AI is rapidly changing, and as a business owner it’s tough to keep up. We know that AI can be very useful in numerous areas (e.g., customer service, marketing and content creation, administrative work, accounting and finance, inventory management, human resources, cybersecurity), and that adoption in many of these areas is necessary to stay competitive.
According to a 2026 survey, 76% of small businesses are using AI, and 93% say its use has had a positive effect. But do you understand the ramifications of AI? There are many things to learn about.
Understanding AI
Digital twins
Digital twins are virtual, data-driven replicas of a physical object, system, or process. It uses IoT sensor data and AI to use real-time synchronization. This creates a two-way flow of data. An example is a retail store that uses sensors to track customer traffic, inventory, and sales in real time. This allows for immediate analytics and responses (e.g., ordering more inventory).
For small businesses, at present the use of digital twins may not be necessary; their use obviously costs money and it’s perhaps too costly now. Using inventory management systems, customer relationship management (CRM) software, AI forecasting tools, and other readily available solutions may be sufficient at this time. But I’d never heard of a digital twin, and you may want to look into options.
Hallucinations
If you use AI for research, be cautious of the information you receive. Unfortunately, at present, AI may give you false or fabricated information, called hallucinations. A couple of years ago, an attorney used ChatGPT for legal research on a personal injury case and was given a half dozen made-up cases with false citations. Hallucinations for attorneys can have dire results (e.g., losing a client; public embarrassment; ethics violation; sanctions). During my research, I’ve been given false tax information (e.g., a wrong year or an incorrect dollar amount), so be very cautious.
Chatbot liability and other legal issues
You probably know that AI has been sued for copyright infringement (my books and blogs have been unlawfully used by AI). Writers and musicians are litigating this. But did you know that there are other types of claims arising from AI use? For example, a person with bipolar disorder sued OpenAI for personal injury, claiming that ChatGPT made his manic episodes more intense and encouraged self-harm. This case of chatbot liability is still pending.
Deepfakes are another area generating considerable litigation. The claims may relate to unauthorized use of a person’s identity (right of publicity), defamation, invasion of privacy, to name a few. When you use AI to create content, be very cautious of using a name, image, voice, likeness, or other characteristic (e.g., distinctive gestures), or you may expose yourself to lawsuits.
Algorithmic discrimination
AI is being used by many companies to screen job applicants and employment decisions. A number of states, including California, Colorado, and Texas, are concerned that there may be bias in this AI application (algorithmic discrimination) and have laws requiring developers to take certain actions. State laws may also require employers to protect against discrimination.
Check whether your state has a law, and what you must do to stay compliant. For example, you may be required to disclose that AI is being used and conduct “bias audits.”
Final thought
“AI won’t replace humans, but humans who use AI will replace those who don’t.” — Sam Altman, CEO of OpenAI
So, you need to use AI. Just be sure you understand what you’re doing to avoid legal and other problems.
Explore more ideas about using AI for small business in this list of blogs here.
