Prediction Machines: The Simple Economics of Artificial Intelligence

by Ajay Agrawal

For a business school, for example, it is easy to say that they are focused on recruiting the “best” students, but in order to specify the prediction, we need to specify what “best” means—highest salary offer upon graduation? Most likely to assume a CEO role within five years? Most diverse? Most likely to donate back to the school after graduation? Even seemingly straightforward objectives, like profit maximization, are not as simple as they first appear. Should we predict the action to take that will maximize profit this week, this quarter, this year, or this decade? Companies often find themselves having to go back to basics to realign on their objectives and sharpen their mission statement as a first step in their work on their AI strategy.