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Is Artificial Intelligence A Smart Choice?

Updated: Jan 27, 2022

By Daniel Garcia


Artificial intelligence (AI) has become a growing part of society as we continue to evolve. It has allowed businesses to expand and streamline many of their services, whether its automating phone call systems, algorithms for effective advertising, or minimizing the time needed to crunch complex data for informed decisions. Is AI our friend, or are we leading down a path to the forewarned Skynet? The details of an AI platform are beyond my expertise, and I won't begin to try and venture down that path. There are many benefits for small business owners who decide to utilize AI. Yet, there are some complications and risks involved as well. This article will help you determine the benefits of AI and what to avoid, limiting the risks that come with AI.

What is AI?

An AI is a set of code directing a computer or computer-controlled robot to perform tasks that humans would perform. These tasks can be simple (relative to AI's ability), such as recognizing a person's face to unlock a cell phone but also can be as complicated as using algorithms to make predictions, recommendations, or decisions based on data to streamline business processes. Sophisticated AI can also learn from past mistakes and develop some ability to reason. AI technology is continually improving, but the decisions made using data and algorithms aren't always 100% accurate or the best course of action. AI systems are created and informed by humans, and with that comes limitations. For example, much of society, myself included, has dealt with virtual assistants, such as Alexa, Siri, and Cortana, and have been frustrated when asking for one thing but get a different response. This article talks about the limitations, namely, 1,000 phrases where virtual assistants get the command incorrect.

AI is used widely today, such as the facial recognition software in Apple and Microsoft products, but also when a person applies online for credit cards. Those applications are processed and evaluated, using the data, by an AI versus a human making the decision. The use of AI has allowed credit lenders to give instant acceptance and increase the number of applications it can process, whereas using a human would increase the time spent on all requests. The advancement of AI has not been unnoticed, and there are regulations specific to automated decisions making in the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA). Yet, there are still concerns over AI uses that result in price gouging and deceptive pricing.

How can AI help my small business?

AI is used, to some extent, in almost all technology today. Many consumers do not realize how integrated AI is in our daily lives, from shopping online, the emails we get, and even how we interact with social media. A recent survey showed that 33% of consumers think they are using an AI-enabled device or service when, in reality, the number is closer to 77%. So, why does this interaction with AI help your small business? Here are four aspects that help small business owners when using an AI:

- Smarter Email Marketing

For those consistently following my articles, you are aware email marketing has an excellent return on investment and is the primary method of advertising for small business owners. Also, I am sure many customers have placed an item in their online shopping cart but weren't entirely convinced, so they let it sit there to think some more. Soon after, they happened to receive an email reminding them about the item in their shopping cart and, if lucky, with a discount code. Usually, an AI system recognizes when a consumer leaves items in their cart and automatically sends a reminder email. This automation allows small business owners to focus on other big-ticket decisions while maintaining maximum profit and advertising programs by letting consumers know they are not forgotten and keeping the company in their mind. Even so, the abilities of AI are vast and can be used to automatically send emails when a specific event happens, such as a registration anniversary, birthday, or even promotional events. The automation of emails helps small businesses by maintaining the same or, hopefully, a higher level of profitable marketing, communication, and promotions but at a much lower cost than having a live human on the payroll.

- Faster price reactions

Consider how quickly calculators can compute significant mathematical problems; it is almost instant. Specific forms of AI are like super calculators looking at the issues and reacting in an instant. Feeding AI systems large amounts of data of the surrounding market conditions such as pricing is a benefit to small business owners. Small business owners can then rely on the AI to react instantaneously to price changes based on market demand, supply, or increased competition, allowing them to stay ahead of their competitors or, at the very least, not fall behind --- all while focusing on other projects or getting a good night's rest.

- Optimize search results on your website

AI can be used to optimize the user's experience on your website. For example, during the holiday season, a small business owner might want to advertise market-specific holiday products when a customer searches for mugs. The small business can command their AI to recognize the time of the year, and during a specific holiday, market seasonable cups first. For example, during colder months, the AI can place mugs on the front page where hot chocolate is a common drink choice versus beach chairs during the warmer summer months. Also, AI can recognize the user's interests and match them with other similar products. AI can also place high demand products, especially during pandemics, such as masks, on the front page, to maximize sales and profit while still changing to the market needs. AI allows the small business owner to maximize his sales and always have his website tailored to each consumer without the need for human interaction.

