AI, Small Business and the Biden Administration

By SBE Council at 6 November, 2023, 6:22 pm

by Raymond J. Keating –

No one should be surprised when the Biden administration stakes out policy ground that diverges greatly from the views and well-being of small businesses. That’s been the case on a wide array of issues, from taxes to regulations to intellectual property and more, and now we see it again regarding advancements in artificial intelligence, or AI.

As reported in SBE Council’s new SMALL BUSINESS AI ADOPTION SURVEY 2023, 75% of small businesses use AI tools for an array business functions. As noted in the report:

“Among users of AI solutions, financial management tools (40%) are the most commonly used. AI-powered email marketing automation (32%), cybersecurity (32%) and inventory management (28%) are also widely used tools. On average, small businesses utilize 4 AI tools, and the survey identified nearly 20 different areas where AI is being used to support business operations.”

As for key reasons cited by small business owners for adopting AI tools, 54% said it was their own research, peer influence and comfort with technology, 51% cited time and cost savings, 29% noted competitive pressures, 26% said inflationary pressures, 25% highlighted high labor costs, and 19% pointed to augmenting skilled labor or lack of access to skill labor.

In general, 82% of small business owners found that AI tools provided benefits in running and growing their businesses, and 93% saw AI tools offering cost-effective solutions that drive cost savings and improve profitability.

In fact, small business owners reported a median weekly savings of 13 employee hours due to AI tools, as well as pegging the median weekly time saved by small business owners themselves at 13 hours. Those savings, as calculated in the SBE Council report (see SBE Council calculations and methodology here), came in at a very conservatively estimated 6.33 billion hours in owner and employee time saved or better utilized, and translated into estimated savings of $273.5 billion annually.

These estimated savings are significant, but at the same time, again, very conservative. Indeed, the history of innovation in our economy clearly indicates that even the additional more expansive and speculative savings estimates included in this report promise to turn out to be naively conservative. While no one can know the exact numbers in terms of future productivity gains from AI, understanding how free enterprise works means that we can count on entrepreneurs building on their gains with AI innovations in such ways that few can imagine today. The results will be transformative for various industries, and for economic opportunity and growth.

It also must be pointed out that as innovations create real and significant potential for generating savings in terms of time and dollar costs, these results ultimately mean enhanced productivity for entrepreneurs and their employees. These gains, in turn, fuel enhanced earnings for those owners and workers. Indeed, advancements in AI fit in with the history of innovation, as investments open up new opportunities for entrepreneurs, businesses, employees and consumers.

And as highlighted in the report, the resulting benefits are quite real: “Time saved on human capital has allowed small business owners to redirect employee time to higher-value work (41%), invest in innovative solutions for customer engagement and retention (39%), invest in new equipment and technology (37%), keep prices stable for customers (36%), pursue growth opportunities for the business (34%), increase wages and benefits (25%), set aside capital for emergency/other purposes (25%), and pay down debt more quickly (20%).”

Having pointed out the current opportunities offered to entrepreneurs, their employees and the entire economy, the survey also found that 85% of small businesses agreed that government must balance regulation and innovation in AI.

Biden’s Executive Order on AI

But while small businesses are looking for balance from the government in terms regulating AI, not wishing to stifle innovation, President Biden’s Executive Order (EO) on AI points to sweeping government regulation and interference.

For example, the Biden EO is rich in vagueness and potentially sweeping government intervention and controls, including government reviews that would seem to be clear threats to innovation and intellectual property in the U.S., while being destined to inflict interference, roadblocks and inefficiencies; foundations being established for expanded workplace regulation; more uncertainty and costs thanks to hyper-active antitrust regulation; and further diverting trade agreements from properly being means to reducing government costs and interference to actually increasing such governmental burdens.

This regulate-on-all-fronts philosophy from the Biden administration is a recipe for undercutting entrepreneurship, innovation, investment and U.S. global leadership in terms of AI and related technology. And based on the extraordinary value AI is providing to small businesses, based on our survey results, businesses and their employees would greatly suffer from such government interference.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.