Evaluate the impact of recent technological developments on the future of the global economy
New digital technologies
In recent years, the availability of big data from Internet of Things (IoT) combined with digital technology has revolutionized the way we do business and created enormous opportunities for international business. Artificial Intelligence (AI) in combination with big data can predict human behaviour. For example, it can pick up 10 of our likes from Facebook and can predict our behaviour more accurately than our friends or colleagues. It can predict whether we are single or in a relationship with 67 percent accuracy, whether we are Christian or Muslim with 82 percent accuracy, whether we are gay or not with 88 percent accuracy and whether we use drugs or not with 65 percent accuracy (Kosinski et al., 2013). When it is used effectively it can lead to monopolistic competitive advantages for businesses (Boobier, 2018). It can also lead to useful innovation and improve our lives. Most of the successful companies of recent years, from Amazon to Uber, are based on digital frameworks and big data.
This new reality is also creating new challenges as regard to ethical, social, economic and legal aspects of doing business. The point is that the predictive power of AI and IoT is greater than human beings and are becoming out of human control. It is, however, confirmed that a combination of brain power, AI and big data can create incredibly successful businesses and systems. This is particularly useful in behavioural predictions and decision making. Moreover, such a system get smarter the more it is used (Walker, 2018).
It was proposed by Alan Turing already in 1950s that machines can do all that humans can do (Margetts & Dorobantu, 2019), and that AI can mimic the human psychology including empathy. It is thus no surprise that a Japanese company, Softbank, is now marketing AI robots as human companions. These robots are able to perceive emotions of their companion and adapt its own behaviour to that of the companion. The latest versions are definitely smarter than human in creativity, empathy and compassion. Many scientists such as Steven Hawkins, and entrepreneurs such as Elon Musk, believe the AI will take over humans as superior species and humans as we know them, are in danger. Although, others believe that AI assistance in the job will help humans to improve work/life balance, freeing them to do more meaningful work (Joy, 2019). There is reason to be worried, as there is transparent AI that we can trust and know what it can and cannot do and opaque AI, a network of genetic algorithms that can analyse huge data sources in minutes, if not seconds, and make decisions. The amount of data used in this process is beyond human capacity to grasp. It is this opaque AI that is more and more driving our businesses, the majority of investments made in Dow Jones are now done by AI (The Economist, 2019).
Global marketing managers in big MNEs are using AI to select locations for their billboards, TV shows and other media channels where they should be advertising in different countries (Walker, 2018). A marketing manager, however, does not understand how the AI makes its decisions. New regulations are coming around, such as the General Data Protection Regulation (GDPR) by the EU, that demand transparency in decision making especially concerning customers, for example decision concerning customer segmentation. These regulations are designed to protect individuals as they do not have control over their own data and there is no way they can take a collective action. GDPR aims to protect the privacy of the individual and has helped to establish individuals’ rights over their own data. Digitalization however, goes beyond individual privacy.
The digital revolution has spread rapidly, it is now creating digital monopolies where technology-based companies have built their business models on digital platforms that are supported by big data. Companies such as Alphabet (google) and Facebook with a combined value of $1.9 trillion, are good examples of these monopolies (The Economist, 2020). These firms depend upon our data that they collect through their own and other sources, that they sell to marketers and strategists of big companies. These types of firms are now so big and have superior decision making power supported by AI that their competitors cannot beat them. For new starters, capital is not the problem anymore, it is the access to data that creates competitive advantage (Mayer-Schonberger & Cukier, 2013).
New realities, such as Covid-19, have in fact accelerated the adoption of digital tools and big data. As consumers are moving towards digital channels, businesses are increasingly interacting with customers through digital channels. According to a recent survey by McKinsey and company, managers say that now 80 percent of their interaction with their customers is through digital channels. They report similar trend on their internal operations such as supply chain, production and R&D (McKinsey & Company, 2020). The survey also revealed trends such as changing customer needs, more online purchases, moving assets to the cloud and increased use of AI for business decisions. These trends are going to last beyond Covid-19 and are here to stay.
Corporate strategies supported by digitalization and AI are however, not a post-Covid phenomena, the top 10 richest individuals globally from Bill Gates to Bezos from Amazon made their fortunes from digital framework based companies. Warren Buffet is the only person in that group who has not made his fortune from digitalization. One of the characteristics of digitalization is that it has made distance and geography less important. Covid-19 has made these people even richer, for example, Bezos saw his fortune increase by $36 billion between January and September 2020 (Westbrook, 2020). Digitalization provides lucrative profits with minimal cost for expansion. The algorithm and data once written can be multiplied and used and reused and is never consumed. The more it is used the more value it creates for the brand and the bigger the firm gets the higher the benefits it can reap form digitalization. Although these companies are started by individuals, who keep the majority share, they seem to gain a life of their own and live for a long time, as is evident from Microsoft, Apple, Amazon and even Alibaba. It seems we do not mind or are unable to stop/control these monopolies. This new reality highlights the need to investigate the impact of AI and usage of big data on businesses, economies and on socio-political systems. This new reality is changing our cultural and economic systems in an opaque manner and can/should be diverted towards the pursuit of sustainable socio-economic goals (Di Vaio et al., 2020; Kuo & Smith, 2018; Metcalf et al., 2019). In short, digital globalization not only offers new business opportunities with profound impact on lives and societies, but also new avenues for IB research and theorization, as Luo (2021) insightful analysis illustrates.