Artificial Intelligence for Business

Session 6- Economics of AI Dr. Siby Abraham

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AI’ s achievement
• Prediction: Taking info of one kind to converting into another.

• Translation

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Nature Communication: https://www.nature.com/articles/s41467-020-
18073-9

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Prediction
• Prediction è Behavior è Decision

• Prediction = Filling info.

• Eg: Credit card use.

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Object detection

• Image Net

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Consequences of cheap prediction.
• Intelligence

• Error reduction in factors

• Transformative.

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AI history

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Predicting churn
• Regression: Focusses on average

• Machine Learning

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Beyond churn
• Regression assumes belief

• ML does not need belief

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Is prediction = Intelligence

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Data is the new oil

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Prediction requires data
• To create

• To Operate

• To improve

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Economies of scale
• Data has decreasing returns to scale.

• Having more data than a competitor is a huge advantage.

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Poor prediction of machines
• Known knowns:

• Known unknowns:

• Unknown unknowns:

• Unknown Knowns:

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Poor prediction of machines
• Known knowns: Rich data è Prediction

• Known unknowns:

• Unknown unknowns:

• Unknown Knowns:

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Poor prediction of machines
• Known knowns: Rich data è Prediction

• Known unknowns: Less data =è Poor prediction

• Unknown unknowns:

• Unknown Knowns:

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Poor prediction of machines
• Known knowns: Rich data è Prediction

• Known unknowns: Less data =è Poor prediction

• Unknown unknowns: Events not captured by data è Prediction

impossible. Eg: Black swan.

• Unknown Knowns:

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Poor prediction of machines
• Known knowns: Rich data è Prediction

• Known unknowns: Less data =è Poor prediction

• Unknown unknowns: Events not captured by data è Prediction

impossible.
• Unknown Knowns: Events influenced by other factors not captured
by data =è Poor prediction

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Predicting better together.

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Prediction by exception
• Machines can predict in a scale which is not possible by human.

• Machines fail in unusual circumstances, where there is not enough

data.

• Human can interfere – human by exception.

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 HBR Case study

Predicting Consumer Tastes with Big Data at Gap

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