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HOW AI WILL CHANGE STRATEGY

A Thought Experiment

by Ajay Agrawal, Joshua Gans, and Avi Goldfarb

How will AI change strategy? That’s the single most common question the three of us are asked by corporate executives, and it’s not trivial to answer. AI is fundamentally a prediction technology. As advances in AI make prediction cheaper, economic theory dictates that we’ll use prediction more frequently and widely, and the value of complements to prediction—like human judgment—will rise. But what does all this mean for strategy?

Here’s a thought experiment we’ve been using to answer that question. Most people are familiar with shopping at Amazon. As with most online retailers, you visit its website, shop for items, place them in your basket, ...

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