Innovation & Technology Investing

Reality check on risks and rewards of Generative AI3 min read

May 7, 2024 3 min read


Reality check on risks and rewards of Generative AI3 min read

Reading Time: 3 minutesReading Time: 3 minutes

Generative AI stands out as a revolutionary force, especially for early adopters profiting from its unparalleled efficiencies. At a conference hosted by Wharton’s Mack Institute for Innovation Management and AI at Wharton, experts and industry leaders came together to discuss the transformative impact of generative AI on business operations and strategic decision-making. As companies continue experimenting with and adopting generative AI, the narrative is straightforward: those who can effectively marry AI with human insights stand to make the fastest gains.

Prasanna Tambe, a Wharton Professor of Operations, Information, and Decisions, posits that generative AI stands at the forefront of revolutionizing management decision-making and the creation of value in organizational contexts. He emphasizes its unique capabilities in handling and interpreting unstructured data, which constitutes a significant portion of enterprise data, to unlock new insights and enhance decision-making processes. Tambe highlights the potential of generative AI to offer more accurate predictions, facilitate better resource allocation, and provide intuitive answers that humans easily understand. His perspective underscores the importance of leveraging generative AI to harness the vast amounts of untapped data in emails, communication platforms, and project management tools, thereby driving innovation and efficiency in business operations.

Take a look at this:

The image is a graphical representation of OpenAI’s valuation and revenue from 2022 to 2024. It started at $20 billion with an income of $28 million and dramatically increased within two years, reaching a multiple of 63 times its ARR by January 2024. This significant growth reflects the market’s strong interest in and perceived value in AI technologies.

Of course, it’s crucial to delve into the risks associated with this technological advancement. Based on a recent article from March 2024 by McKinsey, generative AI presents significant risks that organizations must navigate cautiously. The research highlights the dual nature of generative AI, capable of adding up to $4.4 trillion to the global economy while posing some danger.

Key risks include:

Inaccurate Outputs and Bias: AI can produce outcomes based on biases inherent in their training data, leading to skewed or unjust decisions.
Misinformation and Malicious Use: Gen AI can misuse its capability to generate realistic content, create misinformation, deep fakes, or maliciously influence politics and personal well-being.
Intellectual Property (IP) Infringement: There’s a risk of AI infringing on copyrighted materials or leaking intellectual property into the public domain.
Data Privacy and Quality: AI might use or disclose personal or sensitive information unauthorizedly or rely on inaccurate data for training.
Security Threats: Gen AI systems could be vulnerable to cybersecurity threats, including sophisticated malware that could bypass standard defenses.
Performance and Explainability Issues: AI might not always provide explanations for its outputs, or its answers could be incorrect or outdated.
Strategic and Reputational Risks: Companies face the risk of non-compliance with emerging regulations, societal backlash, or reputational damage.
Third-Party Risks: Using third-party AI tools could introduce risks, including the misuse of proprietary data.

Explore the proposed gradation:

The map is filled with cells to indicate the risk severity for each combination of the use case and risk category. It is color-coded, with blue shades indicating the level of risk: light blue for low, medium blue for medium, and dark blue for high severity.

As organizations continue to embrace generative AI, the focus must be on balancing the technology’s immense potential with a comprehensive understanding and mitigation of its associated risks. Let’s not just ride the wave of generative AI but navigate it with precision, ensuring a future where technology amplifies our potential without compromising values.