What kind of relationship do we want with artificial intelligence (AI) as it exists today?
First, what is AI? It’s a machine intelligence that “perceives its environment and takes actions that maximize its chance of success at an arbitrary goal.”
We use AI at Vendo in many different ways. One is to deliver dynamic pricing. We set the goal for the AI of making more money for our clients than they do with fixed prices. Simple, measurable goal: Make more money.
How does the AI do it? Our AI sees a shopper. The AI also sees the product the shopper is considering to buy. The AI’s objective is to make as much money as possible for the company selling the product. So it chooses a price that the shopper will find attractive. It wants the shopper to buy and spend as much as possible. It’s goal is to show the single best price. That’s the price that the shopper thinks is fair and that makes the company as much money as possible. To do this the AI analyzes millions and millions of shoppers and products and prices. Then it chooses the price with the best chance of making the most money.
What role does a person have with this AI tool? It depends on the human’s goal.
The person shopping wants a fair price. That’s a price that is less than the value of the product to her. If she values it at $40 and is charged $35 by the AI then she’s happy.
The person at the company selling the product wants the AI to make to make him more money. First, that company needs to determine the cost of the product. We don’t want to sell below the cost so we set a floor price that the AI won’t go below. We can also set a ceiling price. So, the human at the company is setting a price range within which the AI operates. Let’s say that for a monthly membership to a content site the range is between $20 and $70. This human is satisfied when the AI makes him more money than his fixed pricing.
It’s literally impossible for a human to process the data we collect and choose the right price for each shopper. Just one day’s worth of data is too big to fit into an Excel spreadsheet. And a human can’t deliver the best price in milliseconds. Only an AI can do the job that needs to be done. So the human at the company chooses to work with AI because it is the best tool for the job.
The person building the AI wants it to learn and improve. So she measures the difference between revenue generated by the fixed prices (a control group gets fixed prices) and the AI’s dynamic prices. Then she adjusts the AI’s technology and its data so that the AI learns and improves.
Each of us has a different relationship to AI based on the role we happen to be playing. The shopper wants a fair price, the company wants to make as much money as possible and the builder wants it to learn and improve. Who knows how we will be interacting with other AI’s in the future? It’s impossible to predict. But the roles are clear for this AI today. It’s a better tool so we use it. Isn’t that the historical definition of humans? “The animal that uses tools.”