Artificial intelligence has taken the world by storm. Companies like Nvidia (NVDA), Microsoft (MSFT), and Alphabet (GOOGL, GOOG) have seen their shares soar thanks to their big bets on AI. But the ripple effects from AI will be felt far beyond the tech sector. There will be real world impacts, ranging from the practical, such as advancing self-driving cars, or scary, such as the spread of misinformation.
One of the big questions about AI is how it will impact people's jobs. According to a new International Monetary Fund study, 40% of global employment will be impacted by AI. That number goes up to 60% in advanced economies. IMF Managing Director Kristalina Georgieva sat down with Yahoo Finance Executive Editor Brian Sozzi to discuss the report.
Georgieva notes there are two unintended consequences of AI the organization is focused on. The first is the difference between jobs that will be complemented by AI and those that could disappear due to the technology. For those whose jobs will be enhanced by AI, they could become more productive and perhaps be better compensated. On the other hand, those who lose their jobs will need to be retrained for other roles and may need government assistance in doing so.
The second unintended consequence of concern is how AI could amplify inequality, both between countries and within a country itself. As for competition among countries, Georgieva discusses how the IMF's "AI Preparedness Index" ranks 125 countries by four categories: digital infrastructure, innovation and economic integration, human capital and labor market policies, and regulation and ethics. With this index, countries may be able to better gauge how prepared they are to take advantage of AI opportunities.
Georgieva goes on to explain why AI is so important to the global economy. "We have been stuck in a low-growth world for some time now, '22, '23, now '24. Growth is way below the historic average... How do we get growth up? We need to get productivity up," Georgieva says. AI can boost productivity, but, as Georgieva notes, the distribution of AI benefits needs to "lift all boats," otherwise, it will increase inequality. As a result, "social safety nets in a world of artificial intelligence are paramount. You have to be able to support those that fall off a cliff because their jobs are wiped out," Georgieva says, adding that older workers may struggle more to adapt to AI technologies than younger ones.
When it comes to what sort of social safety nets governments should consider, Georgieva believes they should provide workers with opportunities. "I prefer to call them social safety ropes. Give people a chance to pull themselves out of a difficult situation," she says.
On January 10, the US Securities and Exchange Commission approved eleven spot bitcoin ETFs, opening the world of crypto to a new swath of investors. When it comes to the asset class, Georgieva stresses that it's important to note the difference between an asset and money. "When we talk about crypto, we are actually talking about an asset class... but it is not exactly money," Georgieva says, adding that central bank digital currencies are a form of money. "We have to be careful not to mislead the public that crypto is equivalent, in all cases, of money."
Editor's note: This article was written by Stephanie Mikulich
Key video moments:
00:00:05 Georgieva discusses the impact of AI on the labor market, including unintended consequences
00:02:40 Georgieva on the pros and cons of AI, importance of social safety nets
00:05:30 Can AI be regulated?
00:06:48 Think "social safety ropes," not social safety nets
00:08:27 How AI-generated misinformation could impact markets
00:10:20 IMF's view on crypto
BRIAN SOZZI: Really a fascinating new piece of research or a study out of the IMF looking at the impact of AI on the world. What do you see as some of the biggest unintended consequences of this AI movement that is in fact spreading throughout the world?
KRISTALINA GEORGIEVA: Let's first start from how significant the impact is going to be. When we measured the percentage of jobs that are going to be impacted, globally 40%. In advanced economies, 60%. So this is a massive transformation of the way we work. Two of the unintended consequences that we are particularly focused on.
The first one is the distribution of this job impact between jobs that would disappear and jobs that would be complemented by AI, very different impact. If your job disappears, you need to be retrained to find another one. If your job gets complimented, you may become vastly more productive and your income level may go up.
So how do we identify these specific impacts in these two streams? And how do we put upfront public policy to maximize the positive and minimize the negative? Two, and this is one that the fund we are very concerned about, inequality. Inequality across countries, inequality within countries. Across countries, what we have seen is countries are in a vastly different place in how prepared they are for the new world of artificial intelligence.
I take as the best first contribution of this research the index that we are calculating on artificial intelligence preparedness. So we looked at 125 countries and we ranked them on four categories of how well they are poised to take advantage of the opportunities of AI and manage the risks. First category, digital infrastructure. Second, human capital and labor market mobility. Third, innovation. Fourth, regulation and ethics.
And when we measured, what we came up with is the champions, Singapore, United States, Denmark. But then a significant number of lower income countries that are way behind in how they are poised for this new world.
BRIAN SOZZI: Do you see AI-- I think there's a lot of focus on it being bad for jobs and the economy, but it doesn't sound as simple as that. If I'm listening to you, completely there is good, but there will be bad.
KRISTALINA GEORGIEVA: Well, let's start with why ripping off the benefits of AI is so important. We have been stuck in a low growth world for some time now, '22, '23, now '24. Growth is way below the historic average. It used to be 3.8% on average in the previous decade before COVID, now it is 3% on average. How do we get a growth up? We need to get productivity up.
