Everyone Is a Manager: AI Use as an Act of Management

When a knowledge worker is given an AI assistant, they stop executing tasks and start delegating them. Thus, we propose that the use of AI is an act of management, which helps explain the heterogeneity in returns to AI use observed across firms. We model the return to AI as moderated by two managerial abilities: direction (how well the worker specifies what they delegate) and verification (how reliably they catch the tool's errors). As AI becomes more reliable, the skill with the higher marginal return shifts from verification to direction. To the extent that use builds skill, workers develop their managerial abilities in the normal course of work, but as the tool improves, direction will continue to build while verification will not. As increasingly fewer tasks are worth checking, the skill collapses. Workers will reach that point sooner if they only bear part of the cost of their errors. In equilibrium, the strongest verifiers tend to sort into the jobs where collapse is most costly.