“Despite AI’s rapid advances, computers haven’t caught up to us — for now. ”
Over the past 44 years, I’ve started seven companies from scratch, each becoming a billion- or multibillion-dollar enterprise. As I searched for my next venture over the past year, there was an AI dimension to my lens:
- What drives industry profitability, and will AI accelerate or dampen it?
- Is AI a headwind, a tailwind, or neutral for this industry?
- What are the risks and opportunities of AI disruption?
- How soon could AI disruption occur?
For example, I looked at doing a roll-up of accounting firms, but there’s a chance that accountants will be replaced by generative AI over the next decade. I could build up a big accounting business over the next few years and see it suddenly go into a black hole because people start using AI to close their books and no longer need to hire a third party to provide expertise and oversight.
Another industry I looked at is for-profit education, but the AI trend is also a headwind for most of that sector. For example, shares of Chegg
CHGG,
— a billion-dollar company that provides textbooks, online help, tutoring, and other educational services — were hit with the potential for AI disruption. In a May 2023 earnings call, the company’s CEO mentioned ChatGPT as a potential impediment to growth. The next day, the stock price fell almost by half. The company plans to launch a proprietary platform powered by ChatGPT, but the question remains: Will potential customers pay Chegg or use ChatGPT for free?
I decided against investing in some financial services firms for similar reasons — AI could make them less profitable, because we might be able to get what we need directly from AI tools. I don’t think we’ll need a human insurance broker, for instance, in 10 years. Also, at some point in the not-too-distant future, I can see AI replacing much, if not most, of what paralegals and even lawyers do. Many jobs in journalism, advertising and other communications roles are likely to become obsolete — and, ironically, AI also puts tech jobs at risk, including coding.
“AI will drive massive digital efficiencies, but the physical needs of humans will not go away.”
At the same time, there’s a lot of money to be made by identifying industries that might benefit strongly from AI over the next 20 years; these include parts of the healthcare, retailing and manufacturing sectors. That’s because each of these areas has, at its core, both a physical component and a digital component. AI will drive massive digital efficiencies, but the physical needs of humans will not go away, ensuring demand. We’re going to need doctors and medicines for a long, long time, just as we’re going to continue to need manufactured products and retail spaces, physical or digital, in which to buy them.
Other industries are unlikely to see significant impacts one way or another in the near term. Homebuilding, for one, will benefit from AI in terms of design and marketing, but the need for an actual physical home won’t go away anytime soon. Even if we start spending a lot of time in the metaverse, we’re still going to sleep in a real bed, brush our teeth over a real sink, and take a real shower.
For the same reasons, AI appears to be more of a friend than foe to my next industry, building product distribution.
Despite AI’s rapid advances, computers haven’t caught up to us — for now. The human brain remains the most sophisticated thing we know of in the universe. However, every human task that can be broken down into rules, systematic processes, and logical decision-making based on historical results can be replaced. Technology will get better and better at this as AI evolves. Someday, everything I do as a CEO may be done more effectively by a robot or hologram with more knowledge and ability than I could ever have.
One of the difficult things about spotting tech trends is not a lack of information — it’s that the implications can be so big that people have a hard time getting a mental grasp on them. For one thing, we have an ingrained tendency to discount technological and social change. Most of us are programmed to believe things will stay the same. Even Thomas Watson, the former chairman and chief executive of IBM, once said, “I think there is a world market for maybe five computers.” That was in 1943.
Obviously, the leadership of IBM changed their minds about the viability of computers, but that’s a significant miss for the leader of the most advanced tech company of the time. Now, we live in an era where a computer program called AlphaGo beat the human world champion, and ChatGPT can pass the bar exam with flying colors, even if it still has a way to go before it does as well on the MCATs.
Many researchers, computer engineers and CEOs of tech companies have posited that technology is on a trajectory that could merge with human beings within this century to form a new, more adaptable species. I believe that this vision for the future might be closer than people think, and that every CEO grappling with the implications of AI needs a rigorous framework, and a healthy imagination, to make the right choices moving forward.
Brad Jacobs is chairman of XPO, GXO, and RXO, managing partner of Jacobs Private Equity , and incoming chairman and CEO of QXO, which operates in the building products distribution industry. He is the author of “How to Make a Few Billion Dollars.” (Greenleaf Book Group Press, 2024)
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