Artificial intelligence (AI) is having some unexpected consequences, and they're still shaking themselves out as the impact spreads. Jeff Childers reports:
The Financial Times reported that KPMG— one of the world’s Big Four accounting firms— bullied its own auditor into a 14% fee cut. Their argument was elegant in its simplicity: if your AI is doing the work, your people shouldn’t be billing for it. KPMG’s hapless auditor, Grant Thornton, tried to kick but quickly folded like a WalMart lawn chair, dropping its auditing fee from $416,000 to $357,000.
And now every CFO on Earth is reaching for a calculator.
Here’s the dark comedy. Grant Thornton’s UK audit leader bragged in a December blog post that AI was making their work “faster and smarter.” KPMG took note, and immediately asked why it was still paying the slower-and-dumber price. This is why lawyers tell their clients to stop posting on social media. The marketing department just became the billing department’s worst enemy.
As a lawyer who bills by the hour —and I suspect many of you work in professions that do the same— I can assure everyone that this story sent a terrifying chill racing through the spines of every white-collar professional who’s been out there cheerfully babbling about AI adoption at industry conferences.
The billable hour has survived the fax machine, personal computers, email, electronic filing, spreadsheets, and the entire internet. The billable hour has the survival instincts of a post-apocalyptic cockroach and the institutional momentum of a Senate tradition. But AI might finally be the dinosaur killer, and KPMG just showed everyone exactly how the asteroid hits: your client reads your own press release and demands a discount.
. . .
The billable hour won’t die overnight. But it just got a terminal diagnosis. Every professional services firm that’s spent the last two years bragging about AI efficiency is now staring at the same problem: you can’t brag to your clients you’re faster and also charge them for the same number of hours. As they say at KPMG, it doesn’t add up. Somewhere in a law firm right now, a partner is quietly deleting a LinkedIn post about how AI is “transforming their practice.” Smart move.
There's more at the link.
It's not just company-to-company billing, either. How many professional services do we, as consumers, use, and get charged by the hour?
- Service your car - hourly charge for the mechanic.
- File your taxes - hourly charge by the tax preparer.
- Domestic services such as plumber, electrician, etc. - hourly rate for labor, plus parts, etc.
How many of these services will be affected by AI? Quite a few, I'm guessing. A mechanic can use AI to finish his repairs more quickly, as the software guides him through the process on an unfamiliar vehicle. The tax preparer is almost certainly going to use AI to do his job, so the number of hours they spend on the job should go down - and so should your bill. Even domestic service calls should be quicker and easier if the technician or professional can look up a reference to what he's doing, possibly on equipment on which he's never been trained, and do the job faster and better.
I think AI can be considered the monkey wrench that just got tossed into the professional billing pool. This should be interesting . . .
Peter
6 comments:
Spend time with plumbers or electricians and you'll find they already work pretty quick if they have a good experience base. Also, remember, most employers pay by the the hour. Will AI impact the trades - undoubtably. Architects make errors requiring the trades to go back and ask if it wouldn't be done like this.... The later is especially common in industrial applications of propane. Inventory levels for trucks would be another area. How about using the more expensive pipe dope that results in less rework - of course the data would have to be collected.
We also live in a replace it society now, not a repair it. Additive and subtractive manufacturing have not taken off like would have thought they would. A variety of factors account for this. AI may be able to make changes there as well. It doesn't take AI to notice the greenest appliance is one that lasts 30 years, not one that needs replacement and disposal every 5 years. Since AI is pattern matching without conscience or morality it will behoove us to understand it and use it cautiously.
AI can do some things very well, but it does not do original thinking. It can repackage solutions that have been tried elsewhere, which has value, but may not be appropriate to your circumstances. It also has a pattern of fabricating evidence to support claims, which is an absolute killer for anyone depending on their output. Discernment is what's missing, and a human will always be needed for that. AI is still a tool, not a solution, and asking it to be more than a tool exceeds its grasp at present.
I remember a guy that was a contract computer programmer back in the early days of the PC who refused to upgrade from his IBM PC/XT to the IBM PC/AT because he was afraid if his customers found out they would begin asking him why his billable hours weren't being reduced.
Of the ones you listed, taxes are the only one I see the possibility of modern "AI" effecting, I'll be impressed if Musk's robots are able to do much outside of a factory (but I would like one that can do dishes and laundry) but I don't see much threat from AI to wrench turners outside a factory floor.
Eliminating a ton of low level lawyer jobs is a good thing, much of that crap should never have been required in the first place.
If AI makes mechanics faster, I'll eat my hat. Auditors and accountants and lawyers, sure, I can absolutely believe that. But mechanics and plumbers don't bill for hours of research etc.
Indeed, AI may make diagnosis of auto faults more efficient (I say may, remember GIGO and that the technician will have to keep a close eye on the results), but it is not going to make the fasteners unfasten faster.
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