Valuing Better Decisions and Error Costs

Joshua Gans, economist and co-author of Prediction Machines (and holder of the Skoll Chair in Technical Innovation and Entrepreneurship at the Rotman School of Management, University of Toronto) joins Robb and Josh to reframe how enterprise leaders should think about AI. Rather than chasing the hype around artificial intelligence, Gans argues we should understand AI as an advance in computational statistics that drops the cost of prediction, reduces decision-making friction, and fundamentally reshapes organizational structure.

Many organizations are full of people waiting for phones to ring, managing buffers, absorbing uncertainty. As AI makes prediction cheap, this middle-management friction layer flattens. His new book, The Microeconomics of Artificial Intelligence, examines the ways AI enhances and perhaps enables decision-making, and how that’s poised to affect organizations and industries. The trio discusses the "hidden secret" of AI adoption that the people who choose the systems used to automate work are essentially "selecting their usurper." While AI will eliminate friction and flatten hierarchies, it will supercharge frontline workers rather than replace them.

Forbidding employees from experimenting with AI tools and pushing adoption underground prevents the learning curve needed for proficiency. For leaders navigating AI adoption, this conversation offers a clearer lens: stop thinking about intelligence, start thinking about prediction costs, friction reduction, and the organizational restructuring required to actually capture value. True AI transformation isn't about deploying models, it's about redesigning decision-making architecture across the enterprise.

https://www.joshuagans.com

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Chapters

0:00 — Who is Joshua Gans + why “Prediction Machines” still matters

1:34 — AI as prediction (and why that framing wins)

2:45 — The “AI startup” wave + the deep learning shift

3:25 — AI is computational statistics, not magic

4:22 — Why “Artificial Intelligence” is a misleading label

6:02 — Econ lens: what becomes cheaper + abundant

6:43 — Cheaper prediction: fraud → self-driving

7:47 — ChatGPT/LLMs: next-token prediction, new apps

9:16 — LLMs as decision support (info → output)

10:43 — Rules vs decisions (weather app example)

12:45 — Better decisions: error costs + human judgment

13:43 — Airports: “cathedrals to uncertainty”

16:02 — Hospitals: capacity is an information problem

18:07 — Digital twins: avatars, meetings, AI “TA”

22:06 — “Ship then shop”: Amazon, prediction, logistics + lock-in

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