For an AI lesson, India must look back — 300 years

The improvement in speed “can be translated into an increase in productivity that outperforms past advances in engineering productivity, driven by both new tooling and processes,” McKinsey says. But how will the gains be distributed between customers and software vendors? More importantly, how will they be shared between shareholders of outsourcing firms and their employees?

Acemoglu and Johnson glean insights for the interplay of machine and labor by comparing the age of AI to the early industrial revolution and the shift it produced in the thinking of David Ricardo, a prominent classical economist, ace bond trader and politician. As the spinning jenny became progressively more efficient, suddenly there was a lot of yarn looking for weavers, creating lucrative new jobs. The golden age of weaving, the MIT economists surmise, is probably when Ricardo came to his famous conclusion that “machinery did not lessen the demand for labor.”

It was when handlooms gave way to power looms in the early 19th century — leaving no alternative occupation for displaced labor — that Ricardo updated his view. He acknowledged in a 1819 speech to the British parliament that “the inadequacy of the wages to the support of the laboring classes” was one of “two great evils for which it was desirable to provide a remedy.”

India’s tech companies are stuck on Ricardo 1.0, and investing very little into a future where artificial intelligence has made their current code-writing business irrelevant. The optimistic view goes like this: Someone needs to prompt generative AI’s large language models with the right questions. Natural-language processing and prompt engineering will create jobs. Finding unique and affordable use cases — especially in local languages — may be another avenue for the most-populous nation to utilize its talent.

According to Nandan Nilekani, co-founder and chairman of Infosys Ltd., India’s second-largest outsourcing firm, building foundational AI models is for people with capital. “Our advantage currently lies not in compute, cloud, or chips,” he said in a speech. “Our advantage is our population and their aspirations.”