Predicting is really a waste of time. Concerns about a major hit to confidence and the economy after Donald Trump announced his tariff plans in April turned out to be misplaced, even as the long-term effects of what's happening in Washington are crucial.
So what fundamentals have changed this year? The most obvious is that artificial intelligence (AI) is slowly but steadily encroaching on all of our lives. I remember being struck earlier this year when someone who organized an international conference told me how the use of AI and a bit of tidying up had reduced the amount of work time that would normally be spent providing information about this field.
This year was the year that AI moved from being “out there” to being an urgent business consideration across many sectors. It was also a key factor in inflating the stock market bubble that appears to be continuing. But everyone is still trying to figure out what that means.
Speaking before the Oireachtas Joint Committee on AI, scientist Dr Ciaran Soyhe, a former senior executive at Research Ireland and currently Director of Forensic Medicine in Ireland, said: “There is no scientific consensus within the community about what exactly AI is. Some believe it is the best thing ever, and others believe it is the end of humanity.”
[ Could we be on the verge of a techlash?Opens in new window ]
Against this backdrop, policymakers and businesses alike tumble about AI, but the answers to what to actually do often inevitably fall into the Father Ted category of crisis response. “Do you have anything to say about celebrating mass again?”
Many potential business users have started investing large sums of money, but want to reap the benefits through higher returns.
A survey conducted by Forrester Research in the US in the middle of this year found that only 15% of companies felt their profit margins had improved. Of course it's still early days, but still. AI’s ability to summarize large documents in the way businesses need is still far from perfect, and the introduction of chatbots to serve customers has had mixed results. The technology exists, but its profitable implementation can still be an obstacle.
A recent economic outlook published by Ivec points to a study by the UK Office for Budget Responsibility showing that the potential impact of AI on productivity across developed countries over the next decade is in the range of 0-6.8 per cent. Gerald Brady, the group's chief economist, concluded: “We are in the early stages of technology development and deployment, so nearly all economic analysis of long-term impacts remains speculative scenario planning rather than predictive.”
Despite this uncertainty, massive investment in AI is driving the U.S. economy, and the shares of a small number of key companies in this space are driving the U.S. stock market higher than ever before. Brady referenced a book by economist Carlota Perez that examines bubbles throughout history, pointing to cycles in which initial enthusiasm emboldens investors and funds speculative developments. When a bubble bursts, some of the original investors and companies lose money, but there is a base of new technology and development that makes it cheaper for new players and investors to enter.
For now, investors continue to make positive bets. However, with predictions that some companies will reduce their AI investments next year, there is certainly a risk of market upheaval here. And, as the Economic and Social Research Institute (ESRI) pointed out this week, many of the large American companies leading the way are also large investors, employers, and taxpayers. If they run into difficulties, there will be some cost to the Irish economy.
The impact on the job market is already being seen, but it is debatable to what extent the rise in youth unemployment and the small increase in the number of 2024 graduates still looking for work are directly attributable to AI.
That appears to be a factor in professional services firms hiring fewer new graduates this year. AI can perform some of the simple tasks that new entrants typically take on, but it's unclear whether this is a one-year “wait-and-see” decision for companies to consider what to do, or something more fundamental.
Every business still needs new blood. But just like the advent of the Internet, AI is certain to have a major impact in the coming years. Alan Smeaton, emeritus professor at DCU and member of the government's AI advisory committee, refers to futurist Roy Amara's Amara's Law, which states that humans tend to overestimate the impact of technology in the short term and underestimate it in the long term.
[ Coming AI revolution needs a serious Government responseOpens in new window ]
In this context, an important area for national policy is education. The discussion is not about students using AI to write essays (although this needs to be addressed), but about how we introduce technology to students and the need to restructure education in many areas to emphasize not only the need for AI knowledge, but also the skills that employers consider valuable in this new world. Smeaton cited Estonia as an example, where the government partnered with large companies to provide tools that could be used in classrooms, overlaying Estonian content to provide questions and answers that encouraged learning rather than just regurgitating information.
New guidelines have been drawn up for schools here, but Ireland has a long way to go. And, as one educationist asked me, at third level, the curriculum is often much the same as it was 10 or 20 years ago, but what are the prospects for someone with a basic second-class degree in business?Until recently, the route into the market for this kind of “average” graduate might have been offered by accountants or the Treasury. Climbing the first rung of the job ladder may be more difficult than it is now.
If Ireland is serious about riding this new wave long-term, it needs to start with schools and universities, just as previous waves of investment in pharmaceuticals and technology were based on the supply of ready-to-work graduates. According to Smeaton, “we need to rattle the cage” on the curriculum to give educators a chance to focus on applying creativity, knowledge and “AI-proof” skills. In a world where AI can give the same answer instantly, memorization learning has little value anymore.
