer through gene testing and AI, — to Adding ethics to the mix when developing health care AI, — which deals with the potential hazards posed by algorithms developed by AI experts with no formal training in the ethical standards for treating patients.

“Imagine a future where your doctor has an AI medical assistant by their side – distilling, in seconds, a world’s worth of medical research into a personalized treatment plan for you,” wrote Dr. Lloyd Minor, Dean of the Stanford University School of Medicine in the issue’s Letter from the Dean. “What if, at the click of a button, a researcher could design a custom molecule with the potential to treat a previously untreatable disease? With artificial intelligence’s rapid emergence, we are barreling toward this reality. Academic medical centers around the world, including Stanford Medicine, have begun investigating how AI, including large language models such as ChatGPT, can help us improve patient care, reduce clinician workload, better understand complex biological systems and accelerate drug discovery.”

As I discussed in a recent blog, “The Promise of Generative AI in Healthcare,” there’s a lot of excitement that AI might help us address our highly complex healthcare industry. Healthcare is a system of coupled systems, encompassing medical and pharmaceutical research; the delivery of healthcare to patients by a variety of practitioners, including hospitals, physicians, nurses, and pharmacists; and the insurance companies and governments that pay for healthcare.

According to Wikipedia, the healthcare industry comprises over 10% of the GDP of most developed countries. “The per capita expenditure on health and pharmaceuticals in OECD countries has steadily grown from a couple of hundred in the 1970s to an average of US$4'000 per year in current purchasing power parities.” In 2022, US healthcare spending “grew 4.1% to $4.5 trillion in 2022, or $13,493 per person, and accounted for 17.3% of Gross Domestic Product (GDP).”

In addition to its inherent complexity, healthcare has several attributes that make the successful deployment of new technologies significantly more challenging than in other industries. HIPPA, for example, protects the privacy of individuals in the US, but it also restricts the data sharing that’s essential to achieving many of the benefits of generative AI. And because the stakes in healthcare are too high to tolerate flaws that could harm patients, it’s harder to introduce new technologies and applications compared to most other industries.

The Case for an AI-Powered Productivity Boom

“Large language models such as ChatGPT are emerging as powerful tools that not only make workers more productive but also increase the rate of innovation, laying the foundation for a significant acceleration in economic growth,” wrote economists Martin Neal Bailey, Erik Brynjolfsson, and Anton Korinek in “Machines of mind: The case for an AI-powered productivity boom,” a Brookings Institutions report. “However, official statistics will only partially capture the boost in productivity because the output of knowledge workers is difficult to measure. The rapid advances can have great benefits but may also lead to significant risks, so it is crucial to ensure that we steer progress in a direction that benefits all of society.”

The authors noted that generative AI systems are machines of the mind, increasingly capable of generating coherent and contextually appropriate text, images, videos, and audio, in a wide range of information-based tasks. Millions of knowledge workers, — from doctors and lawyers to managers and sales people, — will experience ground-breaking improvements in their productivity within a few years.

The Dueling Visions for the Soul of AI

On November 17, OpenAI's board of directors ousted chief executive and co-founder Sam Altman, saying in a statement that “The board no longer has confidence in his ability to continue leading OpenAI.” Then on November 22, after an intense pressure campaign from employees and investors, OpenAI announced that it had reached “an agreement in principle for Sam to return to OpenAI as CEO” with a reconstituted board.

What led to this chaotic governance drama over approximately 107 hours from November 17 to 22?

“Many of the people at the company seem simultaneously motivated by the scientist’s desire to discover, the capitalist’s desire to ship product and the do-gooder’s desire to do this all safely,” wrote NY Times columnist David Brooks In “The Fight for the Soul of A.I.,” where he discussed the conflicting issues that led to OpenAI’s chaotic 4.5 days. “Is this fruitful contradiction sustainable? Can one organization, or one person, maintain the brain of a scientist, the drive of a capitalist and the cautious heart of a regulatory agency?”