REMEMBER when making a video required bulky equipment, a field force of camerapersons, an army of editors, sound designers, and countless other support staff? Probably not. For most of us, it meant taking out our phone to record, downloading to make the edits and then uploading to some platform. The monopoly of content had been broken, as evidenced by the fact that some of the biggest creators of today are not legacy production houses but random kids from the remotest towns.

But as of last week, none of that may hold on for too long. There’s a new kid on the block, except this time, it’s not some kid out of Mirpurkhas or a housewife from Patna. Artificial intelligence has come for everyone, as the demo of OpenAI’s new product, Soro, shows. All you have to do is give a detailed text prompt, and it will make a high-quality video.

This is obviously part of a much broader wave of unbelievable advancements in artificial intelligence, which will change humanity as we know it. But does technological sophistication lead to investors putting in more money in the space? The answer is not as clear-cut. According to CB Insights, a market intelligence platform, AI companies globally raised a total of $42.5 billion in funding across 2,500 deals in 2023.

While it may seem like a big number to us Pakistanis, where any amount of dollars is scarce, funding in AI actually fell 10.2 per cent while deals were down 24.1pc, the decline in investment value would have been much larger were it not for OpenAI’s massive $10bn round. So, at least on the first look, things don’t look all that impressive.

Technological advancements are eroding away the benefit of having an abundant and cheap workforce

But once you put numbers into a broader context, the picture looks a lot better. Sample: total venture funding in 2023 plunged by a much steeper 41.7pc and deals by 30.4pc. As a result, the share of AI in investment value reached 17.1pc, compared to 11.1pc the year before.

So even if funding in AI was down compared to the highs of 2021 and even 2022, the decline has been far milder than the overall investment activity. Also, AI deals tend to be much bigger than the general levels.

In fact, the average and median deals in AI were $23.4 million and $4.4m, respectively. Not only were they substantially bigger than the average and median of $12.5m and $2.8m in overall VC, but also the highest in the last five years, apart from 2021 of course.

What’s the relevance of all these random numbers to us? Very simply, the age of AI is here, and we must adapt or perish. For decades, perhaps the only selling point we have had is an abundance of people who happen to cost very little. Whether it’s sending migrant workers to the Gulf, setting up textile factories in Faisalabad or providing information technology services to foreign firms, the main advantage has always been the labour arbitrage.

Whether it’s sending migrant workers to the Gulf, setting up textile factories in Faisalabad or providing information technology services to foreign firms, Pakistan’s main advantage has always been labour arbitrage

However, given the advancements in AI, that advantage may not hold on for very long. Or at least to the same extent. Companies will automate processes and make people redundant. When that happens, what will be left with? Sure, there would still be people, and they would be doing jobs, but it may be like the media workers: utterly powerless and fighting against not just unjust management but the tide of time itself.

Not meaning to exaggerate, but it’s really high time we change our trajectory and, more importantly, the approach if we don’t want to become entirely irrelevant, even more than right now. How would that happen? Simple, by investing in research and development.

In case the link is not clear, the output of a country is believed to be a function of capital, labour and total factor productivity (TFP). The latter is a broad input but is largely determined by technological advancements and incorporates changes in worker skills. The higher the TFP, the higher the national income, all else equal.

And that TFP is determined by a lot of things, including research and development. Unfortunately, Pakistan spends only 0.16pc of the gross domestic product on R&D, well below the global average of 2.71pc. With AI right in our face to take away jobs, the least we can do is to try and make our people more productive. It may not be enough in the end in some cases, but it is at least worth a try.

The writer is co-founder of Data Darbar

Published in Dawn, The Business and Finance Weekly, February 19th, 2024