AI productivity gains are years away, Deutsche Bank’s Reid says

Artificial intelligence is likely to enhance productivity signficantly but any such impact on economies may still be years away, Deutsche Bank analyst Jim Reid said.

In an interview with Bloomberg Television, the economic historian who is global head of macro and thematic research at the German lender’s research institute said he’s “excited” about the technology’s promise, and predicted it will create jobs in the long run.

“In my career I haven’t seen anything like AI in terms of potential for productivity,” Reid told Anna Edwards on Tuesday. “But I would probably caution that going to take a number of years for us to properly embed it into enterprises to really get the benefits of that.”

Questions over the potential for AI are overshadowing financial markets at present as an unprecedented rally in semiconductor stocks prompt investors to wonder if current valuations and spending plans on the technology can be justified. While policymakers wonder aloud if there’s a bubble that will burst, Reid sees more inflation.

“There’s a risk obviously, when you see parabolic rises up, that at some point there’s a big tech bust,” he said. “But I would kind of go back to the fact that humans have been innovating for 250, 300 years since the Industrial Revolution, we’ve been fantastic at innovating in that quarter of a millennium. We’ve only seen inflation go up.”

More generally, Reid reckons the technology will prove work-enhancing.

“My view on AI and jobs is slightly skewed by what economic history tells us,” he said. “At every point of a new breakthrough in innovation, we’ve been really scared about jobs, about new technology destroying jobs, and it has never happened in aggregate.”

One chart that he and his team produced that supports that view shows how employment in software is still growing.

For all the promise of AI however, it might not offer enough of that to solve the problem of shaky public finances around the world.

“Everybody knows that debt levels aren’t sustainable for a lot of countries,” Reid said. “If you were trying to find hope, you would say that AI is a productivity miracle that you can grow into your debt, that would be the bullish view. I suppose the bearish view is that if anything lifts interest rates or long-term interest rates much above current levels, you start to get into kind of debt sustainability levels that just make no sense whatsoever

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