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The case for Australian AI

Australia needs a sovereign artificial intelligence (AI) capability. It must be developed in Australia and built on Australian data. It must be AI for Australian questions and Australian problems. It needs to embody Australia’s values, geography, and economy. Downloading a foreign model and fine-tuning it undermines our economic future, because it doesn’t build Australian capability. If Australia is to control its own destiny in an AI-enabled future, it must build its own infrastructure, not rent it from overseas. Creating an Australian AI capability is the first critical step in the long process of building Australia’s AI economy. Having Australian capability will develop exactly the skills, experience, and capability in AI that Australia needs to drive its transition to an AI-enabled economy and set us up to build a better one.

Background

AI is the technology of our time. It has changed the global economy permanently, yet its primary impact is yet to come. Businesses that engage in the transformation will improve their productivity and out-compete those that don’t. The larger opportunity that AI offers, however, is to develop entirely new business models.

Various economic reports put the potential value of AI to the Australian economy over the next decade at more than $300 billion. AI is not an emerging technology, or about to descend through the downside of the hype cycle. It is creating far too much economic value right now for that.

Uber, Google, Facebook and TikTok used AI to build global business models that have changed the Australian economy permanently. AI-enabled global businesses will continue to outcompete existing industries over the coming decades. The Australian tax base will shrink, and Australian productivity will continue to decline, unless we compete. This comes at a time when our economic complexity is shrinking, and our population is ageing. We need Australian businesses that use AI to address new global markets if we are to maintain our GDP per capita, let alone grow it.

Large Language Models (LLMs) like ChatGPT are a critical tool for existing companies and startups that want to develop AI-enabled business models. As a result, they have become critical infrastructure for nations wanting to make the transition to the AI-enabled economy. Australia needs AI that reflects its culture, data, and values if it wants to retain economic and cultural sovereignty. The countries we compare ourselves against have already made this step.

AI and global markets

The five largest companies in the world are AI companies. The revenue of the smallest of the five (Amazon) would see it placed at number 25 in the list of nations ranked by GDP. This puts it above 152 countries including Ireland (population 5 million), Norway (population 5 million) and Austria (population 9 million). Amazon has 1.2 million employees, slightly smaller than the population of Adelaide. AI is driving unprecedented value creation globally and will continue to do so.

The founders of Google didn’t inherit a small Internet search engine and make incremental improvements. Larry Page and Sergey Brin were doing PhDs at Stanford and realised that Internet search could be framed as a matrix inversion problem. They started an Internet search engine on this basis, and it was better than its competitors. This meant they attracted more traffic, which gave them more data, which allowed them to improve their algorithm further. Before long they had an insurmountable advantage in search, which they leveraged into online advertising. It is critical to their model that each additional search customer, and each additional advertisement, have almost zero marginal cost to the business. The accuracy and scalability of the model undermined the viability of classified advertising globally, and thus the business model of most newspapers. It had a similar impact on television.

The founders of Uber realised that there was a misalignment of interests between taxi drivers and passengers, and a lot of unused capacity in privately-owned vehicles. They used AI to enable drivers and passengers to connect and undermined the taxi industry’s business model as a result. The taxi drivers were protected by legislation, and by the physically and geographically focussed nature of their business. The value of a taxi licence is now less than 10% of what it was pre-Uber. Uber make 30% of every transaction and have almost zero marginal cost.

The challenge for many incumbent businesses is whether they want to be Uber, or Uber drivers.

Value proposition

The value in AI is not chatbots. The value is in the fact that AI enables existing business problems to be solved with far less training data, and far more quickly, than has been possible previously. It has thus removed the moat that many existing businesses depend upon. The truly disruptive value in AI is that it enables solving new problems that would have been considered impossible previously. Some of these new solutions enable global businesses. This is a great opportunity for Australia to transition to a more complex, productive, and modern economy.

Australians need to be able to use AI without sending data to foreign countries or companies, and without leaking IP. More than this, building Australia’s sovereign AI capability is the first step towards joining the modern global AI-enabled economy. If Australia does not develop its own capability, it will perpetually need to download this critical infrastructure from overseas. In developing our own infrastructure, we build the skills and experience required to create AI-enabled global businesses in Australia.

 

Professor Anton van den Hengel is the founding Director of The Australian Institute for Machine Learning, a Chief Investigator of the Australian Centre of Excellence in Robotic Vision, and a Professor of Computer Science at the University of Adelaide.

 

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