RECALL a time when the production of a video necessitated cumbersome equipment, a team of camerapersons, editors, sound designers, and various support staff. This scenario may not resonate with many today. For the majority, creating a video now involves simply using a phone to capture footage, editing it, and then sharing it on a platform. The landscape of content creation has shifted significantly, evident in the rise of prominent creators who are not established production companies but rather individuals from remote areas.
However, the recent introduction of a new player might disrupt this status quo. Unlike the up-and-coming talents from small towns, this newcomer is not an individual from a specific region. Enter artificial intelligence, exemplified by OpenAI’s latest offering, Soro. This innovative tool can generate high-quality videos based on detailed text prompts.
This development is just one facet of the remarkable progress in artificial intelligence that is poised to revolutionize human existence. Yet, does this technological advancement translate into increased investments in the field? The answer is not straightforward. According to CB Insights, a market intelligence platform, AI companies worldwide secured a total of $42.5 billion in funding through 2,500 deals in 2023.
While this figure may seem substantial, especially in a context like Pakistan where financial resources are limited, the funding for AI actually experienced a 10.2% decline, with deal numbers decreasing by 24.1%. The dip in investment would have been more pronounced if not for OpenAI’s significant $10 billion funding round. At first glance, the outlook may not appear overly impressive.
However, when viewed within a broader perspective, the scenario brightens. For instance, total venture funding in 2023 plummeted by a more substantial 41.7%, with deals declining by 30.4%. Consequently, the share of AI in investment value surged to 17.1%, up from 11.1% the previous year.
Despite the drop in AI funding compared to the peak levels of 2021 and 2022, the decline has been less severe than the overall investment landscape. Moreover, AI deals tend to be larger in scale than the average investments.
In fact, the average and median deal sizes in AI stood at \(23.4 million and \)4.4 million, respectively. These figures not only surpass the average and median values of \(12.5 million and \)2.8 million in the overall venture capital arena but also represent the highest levels in the past five years, barring 2021.
What significance do these statistics hold for us? Simply put, the era of AI is upon us, and adaptation is imperative for survival. Historically, Pakistan’s competitive edge has often been its abundant and cost-effective workforce. Whether through labor migration to the Gulf, textile manufacturing in Faisalabad, or IT services for foreign companies, labor arbitrage has been a key advantage.
Nevertheless, with the rise of AI, this advantage may diminish over time. Companies will increasingly automate tasks, rendering human roles redundant. In such a scenario, what will remain? While human labor will still be present, the nature of employment may resemble that of media personnel: marginalized and grappling not only with unjust practices but also with the relentless march of technological progress.
To avoid potential irrelevance, it is crucial to alter our course and strategy promptly. This shift necessitates a focus on research and development. A nation’s output is believed to be influenced by capital, labor, and total factor productivity (TFP), with the latter primarily driven by technological advancements and changes in workforce skills.
Given that Pakistan allocates a mere 0.16% of its GDP to research and development—significantly below the global average of 2.71%—enhancing productivity through investments in R&D becomes imperative. While this may not suffice in every scenario, it is a step worth undertaking, especially in the face of AI’s disruptive potential.
The author is a co-founder of Data Darbar Originally published in Dawn, The Business and Finance Weekly, February 19th, 2024
