“Despite the rapid progress made by artificial intelligence, computers have not been able to catch up with us – yet. “
Over the past 44 years, I've built seven companies from scratch, each of which has become a multi-billion-dollar enterprise. As I searched for my next project over the past year, there was an AI dimension in my lens:
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What drives industry profitability, and will AI accelerate or weaken it?
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Is AI a headwind, tailwind or neutral for the industry?
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What are the risks and opportunities of AI disruption?
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When can AI disruption occur?
For example, I thought about bringing together accounting firms, but there is a possibility that accountants will be replaced by generative AI within the next decade. I could build a large accounting firm over the next few years and then see it suddenly turn into a black hole because people start using AI to close their books and no longer need to hire a third party to provide expertise and oversight.
Another industry I looked at was for-profit education, but the AI trend is also a headwind for most of this sector. For example, Chegg CHGG stock,
— a billion-dollar company that provides textbooks, online help, tutoring and other educational services — has been exposed to the potential disruption of artificial intelligence. In a May 2023 earnings call, the company's CEO mentioned ChatGPT as a potential impediment to growth. The next day, the stock price fell by almost half. The company plans to launch a proprietary platform powered by ChatGPT, but the question remains: Will potential customers pay for Chegg or use ChatGPT for free?
I have decided not to invest in some financial services companies for similar reasons. AI can make them less profitable, because we may be able to get what we need directly from AI tools. I don't think we'll need a human insurance broker, for example, in 10 years. Also, at some point in the not-too-distant future, I can see AI replacing much, if not most, of what paralegals and even lawyers do. Many jobs in journalism, advertising and other communications roles are likely to become obsolete – and ironically, AI is also putting technical jobs at risk, including programming.
“AI will drive massive digital efficiencies, but the physical needs of humans will not disappear.“
At the same time, there is a lot of money to be made by identifying industries that may benefit most strongly from AI over the next 20 years; These include parts of the healthcare, retail and manufacturing sectors. This is because each of these fields contains, at its core, a physical component and a digital component. AI will drive massive digital efficiencies, but the physical needs of humans will not disappear, ensuring demand. We will need doctors and medicines for a very long time, just as we will still need manufactured products and retail spaces, physical or digital, to purchase them.
Other industries are unlikely to see significant impacts one way or another in the near term. For example, homebuilding will benefit from AI in terms of design and marketing, but the need for a physical home is not going away any time soon. Even if we started spending a lot of time in the metaverse, we would still sleep in a real bed, brush our teeth over a real sink, and take a real bath.
For the same reasons, AI seems more friend than foe to my next industry, building product distribution.
Despite the rapid progress made by artificial intelligence, computers have not been able to catch up with us – yet. The human mind remains the most advanced thing in the universe that we know of. However, every human task can be broken down into systematic rules and processes and make logical decisions based on replaceable historical results. Technology in this area will improve with the development of artificial intelligence. One day, everything I do as a CEO might be done more effectively by a robot or hologram with more knowledge and ability than I could ever have.
One of the difficult things about spotting technology trends is not a lack of information, but rather that the implications can be so large that people have trouble mentally comprehending them. For one thing, we have an inherent tendency to ignore technological and social change. Most of us are programmed to believe that things will remain the same. Even Thomas Watson, former chairman and CEO of IBM, once said: “I think there's a world market for maybe five computers.” That was in 1943.
Obviously, IBM's leadership changed its mind about the viability of computers, but this represented a big mistake for the leader of the most advanced technology company at that time. Now, we live in an age where a computer program called AlphaGo beats the human world champion, and ChatGPT can pass the bar exam with flying colors, even if it still has a way to go before it does so on the MCAT exams as well.
Many researchers, computer engineers, and technology company CEOs have hypothesized that technology is on a path that could merge with humans within this century to create new, more adaptable species. I believe this vision of the future may be closer than people think, and that every executive wrestling with the implications of AI needs a rigorous framework, and a healthy imagination, to make the right choices moving forward.
Brad Jacobs is Chairman of XPO, GXO and RXO, Managing Partner of Jacobs Private Equity, and Chairman and incoming CEO of QXO, which operates in the construction products distribution industry. He is the author of “How to Make a Few Billion Dollars.” (Greenleaf Book Group Press, 2024)
more: “For every step we get closer to super powerful AI, everyone's character gets 10 crazy points.” Sam Altman talks about the OpenAI disruption.
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