SF Fed's Mary C. Daly: AI, Productivity, and Lessons From the 1990s

Why It Matters

Understanding AI’s early, firm‑level impact helps policymakers and businesses anticipate when the technology will shift from cost‑saving tool to a driver of broad productivity growth, informing monetary decisions and strategic investments.

Key Takeaways

• AI adoption mirrors electricity’s century‑long productivity journey in economies
• Current AI use yields cost savings but limited macro productivity gains
• Micro‑level firm data, not aggregates, reveal early AI impact
• Policy should rely on business insights and disaggregated data
• Transformative AI gains require imaginative business models, not just tools

Summary

In a Silicon Valley address, San Francisco Fed President Mary C. Daly examined artificial intelligence as the latest general‑purpose technology, drawing a parallel to the century‑long diffusion of electricity. She argued that, like electricity, AI’s macroeconomic impact will unfold over decades, and that today’s enthusiasm—spurred by the 2022 launch of ChatGPT and other large language models—has translated into tangible cost‑saving applications across back‑office functions, marketing, and finance, but not yet into the sustained productivity surge that reshaped the economy in the early 20th century.

Daly highlighted that the bulk of evidence for AI’s effect comes from firm‑level case studies: call‑center automation, software development tools, and loan‑application processing that shave time and expenses. Yet aggregate productivity statistics still show only modest gains, suggesting the technology is still in an adoption and learning phase. She cited the 1990s computer and internet boom, when Greenspan’s team relied on disaggregated data and direct business surveys to anticipate a productivity lift that official metrics missed, ultimately informing a more patient monetary stance.

The speech featured vivid analogies—Faraday’s discovery versus today’s LLMs—and concrete examples, such as financial firms using AI for document review without overhauling the entire loan workflow, mirroring the early electric motor’s limited impact on factory layouts. Daly stressed that transformative outcomes will require firms to reimagine processes, not merely plug in tools, echoing how electricity’s true power emerged only when businesses redesigned production around it.

For policymakers, the lesson is clear: monitor micro‑level innovation signals, engage directly with firms, and remain forward‑looking while acknowledging uncertainty. Monetary policy must balance the potential for AI‑driven growth against the risk of premature tightening, using granular evidence to gauge when AI moves from incremental efficiency to economy‑wide productivity transformation.

Original Description

Hosted by the Silicon Valley Leadership Group and San Jose State University, President Mary C. Daly delivered keynote remarks on AI and the U.S. economy. Following her remarks, she sat down with Bloomberg Tech’s Ed Ludlow for a moderated conversation and audience questions.

Date: Tuesday, Feb 17, 2026

Time: 11:30 a.m. PT

Location: San Jose, CA

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00:00 - Introduction and Opening Remarks

00:18 - AI's Promise and Concerns: Learning from Electricity's 100-Year Transformation

04:00 - AI's Evolution and Current Adoption Across Industries

07:17 - The Transformation Question: Can GenAI Redefine Production and Business?

10:28 - Lessons from the 1990s: Greenspan, Productivity, and Monetary Policy

16:44 - Applying Historical Lessons to Today's AI Challenges

18:08 - Moderated Conversation: Unpacking Productivity Data

21:09 - AI's Effects on Workforce, Inflation, and the Labor Market

26:43 - Worker Anxiety, Job Displacement, and the Need for Durable Skills

33:22 - How the Federal Reserve is Using AI Operationally

37:38 - Monetary Policy Strategy Amid AI Uncertainty

42:15 - Economic Diversity: From Tech Compensation to Agricultural AI Adoption

45:07 - Audience Questions: Advice for Economists and Regulation Balance

49:51 - Closing Thoughts: Optimism About AI's Impact on the 12th District