On a Sunday in August 1965, the Beatles walked onto a stage at New York’s Shea Stadium and played for 55,600 ecstatic fans—who never heard a note. The screaming from the audience was so loud that the Fab Four could not even hear each other. The greatest band of all time might as well have forgotten their guitars.
That concert explains a lot about how American business is handling artificial intelligence (AI). Unfortunately, its leaders are not the geniuses on stage, they are the screaming teenagers in the crowd.
Last week, Ford became the top mainstream brand in the latest JD Power Initial Quality Survey for the first time in 16 years, rising from No. 15 as recently as 2023. It got there by rehiring and promoting 350 veteran or ‘greybeard’ engineers, many of them people it had laid off in the belief that their skills were no longer necessary.
Ford CEO Jim Farley has predicted that AI will replace half of all white-collar workers. Maybe someday, but apparently not yet.
Ford is hardly the only example of a company besotted with AI. Imagine asking any experienced executive, “Is evaluating your people by the amount they spend, not the output they produce, a good idea?” You probably would not get an answer through the laughter.
But sprinkle some AI pixie dust on the question and you get Meta running a leaderboard for employees that handed out titles like “Token Legend” to the heaviest users, who in 30 days consumed more than 70 trillion tokens, the units of data processed by AI models.
Then there’s Amazon setting weekly AI-use targets for most of its employees. Engineers naturally began handing AI agents busywork.
And Uber urging its staff to use AI as much as possible and exhausting its entire annual budget for coding tools in four months. It has since capped employee usage. Both also used token burn leaderboards until Meta, after spending what CEO Mark Zuckerberg alone knows how much, reversed course and told its people to use less.
Asked whether all that consumption was producing more of the features customers want, Uber President Andrew Macdonald was candid: “That link is not there yet.”
Why would successful companies and intelligent executives make decisions that, in any other context, they would reject out of hand? They are swept up in a fad.
We have seen managerial fads before.
In 1990, Massachusetts of Institute of Technology computer scientist Michael Hammer published an article in Harvard Business Review whose title became a slogan: ‘Reengineering Work: Don’t Automate, Obliterate.’ Companies were using computers to quickly fix broken processes instead of redesigning the processes around what computers could do.
By 1994, more than two-thirds of big American companies had a reengineering programme, and a multibillion-dollar consulting industry had sprung up to sell it.
Ford used reengineering to shrink its accounts-payable department from several hundred people to a fraction of that. It’s not the only fad. In 1990, Harvard economist Michael Jensen argued that the way to align chief executives with shareholders was to load their pay with stock options. Corporate America took the prescription wholesale and CEO compensation went vertical.
How do we know these were fads and not managerial revolutions? Because the people responsible for them say so. Hammer told the Wall Street Journal he had been “insufficiently appreciative of the human dimension.”
Thomas Davenport, another founder of reengineering, wrote an essay titled ‘The Fad That Forgot People.’
And by the early 2000s Jensen was calling the overvalued equity that stock options encouraged “managerial heroin,” because it gave an initial high but destroyed firms’ real value over time.
And now Ford has made the same admission about AI. According to Charles Poon, its vice president of vehicle hardware engineering, the auto company had “mistakenly” assumed that feeding its design requirements into AI would by itself produce a high-quality product.
Hammer’s central warning was that you cannot fix a broken process with automation. More than three decades later, Ford used technology to make its processes worse instead.
Economists who study fads say they happen because of an informational cascade. When you are uncertain and can see what everyone else is choosing, copying them feels rational, because surely they must know something you do not.
Sushil Bikhchandani, David Hirshleifer and Ivo Welch showed how a long line of people can each behave sensibly and still produce a collective answer that is quite wrong, because everyone is deferring to a crowd that is deferring back. Add the ordinary terror of being the one company that fell behind, and the smartest move feels like joining the stampede.
People’s desire to conform to crowds is so strong that in the psychologist Solomon Asch’s famous experiments, subjects asked which of three lines matched a reference line picked one that plainly did not, simply because the group had unanimously picked it first.
The damage stretches far beyond the companies running up the tab. Apple just raised prices across its Macs and iPads, some by 20% or more, blaming the AI buildout for driving memory chip costs higher.
Microsoft raised prices the same week and the biggest PC makers, Dell and HP among them, have warned of 15% to 20% increases, because all the world’s RAM is going into data centres.
The largest technology companies are on course to spend close to $700 billion this year, most of it on AI, chasing profits that are about as detectable as the Beatles’ music at Shea.
Some of that spending might prove visionary, but a lot of it is executives playing a huge game of follow-the-leader. In other words, a fad—only one that’s pulling in hundreds of billions of dollars.
The Beatles were the ultimate definition of a fad. They were also the ultimate band. AI can be a revolutionary technology and yet many companies trying to use it could still be swept up in a self-destructive fad. That is excusable for teenagers but not for senior executives. Their job is to judge the music, not join the screaming. ©Bloomberg
The author is a Bloomberg Opinion columnist who writes about corporate management and innovation.