The development of Artificial Intelligence (AI) is the most significant scientific breakthrough since man split the atom. It has the potential to revolutionize the way we live, do business, even think in ways that heretofore have been the stuff of science fiction.
Predictably, as is usually the case with changes of this scale, its arrival has generated a climate of fear into which the guardians of our culture tap, then spread, so they can drive the narrative that the only wise course for us to follow is to allow them to regulate what happens.
No thank you. Even though I understand well the cost of such developments in human terms, I’m all for creative disruption. Let the market sort it all out. It will, as most people refuse to accept, for the market system represents the largest spontaneous transfer of critical information imaginable. As powerful as AI is now or ever becomes, it won’t take its place as a determiner of outcomes for humankind.
We know this because we’ve seen these predictions of doom before. And the same technological luddites who’d have us remain in the relative Dark Ages then are the same kinds of supposed scholars and experts who now urge great caution as we adopt and adapt to the new realities AI will make real.
As to the fear that AI might displace people in the workplace, relax, it will, as have innovations before it over the last 100 years. Most of them have turned out for the better, leading to higher standards of living, the creation of unimagined levels of prosperity, and the lifting of entire nations out of the historical muck in which much of humankind has dwelt throughout its time on earth.
As a thought experiment, think of the advent of the automatic teller machine or ATM. It’s one of the thousands of technological innovations that created displacement in the workforce but also increased convenience, expanded choice, empowered consumers, and improved the global financial system.
It all started in 1969, at a Long Island, New York, branch of the long-ago-assumed-into-another-institution Chemical Bank. One day, customers were introduced to a new addition to their banking business, one that dispensed cash, received deposits, never called in sick, didn’t close at lunchtime, and was open after 3 pm.
Some could only see how this change would lead to bank tellers joining carriage drivers, elevator operators, and coal delivery men on the line of the permanently under- and unemployed. They didn’t see the opportunity.
It wasn’t all that long before ATMs were everywhere. And our behavior changed.
College students, instead of writing Mom and Dad for money, carried little plastic cards that let them withdraw funds to buy books, pay for meals, and enjoy the pursuits that college students throughout history have pursued after parents deposited funds in the bank back home.
Business travelers going from city to city had ready access to cash at all hours of the day and night without having to find a place that would accept an out-of-state check. Eventually, as national banking took hold for real in the 90s, dealmakers could deposit checks where they got them rather than having to wire funds or have checks couriered home.
Now there are more than 600,000 ATMs across America, not just in or just outside bank branches, but in malls, gas stations, and convenience stores that, in some cases, are miles away from the nearest financial institution. ATMs brought the bank and your money to you, wherever you are.
But here’s the really interesting thing: after the ATM became commonplace, the number of bank tellers in the U.S. went up rather than down, from just about half a million when the rollout began to nearly 600,000 by 2010. And many of them weren’t called tellers anymore. They were now personal bankers, doing more than just taking money in or passing it out from behind a window a few hours a day.
Searching for an explanation for this counterintuitive result, Boston University economist James Bessen dug into why things happened the way they did: the ATM did exactly what pessimists predicted at the branch level. The number of tellers needed to run an average urban bank branch dropped from twenty to about thirteen. But what people missed is that a branch that is less expensive to operate, thanks to lower personnel costs, making a smaller footprint possible, is one that can be opened where, on paper, the numbers said it would fail. Banks opened more branches, as much as 43 percent more in urban areas by most accounts.
Fewer tellers per branch meant more branches could be opened at similar cost, requiring more tellers overall. And, once the machines took over the job of counting cash and cashing checks, the work machines could not do became more valuable. Tellers stopped being the medium through which money moved in and out of cash drawers and became someone who walked you through the process, knew your kids by name, and, most importantly, from a perspective on what needs to happen to grow a business, knew what your potential banking needs might be.
In “relationship banking,” as it's now known in some circles, machines do the tedium. At the same time, people use their judgment to improve the customer experience and, and this is the best part, get paid more for doing it than those who occupied similar positions in the workplace three or more decades ago.
That’s what matters most as pertains to AI. The improvement in ATM efficiency freed people to innovate. At the same time, the savings created for business owners were directed into new enterprises because there was nowhere else to put them.
The deregulation of the banking industry, which admittedly had a few fits at its start, became possible because of automation. Technology made national and international branch banking real. Now you can get funds from an Iowa bank out of an ATM in London faster than it takes to hail a cab in Westminster. The timing of it all isn’t a coincidence either. It’s the result.
This is why the ATM story is worth telling, and it is not the reason it usually gets told. It is not evidence that things work out. It is evidence about the conditions under which things work out.
Things are still changing in banking, but banks have developed apps that moved simple transactions onto smartphones. You don’t have to go to the bank or an ATM to deposit a check anymore. And the fact that you can take a picture and send it in means there’s no need for a teller to take your deposit.
Working Americans don’t thrive because the government steps in and protects them from technology. That harms them because it denies them the opportunity to benefit from how the marketplace changes. We must be open to adopting AI and prepare to adapt by seizing its promise rather than setting out to protect people from potential peril at the outset. Intent matters, so let’s get this right by staying out of the way.
Stephen Moore is an economist, syndicated columnist, and co-founder of Unleash Prosperity Now, an organization promoting pro-growth policies and ideas.
