Prediction Machines: 8 key ideas
The core ideas of Prediction Machines, each in under a minute, written in our own words. Want the full depth? Get the book.
- IDEA 1 OF 8
AI makes prediction cheap
Agrawal, Gans and Goldfarb, economists, argue that the simplest way to understand modern AI is as a technology that makes prediction cheap.
When something becomes cheaper, people use more of it and find new uses.
- IDEA 2 OF 8
Cheaper prediction changes everything
The authors explain that as prediction becomes cheaper, it will be used for tasks that were not seen as prediction problems before, such as driving or translation.
Falling cost leads to using it more widely.
- IDEA 3 OF 8
Judgement becomes more valuable
The authors argue that as machines handle prediction, human judgement, deciding what outcomes matter, becomes more valuable.
The two work together. A machine can say what is likely, but people must still decide what is worth wanting.
- IDEA 4 OF 8
Prediction has complements
The authors explain that cheaper prediction raises the value of things that go with it, such as data and judgement.
Some jobs may grow while others shrink. When one input gets cheaper, the others grow in importance.
- IDEA 5 OF 8
Data feeds predictions
The authors explain that predictions depend on data.
Organisations need the right data to benefit from AI. A strong system without good, relevant data will make weak predictions. Gathering that data can take as much effort as building the system.
- IDEA 6 OF 8
Break decisions into parts
The authors suggest breaking decisions into elements such as prediction, judgement and action.
This shows where AI can help. Looking at each piece separately makes it easier to see which part a machine can handle.
- IDEA 7 OF 8
A tool maps AI use
The authors propose the AI canvas, a tool for planning how AI fits into specific tasks.
It helps organisations think clearly. It lays out the task, the prediction needed, the judgement and the action in one view.
- IDEA 8 OF 8
Strategy may need to change
The authors argue that once predictions become very accurate, businesses may need to change their whole strategy, not just individual tasks.
Accurate predictions can change what the business offers and how it competes with others.
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