If we capture the benefits of artificial intelligence more through complementarity and then enhance productivity, then actually national incomes can go up. In other words, the old story of lifting all boats. But if we don't have thoughtful distribution of benefits and inequality grows dramatically, that can break the social fabric in a way that is going to be very unhealthy for the world.
So what we are saying in this research is social safety nets in a world of artificial intelligence are paramount. You have to be able to support those that fall off a cliff because their jobs are wiped out. We also look at who are most adaptable, obviously the younger generation. In some areas, women more adaptable but in others, less. And the older generation may need more support to catch up in this new world.
Ethical considerations are going to be hugely important. This is now not our specialty, but we recognize that unless you have policy framework that says, OK, you have a small number of companies that are hugely ripping off the benefits of this tremendous advancement in technology. How do they contribute to the rest of society? How is this going to be handled? And then ethics goes into regulation.
How do we regulate something that is changing so rapidly? And how do we allow space for innovation? Can it be regulated? Well, that is exactly the question. I mean, if you talk to-- when you talk to people that are ahead-- like Singapore is ahead, yes, they can be regulatory framework which is more around the fairness of distribution and also protecting areas where the risks are highest.
Actually in your profession, risks are very high.
BRIAN SOZZI: Somebody is taking my job, managing director. I'm not giving-- I'm not ready to give it to a robot.
KRISTALINA GEORGIEVA: No, no, no, no, no. Absolutely do not. But what you know is that there could be creation of reality that swings public opinion in a very dramatic way. It can undermine democracy. And we have seen it, it's no more fiction. So how do you deal with these things, so we have to be very mindful of. But pretending that we can put a leash on a rapidly changing technology, this is going to be an illusion.
So regulation that as the experience in Singapore shows that is more in terms of defining what are the issues. And then systematically thinking through rather than trying to put upfront a framework is probably the way we would go.
BRIAN SOZZI: You mentioned social safety nets and AI. Now, I imagine this will put a lot of folks out of work. Do you imagine that governments now have to create new social safety networks to support people who just can't get trained up on these new jobs?
KRISTALINA GEORGIEVA: Well, yes. The short answer is, yes. Governments need to think about the way in which they protect especially the older workers with lower skills that see their jobs wiped out by artificial intelligence. Because retraining is an option, but for some of them may not be a viable option. You have to try it and yet recognize that support would be necessary.
And that goes into distribution of benefits. In a best case scenario, we have artificial intelligence lifting up productivity. Big part of it is complementary rather than substituting massively labor. And then we have profitability of companies going up. A society that has distributional policy, both in terms of generating revenues for the social safety nets but also deciding on social safety nets that are more about creating opportunities.
I prefer to call them social safety ropes. Give people a chance to pull themselves out of a difficult situation. We have to work hard to make that possible.
BRIAN SOZZI: The World Economic Forum put out a very good study ahead of the latest attendee or conference in Davos talking about misinformation in elections. Makes sense, it was a good piece of research. But how concerned are you about AI misinformation and the impact on markets, especially markets that are moving super fast? Whether it's in the stock, asset markets, currencies, you name it?
KRISTALINA GEORGIEVA: Well, we have seen actually algorithms being used in markets for a long time. It's not new. And so far, so good, it hasn't led to market manipulation and actually led to efficiencies, speed of transactions, and overall on the whole a positive economic impact. The risks are in moving towards the dark forces unleashed then in place.
And I may be this rare breed of relentless optimist. But the way I think about it is, majority of people on this planet, vast majority of people on this planet are good people, they are ethical. The problem we face is that this small minority of hateful evil creatures is very loud and very visible. So we will have a society, we will have a big test.
How do we make the now more silent majority of goodness to determine the way we live? And you would have a big role. And yes, I agree, your job is safe because it does require that emotional intelligence you bring to this conversation.
BRIAN SOZZI: OK. I feel a bit better. Thank you. So I guess that the natural extension to that managing director is what we see in crypto. What is the IMF view on crypto and what looks to be a very unique moment for this investable asset?
KRISTALINA GEORGIEVA: Our view is that we have to differentiate between money and assets. When we talk about crypto, we are actually talking about an asset class. It could be backed up, and in that sense more secure, less risky, or it could be not backed up and therefore a riskier investment. But it is not exactly money, it's more like a money managed fund.
So when we look at money, there we have the central bank digital currencies. And they are indeed a digitalized form of money. Is it possible to have the private sector play a role in this area? Yes, of course. Private sector has played a role throughout the history of money. But we have to be very careful to inform the public about what exactly in front of them the private sector has placed.
I like the notion that we can enhance the payment systems with private sector participation, but we have to be careful not to mislead the public that crypto is equivalent in all cases of money.
