Will AI make a real difference in production automation?

QUESTION: Does generative AI (Large Language Models, LLMs) really represent a generational change in automation, or is it just another wave of automation as we have seen it for 200 years? (found here: https://lnkd.in/eBPE7v2t)

MY ANSWER: 

The automation of production processes through AI will skyrocket in the future. But it will not start in the factories! The impulse will come from consumers, and consumers will reinforce the process.

AI-powered shopping assistants (smart apps?) will help consumers find better and cheaper offerings. More expensive and inferior products will be weeded out. This will force factories to upgrade, catch up, and improve.

Today's Large Language Models (LLMs) will not suffice, however. We anticipate a more advanced, specialized AI. With this AI, companies will revise their production process algorithms in order to survive in the face of competition. This is not an option, but a necessity, because more and more consumers will use AI-powered assistants to find the best deals and save money.

This constant and ubiquitous competitive pressure forces companies to become ever more efficient. Since human labor is typically more expensive than machine labor, more and more processes will be automated. 

As this competition never ends, more and more factories will use intelligent machines. Entire production lines will be controlled by AI powered units. This will lead to a decrease in the demand for human labor in production, which will at the same time increase the pressure on the consumer side, as consumers will have less money to spend and will therefore need even cheaper products. At the same time, productivity will increase because machines do not need breaks and do not make mistakes – provided the underlying information is correct.

But there is another effect of AI usage in production and shopping processes: The products will become better and better, more durable, and with a reduced need to buy complementary products (trouble index going down), so the need for constant new purchases and repurchases will decrease.

In the long run, production will transform into a series of small, smart manufacturing systems capable of producing all the few material goods we need.

One must not look for the impact of AI on the production process in isolation. We need to look at the interplay between production and consumption to understand the full scope of the change.

So, the prospects for consumers should be fine. But what about the companies? That is another story.

About the author: Silvio Gerlach, an economist with a sharp, systemic lens, breaks down the logic of how AI reshapes business, society, and our daily lives. Discover what AI means for us – and how to deal with the new realities. Subscribe now and cut through the hype.