Our algorithmic planet

Book review of Competing in the Age of AI: Strategy and Leadership When Algorithms and Networks Run the World

In one of the most masterful expositions, Messrs Iansiti and Lakhani, Harvard Business School dons, lay bare the nuances of strategy and leadership when algorithms run the world. The book begins with how artificial intelligence and machine learning (AI/ML) recreate a Rembrandt masterpiece 350 years after his death, which even art experts could not detect at first sight. It also explains how the now more than 10 trillion digital photographs each year, five orders of magnitude greater than the total number of traditional photographs ever taken, are a growing dataset that, with some training from the algorithms that Google, WeChat, Facebook and Microsoft possess, can identify family members, places and everything else. Going further, anything digital is  infinitely scalable and can be easily and perfectly communicated, replicated and transmitted at virtually zero marginal cost to a near infinite number of recipients, anywhere in the world. Even more, anything digital can be connected again at zero marginal cost to other complementary activities, thereby enriching and adding even more value to itself.

In another example, the authors show how Ant Financial engages with 10x more  customers as the largest US banks (700 million users and 10 million small and medium enterprises) but  with 1/10th the number of employees and far lower costs, with attendant higher profitability. This magic is again made possible by AI/ML from its core mobile payments platform, Alipay, enabling it to perfect that extraordinary combination of wide reach and low cost. Ant Financial uses data and artificial intelligence from its mobile payments platform, Alipay. This enables it to give loans via its hallmark 3-1-0 system: It takes customers three minutes to apply for a loan, requires one second for approval, and involves zero human interaction. The loan approval and issuance processes rely solely on credit scores and are entirely digital and AI driven: Each loan application is run through 3,000 risk control strategies — no human judgement can come even close to it. 

In more examples from the UK, the book shows how Ocado, an online grocer has perfected the art of “visualize it, trial it, iterate, iterate, iterate and iterate in volume” to enable algorithms to move tens of thousands of packages with minimal human intervention and is now so good at what it does that it is able to offer its AI/ML platform and digital capabilities to third-party grocery chains around the world. 

Competing in the Age of AI: Strategy and Leadership When Algorithms and Networks Run the World 

Author: Marco Iansiti & Karim R. Lakhani, Publisher: Harvard Business School Press

Price: Rs 1,250

The greatest learnings from the book are four-fold. First, the authors demonstrate conclusively through hard facts and data that the “age of AI,” which is only beginning as I type, is highly under-appreciated and under-valued yet. What’s coming with the delightful dance of AI/ML and other technologies such as augmented and mixed reality, quantum computing and so on will truly dwarf the previous two information and industrial revolutions. Second, the book reveals the power of AI/ML through easy-to-understand examples and everyday occurrences that would appeal to the common reader. Nothing technical or too esoteric here. Third, the authors demonstrate persuasively that the limitations of the “previous worlds” of size, scale, learning and cost that lead to diminishing returns do not apply in the algorithmic economy any longer. The AI/ML-driven operating system that is at the core of modern business and society is “almost infinitely scalable”, has “self-reinforcing loops” of network and learning effects that enables actual increasing returns with scale, which is leading to a “winner takes all economy”. 

Lastly, a tantalising, seemingly ironical, yet very authentic takeaway is this: The coming AI age will be dominated by “a small number of digital superpowers” that will also create the greatest entrepreneurial opportunity in the history of human civilisation. It sounds implausible but this revolution appears to be just around the corner, going by the rich tapestry this book weaves.  

The only gripe I have is that the book has very little mention of government and how AI/ML can transform the delivery of public services. Separating the point of decision of a government service from the point of delivery of a government service has many laurels to be won and much value to be unlocked if done correctly. And with it, countries can solve some of the largest, most vexatious problems citizens across the planet face when they interact with their own elected governments. Government services have moved from paper to silos to “joined-up”, to “single-window” to mobile — the next step would be using the data, with appropriate safeguards and infusing it with large amounts of intelligence. That way AI/ML revolution can breach the last — impregnable? — fort of government too. Perhaps a sequel could focus on just that? 

The reviewer is an IAS officer. These views are personal. @srivatsakrishna