OliverWyman – Navigating The AI Revolution

OliverWyman, a consulting firm, explores the potential impact of generative AI on industries and how business leaders can prepare for it. The term "generative pre-trained transformer" (GPT) refers to a class of large language models, and it holds historical irony as the product that introduced generative AI to the world is called ChatGPT. In the field of science and technology, "GPT" also stands for "general purpose technology," which refers to innovations that have sweeping effects on economies and civilizations, such as the wheel, printing press, internal combustion engine, and the internet. The question now arises whether generative AI will become another GPT with similar implications and impacts. Business leaders are facing tough decisions on investing in AI deployment, determining where to focus their efforts and how to manage the associated risks. It is crucial for private equity investors and financial sponsors to understand their portfolio's exposure to AI's risks and opportunities to make informed investment decisions and provide appropriate guidance to portfolio companies. To simplify this complex topic, OliverWyman suggests considering two dimensions: the likely impact of AI on a specific industry and the potential expansion of total demand in that industry due to increased productivity and lower costs from AI deployment. The impact of generative AI is expected to be greatest on middle-skilled, white-collar jobs, potentially affecting job roles as well as management structures within industries. Some industries may have more exposure to the potential impacts of AI based on their job mix. To quantify these differences, OliverWyman leverages the AI Industry Exposure (AIIE) index developed by Edward Felten, Manav Raj, and Robert Seamans, which assesses the impact of AI on various industries. Industries such as janitorial services, meat processing, and coal mining are expected to see less impact from AI, while accounting, commercial banking, and legal services are anticipated to be more affected.