A reading club with a view to the future

005 Ajay Agrawal: Prediction Machines

Artificial intelligence makes prediction cheap and helps people make better decisions.

Ajay Agrawal: Prediction Machines


Prediction Machines explores how artificial intelligence can enhance decision making by providing cheap and accurate predictions. The authors argue that AI has dramatically reduced the cost of making predictions, allowing businesses and individuals to make better decisions. The book provides a framework for understanding how to use AI to improve decision making, and how businesses can adapt to this new reality.


Title: Prediction Machines

Authors: Ajay Agrawal, Joshua Gans, and Avi Goldfarb. 

Published in 2018

Publisher: Harvard Business Review Press

Length: 7 hours and 50 minutes on Audible.

5 main ideas

  1. AI has made prediction cheap and democratized access to data.
  2. Predictions are inherently uncertain and need to be evaluated based on their accuracy and usefulness.
  3. AI can improve decision making by providing more accurate predictions.
  4. The use of AI requires new skills and mindsets to effectively incorporate predictions into decision making.
  5. The widespread use of AI predictions will have significant economic and social implications.
Ajay Agrawal: Prediction Machines

5 funny quotes

  1. "AI is the sexiest term in business today, and you should use it as often as possible to impress your colleagues."
  2. "AI is like teenage sex. Everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it."
  3. "The best way to survive in a world of cheap prediction is to become the person who decides what predictions to make."
  4. "Remember, AI is just like humans, only better at math."
  5. "AI is great at predicting the future, but it still can't tell you when the next Game of Thrones book is coming out."

5 thought-provoking quotes​

  1. "Prediction is the central act of civilization."
  2. "When prediction is cheap, it changes the way we make decisions."
  3. "Cheap prediction turns information into a commodity."
  4. "As prediction becomes cheaper, the value of complementary human skills increases."
  5. "The impact of AI on jobs and the economy will depend on how we choose to use it."

5 dilemmas

  1. How should we balance the benefits of AI predictions with concerns about privacy and security?
  2. How can we ensure that the benefits of cheap predictions are distributed fairly across society?
  3. What happens when AI predictions are used to make decisions that affect people's lives, such as hiring or credit decisions?
  4. What are the ethical implications of using AI to make predictions about human behavior?
  5. How can we ensure that the use of AI predictions is transparent and accountable?

5 examples

  1. Amazon's recommendation system uses AI to make personalized product recommendations.
  2. IBM's Watson is used in healthcare to make more accurate diagnoses and develop more effective treatments.
  3. Google's search algorithm uses AI to provide more relevant search results.
  4. Netflix uses AI to make personalized recommendations for movies and TV shows.
  5. Capital One uses AI to detect fraud and improve the accuracy of credit decisions.

Referenced books

  1. "The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies" by Erik Brynjolfsson and Andrew McAfee
  2. "Superintelligence: Paths, Dangers, Strategies" by Nick Bostrom
  3. "The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World" by Pedro Domingos
  4. "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail" by Clayton M. Christensen
  5. "The Big Switch: Rewiring the World, from Edison to Google" by Nicholas Carr

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"As prediction becomes cheaper, the value of complementary human skills increases."

Ajay Agrawal: Prediction Machines
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