AI Revolution: Echoes of the Industrial Age and the Potential for Economic Transformation
A transformative technology that affects the entire economy is known as a general-purpose technology. An example of this is the steam engine, which altered what people consumed, how they travelled, and even where they lived. Today, the spotlight is on artificial intelligence (AI), as it holds great promise for significant impact.
It may seem peculiar, but there are similarities between the rise of steam power and the current surge of AI, both in terms of increased efficiency and fervent investment. In 1698, Thomas Savoury patented the original steam pump, but it was James Watt’s improved Boulton-Watt engine in 1769 that truly revolutionized the economy.
Factories were previously powered by horses, wind, or water, which limited their locations. The adoption of steam power, coupled with the invention of trains, facilitated the seamless transfer of materials, goods, and ideas between hubs. This created a domino effect. Between 1800 and 1900, the UK’s gross domestic product (GDP) per person saw a remarkable 109% increase, from £2,331 to £4,930 (adjusted for 2013 prices).
The introduction of the first commercial railway in 1830 sparked widespread interest. Private companies emerged, pledging to construct tracks nationwide. Railway advertisements flooded newspapers, and in 1845, parliament approved the construction of 3,000 miles of railway—equivalent to the total built in the preceding 15 years. Much like the current surge in AI-related investments, the British railway share price index more than doubled between 1844 and 1846.
However, like any investment bubble, it eventually burst. Demand couldn’t keep up with the rapid expansion of supply. Investors, including notable figures like Charles Darwin and Charlotte Brontë, found themselves in a difficult situation. Brontë, the renowned author of “Jane Eyre,” lamented, “The original price of shares in this railway was £50. At one point, it rose to £120; for some years, it provided a dividend of 10%; they are now down to £20.
