Policymakers have been warned not to “act too quickly to clamp down” on artificial intelligence (AI) innovation, with concerns from a leading asset manager that overregulation of the burgeoning technology could strangle innovation, and thus stifle wealth-building opportunities emerging from the technology, without necessarily improving social safety.
Dr Kevin Hebner, managing director, global investment strategist at Epoch Investment Partners, a New York-based investment firm owned by TD Bank Group, and author of the just-released AI: How to Regulate an Emerging Tech? white paper, has cautioned against the implementation of a “rigid and complex regulatory framework” for AI.
He argues that premature regulation or overregulation could increase AI development costs without any material benefit to social safety.
Hebner noted that policymakers are currently faced with a challenging balancing act with AI: to nurture AI innovations that could significantly boost economic and wealth-growing opportunities whilst at the same time managing citizens’ concerns around the technology, particularly around its potential to undermine employment and public safety.
“We believe AI will be the key driver of equity markets over the next decade, significantly impacting the labour market, productivity and sector concentration, as well as margins and free cash flow generation,” Hebner said.
PwC estimates that AI could contribute up to $15.7 trillion to the global economy in 2030 – more than the current output of China and India combined.
Hebner added, however, that big technology companies (or ‘bigtechs’), driven by the market imperative, have emphasised speed over safety in their AI innovation ecosystems. This turbocharged development has, unsurprisingly, spooked the public, leading to increased demands for transparency around and regulation of the technology.
While sufficient guardrails are critical, Hebner warned that there is the risk, driven by overt political pressure, of rushing through AI regulations “without the benefit of rigorous cost-benefit analysis and a firm understanding of how the technology is evolving”.
“As often occurs, regulators would inflict a lot of harm in their vain attempt to do a little good,” Hebner said.
The US, he argues, has proved far better than Europe at balancing the innovation imperative with citizen safety, believing the latter has effectively “stifled innovation through regulation”.
“This helps explain why most of the top AI professionals are based in the US or Canada even though they were born abroad. It also clarifies why America captures the lion’s share of private sector investment in AI,” he said.
“Mistakes will be made,” Heber conceded, with “important implications for the evolution of AI, the structure of the industry and the cash flow earned by investors,” he added.
Winners (and losers) of the AI revolution
For Epoch, AI represents the “fourth wave” of digital technology after the PC, internet and mobile phones.
However, according to Hebner, when it comes to investing in AI for long-term returns, only a small handful of companies will prove winners from the AI revolution and “successfully capture the value inherent” in the technology.
“Nobody possesses a crystal ball and we do not know which start-up companies will become the next titans, and which current superstars will fall,” he said.
“This level of uncertainty means we are regulating what we do not really understand, which is, which governments need to be cautious now about introducing restrictive laws.”
Australian businesses may, however, already be on the back foot.
A just-released report by RMIT and Deloitte Access Economics has found that, despite 86 per cent of all occupations being affected by the technology, just five per cent of surveyed Australian businesses were fully prepared to deploy and leverage AI within their operations.
Further, only one in 20 Australian businesses were found to be ready to deploy and leverage the technology.