Why AI isn’t showing up on your bottom line

It is based on the essay and analysis that Nathan and I put out early this week to try to make sense of what we are really seeing, and I thought the story in-- of electricity was really amazing, and I just-- I think it's the best thing we have right now.

The first companies to use electricity in the eighteen nineties used it to illuminate the workplace, right? They just added more and more light bulbs to extend the working day.

And, you know, famously, uh, we talk about Serrano, who's an Italian coach maker.

He ends up making the first automobile for what became Fiat, and he used electricity very early on, actually fifteen years before Henry Ford got started, with light bulbs.

Uh, and in many ways, where we are today with AI is in the light bulb stage.

That is the copilot or the chatbot.

But what actually happened in electricity was that the productivity emerged when people really rethought what happens when you think about a company in the age of electricity.

So Henry Ford's business, Highland Park, that famous factory, wasn't more light bulbs.

It wasn't a million light bulbs rather than ten.

It was a complete rethinking of what it was to be a car manufacturer.

It was no longer artisanal.

It was no longer about stock.

It was about flow.

It was about standardization.

It involved changing the supplier relationships.

It involved changing the buyer dynamics.

Lots had to change.

It was not a million light bulbs.

So when you think about AI and you're a company rolling out Microsoft Copilot licenses, you're not going to really see the benefits of the general purpose technology by rolling out more licenses.

Oh, instead of one license per person, it's gonna be ten licenses per person, in the same way that you didn't get to Henry Ford with ten light bulbs more per person.

And I think that's a really hard thing to make sense of at this moment.

You know, Nathan and I spent a lot of time talking about the analogies, and one thing that didn't make it into our analysis was that I felt that this is a little bit like going from level two self-driving to level four self-driving, right? There is a complete phase change because going from something where human intervention is required to never being required is just a completely different way of conceiving of the system.

And that, I think, is at the heart of the challenge that Main Street is gonna face over the next three to five years.

It's one thing to speed up a few processes with some copilots, meeting transcripts, summaries of emails.

The moment you start to get work groups effective within their groups, they run into this idea of congestion.