Michael S Barr: Artificial intelligence - hypothetical scenarios for the future

Speech by Mr Michael S Barr, Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, at the Council on Foreign Relations, New York City, 18 February 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Advances in artificial intelligence (AI) have accelerated rapidly over the past few years. It is now commonplace to see autonomous vehicles navigating city streets, and generative AI tools are available on phones and other devices wherever we go. AI innovations make headlines and play a big role in financial markets, and generative AI has the potential to change how we think about productivity, labor markets and the macroeconomy. Today, I will address that question by outlining two hypothetical scenarios for AI's impact and the implications for businesses, regulators, and society. I will focus my comments on Generative AI, or GenAI, a subset of AI that has seen significant growth and integration into economic activity in just a few short years.

GenAI and Its Adoption

Compared to earlier iterations of AI, GenAI is able to generate content, which allows it to significantly enhance productivity across a range of knowledge-based activities and be used by people without coding skills. GenAI will likely become a "general purpose technology," with widespread adoption, continuous improvement, and productivity enhancements to a wide range of sectors across the economy. We are already seeing GenAI improve the productivity of its own R&D. There is widespread enthusiasm for GenAI, and survey evidence shows much faster rates of consumer adoption of GenAI already than were seen for the personal computer or the internet. While actual deployment of GenAI is limited to some business functions, and there have been pitfalls along the way, businesses in almost every sector are experimenting with or considering how to make use of the technology.

Firms are also exploring Agentic AI-Gen AI systems that not only produce new content, but are also able to proactively pursue goals by generating innovative solutions and acting upon them at speed and scale. Imagining Agentic AI's ultimate application, some speculate that we could experience a "country of geniuses in a data center"-a collective intelligence that surpasses human capabilities in problem-solving and collaboration. Some believe Agentic AI has the potential to connect ideas in disparate domains, potentially transforming research and development and society more broadly.