- Chatbot for extended hours assistance

A chatbot is especially useful for small business owners who may not have the ability or need for a dedicated sales team or customer service, or maybe they do and want to have extended hours of assistance. We all have seen chatbots on websites asking if we need support. The benefits include giving customers 24/7 assistance, answers to common questions (by feeding the response to the AI), or direct them to a FAQs page where the answer may be, and ultimately to determine if human assistance is needed. Chatbots can be used to streamline support to consumers with relatively minor and straightforward requests, freeing up the live humans for more complex or unique consumer needs.

If you're interested in other benefits and how to implement AI in your business, you can visit this link to begin your journey. AI systems can use the data to understand your customer's desires, reduce the need for employees in customer service and marketing, and keep a business competitive with the market conditions.

While AI can take decision making out of your hands, it is essential to have human oversight for the choices the AI is making and to correct problems that AI makes. The benefits of using AI in all aspects of life are endless. Still, such use can cause risks such as the potential for deceptive practices, unfair or discriminatory outcomes, or the perpetuation of existing socioeconomic disparities.

What problems can come from using AI in your small business?

AI is in a weird place right now; there are attempts to increase the abilities of AI from the President's administration, AI for the American People, but also push from Congress to pass laws, such as the Algorithmic Accountability Act, to regulate the use of AI. Some forms of automation currently used in businesses are regulated by other Acts, such as the FCRA and ECOA. Yet, for small business owners using AI in marketing and price setting, its algorithmic decisions, while not directly regulated, can cause undesirable results. However, the FTC may regulate some aspects of AI, such as price discrimination or using algorithms to collude for price-fixing. The FTC's power is broad and can investigate "unfair or deceptive acts or practices in or affecting commerce," but one area the FTC hasn't enforced is price gouging.

- Price gouging

The pandemic has caused a lot of issues for consumers; there has been significant demand for toilet paper, hand sanitizer, and masks. Some people went to so far to hoard needed supplies to make a profit. While this is human action, AI can have the same effect; when supply is becoming low, algorithms can take steps to acquire more of the high demand product to and sell the products at a premium price. During a regular economic quarter, most costumers won't notice the slight deviation in prices or supply. However, during a state of emergency, this well-intentioned algorithm for business success can cause more harm than good.

Currently, as of this writing, there is no direct federal law for AI price gouging; however, several states have price gouging laws that apply whether a person or AI increases the price significantly. Typically, price gouging laws come into effect only occur during a state of emergency and where the price increase is over 10-20%. Many state Attorney Generals issued press releases to inform the citizens of their respective states to report pricing gouging on medical supplies, food gas and other essential supplies, such as CA's AG, Xavier Becerra's statement here. Many states currently have regulations in place, such as New York, where penalties can rise to $25,000 per violation, a costly price to pay, especially in times of uncertainty. You can read more about the increased reliance on price gouging statues here.

Small business owners need to maintain human oversight for situations such as the one above; even with good intentions, not a single person should be taken advantage of during times of emergency. Not only is this good business practice, but it will help small business owners stay ahead for possible future regulations.

- Risks of objective analysis

As mentioned earlier, AI systems get their knowledge from humans, and as a result, are imperfect. AI systems do not look at the data subjectively and cannot understand the underlying information that caused it to react. Like above, the AI would not know that the state of emergency substantially increased demand and lowered supply. It is purely objective data analysis and reaction. For example, this article referenced a hospital that was using algorithms to calculate which patients would benefit from extra care to streamline assistance to patients. Yet, the algorithm gave heathier white patients the same ranking as black patients who were sicker. Why? The algorithm calculated the need for assistance on the amount of money spent on health care to determine who could use more help. Since black patients spent less than white patients for similar health care, using a seemingly benign factor, they were ranked the same even though they were sicker. The same can happen for sales and pricing, but instead of using cost as a factor, the algorithm uses zip codes or other data and sets prices based on how affluent the community is. While, generally, price discrimination is legal, if an AI determines the price based on classifications such as race, general, religion, and nationality, it will be illegal. Thus, it is crucial to understand the data that is being entered into the AI system and maintain human oversight to certify the decisions made are up to human standards, compliant with laws and ethical business practices.

Take Away

AI has seemingly infinite potential in making small businesses more efficient and profitable, but it can result in some negative consequences. AI will continue to evolve and have a significant impact on society. At the same time, movements are attempting to require AI development to recognize the rule of law. Until AI can, small business owners should maintain proper oversight and continued observance of AI decisions and operation to avoid any wrong and to rectify those situations if they arise. Artificial intelligence is an intelligent choice, as long as small business owners oversee its use. While there is no Skynet level threat, AI is flawed like humans. Best of luck implementing the systems and utilizing this intelligence in your business.


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