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McDonald’s said it is temporarily halting its voice ordering AI initiative. One reason is the bacon topped ice cream cone that one customer received.
Fast Food AI
Our fast food AI story starts when McDonald’s acquired an AI startup in 2019 that became a part of its McD tech Labs. When IBM bought the McDonald’s tech subsidiary, the two firms partnered an AOT (Automated Order Taking) initiative. Now they’ve decided the experiment will shut down no later than July 26.
One reason for the program’s demise is the mistakes.
In addition to one customer’s bacon topped ice cream, another reported getting nine sweet teas instead of the single tea, hash browns and Coke she ordered. Adding to the list, we have ice cream accompanied by butter packets, and more than 20 McNuggets Meals costing $222 on a bill as two women laughingly shout, “Stop.”
Because the system had difficulty with accents and background noise, we can assume the mistakes were far more frequent and costly than the media reported.
However, AI remains on the fast food supply side menu. At varying stages of implementation, the major fast food outlets like White Castle, Hardee’s, and Taco John’s have AOT systems. Meanwhile, Wendy’s was slammed after suggesting AI could provide dynamic pricing. For all, the goal is to simplify and speed service while reducing costs.
Our Bottom Line: Private and Social Return
Long ago, Edwin Mansfield (1930-1997), a University of Pennsylvania economist, said that a seemingly small innovation can have a large impact. While he was referring to manufacturing inputs like thread, he could easily have been talking about AI. As Mansfield explained, at first an innovation privately benefits its developer. But then, from there, some innovations go big with a social return.
Having read Mansfield’s books years ago, I always connected private and social return to the spread of U.S. canals. Starting with the completion of the Erie Canal in 1825, we subsequently had a network of waterways that were privately funded. Spreading, they (sometimes) brought a return to their investors. But even more so, we wound up with a transportation network that created a regionally specialized national market. As a result, we had the economic growth that generated a massive return to society.
Somewhat similarly, in a 2020 NBER paper, economists Lawrence Summers and Benjamin Jones conclude that innovation generates an enormous social benefit that is at a minimum five times the initial investment. Although their 55-page analysis is complex, we can emerge with one word: spillover. As they point out, we have “imitative spillovers” whereby other firms copy an innovative product or process. Next, moving from firm to firm to the consumer, we have user spillover that multiplies the impact of the innovation. And finally, they cite the “intertemporal” spillover that the present creates for the future.
So yes, it might seem silly to connect a bacon laden ice cream cone with innovative spillover. But it is all a part of the process.
My sources and more: My thanks to Axios for directing me to this NY Post article. From there. an industry magazine had more detail as did Fast Company, Yahoo Tech, and Retail Wire . But, if you want to take the next step with an academic perspective, do read this NBER paper on the huge social return from innovation.
