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AI: Painkiller, Vitamin, or Psychedelic? Making Sense of Its Impact

The increasing prevalence of AI and its multifaceted impact on industries has left many pondering its consequences. AI is often categorized as either a painkiller, reducing costs by replacing jobs, or a vitamin, enabling growth by introducing new capabilities and creating markets.

As AI continues to expand its influence across industries, understanding its impact is a complex task. To navigate the evolving landscape, AI can be categorized into three types: painkillers that reduce costs by automating tasks, vitamins that enhance productivity and drive growth, and psychedelics, which encompass imaginative and transformative uses of AI.

AI as a Painkiller - Painkiller AI focuses on automation and cost reduction. It aims to replace manual labor and repetitive tasks, increasing efficiency and reducing expenses. Examples include AI-driven chatbots that handle customer service inquiries or AI systems that automate data entry. Painkiller AI is akin to pain relief, making processes more comfortable and less resource-intensive.

AI as a Vitamin - Vitamin AI serves as a catalyst for innovation and growth. It introduces new capabilities, expands markets, and enhances human abilities. For instance, AI can enable the creation of new services and industries, such as digital therapists or autonomous vehicles. It complements human workforces and drives economic expansion.

While some argue that AI could replace 80% of existing jobs within a decade, it's essential to consider the other side of the equation. AI doesn't just eliminate jobs; it also creates new and different roles. AI's impact on employment will be multifaceted, reshaping the nature of work rather than eliminating it.

Roy Bahat of Bloomberg Beta categorizes AI projects as looms (replacing workers), slide rules (assisting humans), or cranes (extending human capabilities). This metaphor helps understand AI's role in different contexts and industries.

Companies that initially address a specific pain point with AI may evolve into platforms that offer AI services to others. An example is Amazon, which transitioned from an online bookstore (a painkiller) to Amazon Web Services (a super-vitamin) by providing cloud services to other companies.

AI's Psychedelic Aspect - AI can have a transformative and creative aspect, similar to entertainment, casinos, or imaginative applications. These uses of AI can be less predictable and more exploratory. This "psychedelic" category encompasses speculative investments and innovations.

Understanding AI's impact involves distinguishing between painkiller, vitamin, and psychedelic applications. While painkiller AI automates tasks and reduces costs, vitamin AI creates new markets and growth opportunities. The psychedelic category represents creative and imaginative AI uses that may be less predictable.

Investors and businesses should assess AI projects based on their potential to provide real-world value as painkillers or vitamins, avoiding excessive speculation. AI's impact on employment is complex, with both the displacement of some jobs and the creation of new roles. Ultimately, AI's influence on industries and society depends on how it is harnessed and integrated into various applications and processes.