I'm sure you've all read the sheer echo chamber of posts on AI be it from this forum, LinkedIn or God knows how many internal corporate communications.
I thought to take a temperature of the room and share my own thoughts on what I've seen from my vantage point.
- Productivity - AI has objectively made specific tasks or even workflows easier. This is especially true for research aggregation and first-class corporate messaging as well as aiding in structuring or brain storming large problems. On the flip side, it also regurgitates stale or inaccurate content which is an issue in SaaS and especially given how quickly products or processes change. It also does not scrutinize the source and sometimes uses local documents or vague email threads as proof.
- ROI - this one has been evident for some time. AI is not leading to ROI gains as touted. This is seen through an uptick in employee growth and documented exponential costs (explicit and implicit) from use and implementation of AI.
- Externalities - the first unintended consequence of over-reliance on AI is how it fundamentally weakens our ability to think, parse through complex bodies of text and distill nuance. I'm guilty of this myself at times. And being cognizant of it has made me realize that there may need to be an age restriction to AI so kids who haven't yet developed the critical thinking don't outsource it at that stage. The second is that we have yet to finalize the commercial models in place for AI as an industry with every firm in a trial and error phase to see what's worth paying for and what balance to strike. This will likely lead to a push for and pull back from AI in the continued few years as use cases are refined with greater granularity.
Where I stand: I've seen AI do some really impressive stuff for clients including building firm-defined financial models and slide decks to ~70-80% accuracy. I've also seen the cost of those models and implementation breach the cost of the people that has managed the workload prior. I also think the overwhelming consensus is that AI cannot handle nuance or complexity often not prioritizing relevance or brevity in text. This all ignores or pauses the errors that can be small from a misinterpreted prompt to a legal or security issue.
All that said, I envision AI adoption will peel back and be used with pre-defined prompts or agents where the usage is known and output is proven to be high ROI. Until then, a few firms will rise and fall.
AI in consulting is undoubtedly a hot topic, and your points highlight both the promise and pitfalls of its integration into the industry. Here's a breakdown of the key themes and insights based on the most helpful WSO content:
1. Productivity Gains vs. Limitations
AI has indeed streamlined tasks like research aggregation, corporate messaging, and structuring problems. However, as noted in WSO discussions, AI often struggles with nuance, overfitting, and sourcing issues. For example: - AI can generate financial models or summaries but may lack the ability to critically evaluate or adapt to novel, complex scenarios. - The "bias-variance tradeoff" in AI models means they excel in repetitive, structured tasks but falter when faced with unique or ambiguous inputs.
2. ROI Challenges
The ROI of AI in consulting is a contentious issue. While AI can reduce time spent on repetitive tasks, the costs of implementation, training, and maintenance often outweigh the savings. WSO threads have highlighted: - Exponential costs tied to AI adoption, including infrastructure, data management, and error mitigation. - The reality that AI often supplements rather than replaces human labor, leading to increased headcount rather than reductions.
3. Externalities and Over-Reliance
Your point about AI weakening critical thinking aligns with broader concerns on WSO. Over-reliance on AI risks: - Eroding analytical skills, especially among younger professionals who may not yet have developed the ability to parse complex information. - Ethical and security dilemmas, such as AI misinterpreting prompts or mishandling sensitive data, which have been flagged as significant risks.
4. Future of AI in Consulting
The consensus from WSO threads is that AI will likely evolve into a tool for specific, high-ROI use cases rather than a blanket solution. Key predictions include: - Increased use of pre-defined prompts and agents to ensure consistent, reliable outputs. - A shift in consulting models, with firms focusing on integrating AI into workflows while retaining human oversight for nuanced decision-making. - Greater emphasis on refining AI's ability to handle ambiguity and complexity, though this remains a long-term challenge.
Final Thoughts
AI in consulting is a double-edged sword. While it offers undeniable efficiency gains, its limitations in handling nuance, high costs, and potential externalities mean its adoption will likely be cautious and targeted. As you mentioned, the next few years will be critical in determining which firms can strike the right balance between leveraging AI and maintaining the human touch that consulting thrives on.
Sources: Q&A: I grew up in Consulting and reinvented my brand 3 times, Will robots replace your consulting or financial career?, Thoughts on AI and the future of the job market?
I think AI works best as a tool, not a replacement for actual thinking. If the time saved gets eaten up by implementation costs and fact-checking, the ROI isn't as impressive as everyone claims.
Why would AI weakening your thinking ability be a negative externality? These past months has shown that the current state of frontier AI is that of a perfectly interdisciplinary Nobel Laureate in your pocket — intelligence is no longer a valuable or differentiated skill. It’s becoming increasingly clear that our role over this intermediary period between now and full-fledged AGI is to serve as an expanded context window that is helpful for translating the requests of Directors & clients into prompts that AI can effectively digest.
The point about it weakening our ability to parse complex text is the one that worries me most. It's a muscle, and if you outsource the hard thinking to a model that summarizes things, you lose the stamina for reading the full document. The kid restriction is a good idea, but honestly, it applies to adults too.
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