By Jeremiah Owyang and special guest co-author Chris Yeh.
Don’t settle for less. With AI, you can have it all.
Speed, cost, and quality; you’ve seen the popular Venn diagram that only allows you to pick two, called the Triple Constraint. Humans have always wanted goods and services to be faster, cheaper, and better. But throughout our history, we have been forced to choose between them.
In the pre-industrial age, most of us got to choose one of the three. Since the only resources we could control were our immediate surroundings and our own labor, the only way to achieve quality was to sacrifice cost and speed. If we wanted to achieve speed, we had to prioritize that work ahead of the everyday work of simple survival, and accept low quality. And if we wanted to minimize cost, we had to work in our free time with the simplest, most readily-accessible materials.
(A few lucky pharaohs and the like could command the labor of others, allowing them to select “Faster” and “Better” at an enormous cost in terms of labor. No person could construct the Great Pyramid of Giza single-handed for example!)
The industrial revolution represented a huge upgrade in tradeoffs because the ability to leverage mechanical power sources like steam and electricity allowed us to dramatically increase labor factor productivity, while other innovations like the assembly line and interchangeable parts amplified this effect even further.
According to famed economist Angus Maddison’s dataset, the per-capita GDP of Great Britain (or the territories that would one day become Great Britain) was $1,320 (in adjusted 1990 dollars) in 1252. It roughly doubled over the next 500 years to $2,702 in 1750, right at the start of the Industrial Revolution. In 2022, the figure had risen to $38,407, a 14X increase. That’s the massive impact of industrialization.
All these productivity gains mean that in an industrial society, we often get to choose two of three from Faster/Cheaper/Better. While there are still some artisanal products that are slow, expensive, and high-quality, mass-produced luxury allows most American consumers to choose between the Faster/Cheaper and Faster/Better dyads.
(Cheaper/Better rarely crops up; high-quality goods rarely spontaneously appear, though I suppose waiting in line for a free concert might qualify.)
Yet while the Triple Constraint has been around so long that it seems like a natural law of the universe, it’s simply a heuristic for understanding the status quo. And now, thanks to the AI Revolution, it no longer applies.
If the Industrial Revolution allowed us to substitute or amplify human or animal muscle power with mechanical power, the AI Revolution allows us to substitute or amplify human brainpower with computing power. This sounds simple, yet its effects are profound. Just like the Industrial Revolution accelerated productivity growth to a whole new level, the AI Revolution may have a similar effect by eliminating constraints we’ve taken for granted. One of those changes is the ability to break out of the Triple Constraint.
(And just wait until Robotics catches up to AI; we’ll be able to apply the AI Revolution to the mechanical world as well and generate exponential impact there!)
The Industrial Revolution impacted mainly goods, by increasing manufacturing productivity. The AI Revolution will impact services, by increasing labor productivity, with a special focus on services that are mostly or purely digital.
Let’s think about what this change looks like for individuals, businesses and society as a whole:
- For Individuals
The services we consume will become nearly faster and cheaper to the point of being nearly instantaneous. For example, in the pre-AI era, when I wanted to add a graphic to a slide presentation, I had to either laboriously build one myself, or search the internet for something that almost, but didn’t quite match my desires. Either way, I would spend somewhere between 15 minutes to multiple hours on the task. If I were particularly ambitious, I might try to find a designer to create a graphic for me, which would be slow AND expensive. Today, I can usually generate an appropriate graphic in three prompts or less, and I’ll feel irritated during the process because it takes several seconds for Dall-E 3 to generate each graphic, rather than appearing instantaneously!
And when we need something better, we can get the same or better quality as we did in the pre-AI world, but much faster, and at a much lower cost by tapping into human experts who are amplifying their talents via AI. Now, if I wanted to get a human designer to help me, I could provide that designer with AI-generated “rough drafts” and the designer could work with AI-enhanced tools to produce a higher-quality result for a fraction of the cost in the pre-AI world. - For Businesses
During the industrial age, many companies focused on maximizing operational efficiency. The lower the cost structure, the higher the market share and profits. The AI Revolution will lead to massive improvements in efficiency by allowing human workers to become much more productive, and in some cases, by replacing human workers altogether. In some cases, the resulting cost structures will be so low that businesses will need to find other means of differentiation.
For example, in the present a management consultancy that offers to charge half the price for an engagement is likely to win a lot of business. Consulting engagements are expensive, and the difference in cost is a significant incentive. But in a future where the cost-to-serve drops dramatically, service quality and the strength of the client relationship will become far more important decision criteria. When the price difference is $1 million versus $500k, price is a key factor; when the price difference is $10k versus $5k, it isn’t, at least for most B2B customers.
Ironically enough, in a faster/cheaper/better world, better will become more and more important to buyers. - For Society
It’s tempting to believe that AI and automation will deliver such incredible productivity improvements that we will live in a post-economic Star Trek future, where money is irrelevant (yet curiously, gold-pressed latinum persists as a medium of exchange). But imagine that you used your time-warping TARDIS or DeLorean to travel to England in 1252. If you told the first person you met that in your far-off time, the average Englishperson had an income 29 times greater, that person would imagine a Star Trek future, especially if you used your iPhone to show some videos of cars, airplanes, and, well, a Star Trek movie. The person would likely conclude that you live in a true utopia, and would be shocked that anyone could be considered poor or unhappy (ironically enough, Thomas More won’t publish the book Utopia until 1516, but we won’t let that get in the way of the story…).
The fact is that life in 2024 is vastly better than life in 1252. Technology has helped, and not just in terms of living standards–modern communications enables large-scale democracy, which sure beats feudalism! Yet human nature hasn’t changed during those nearly eight centuries. It is still imperfect, still frustrating.
What is true, however, is that the rate of AI adoption will have a huge impact on the relative wealth of nations. Remember Angus Maddison’s database? In 1252, China’s per-capita GDP was greater than Great Britain’s. By 1750, China was actually poorer than it had been in 1252. By 1950, the UK was 14 times richer than China! But then when China industrialized, it turned the tables; from 1950 to today, China’s per-capita GDP increased 7 times faster than the UK.
Societies which adopt AI will become more productive and richer than those that do not. Not only will the rapid adopters benefit from faster, cheaper, and better goods and services, but their relative economic power will increase, which will ultimately be reflected in their geopolitical power.
Conclusion (And The Next Big Thing)
By now, we hope you have a greater understanding and appreciation for the massive impact that AI is likely to bring by making things faster, cheaper, and better. But in the words of the late, great Steve Jobs, there’s one more thing…
Breaking the Triple Constraint will provide a tremendous boost to productivity and thus wealth creation. But the greatest boost will come not from making goods and services faster, cheaper, and better, but rather from creating NEW goods and services that weren’t previously possible. Exploring that thought will have to wait until a future blog post.
