Funston Brief (Issue No. 27)
This month, our featured commentary discusses AI's ROI. We also discuss how to best implement generative AI and the future of space travel.
The ROI in AI
The adoption of generative artificial intelligence (genAI) platforms for automation is projected to double, with companies expected to spend $42 billion annually on genAI projects by 2030. Despite the potential for productivity gains, determining a clear return on investment (ROI) with GenAI remains challenging. Rita Sallam, a vice president analyst at Gartner, notes that while productivity improvements are evident, expressing ROI is difficult due to many benefits having indirect or non-financial impacts that translate into future financial outcomes.
For instance, utilizing GenAI to automate code generation could enhance a software developer's productivity, allowing more time for innovation and potentially speeding up the time to market for new features. This would ultimately lead to improved customer satisfaction. However, quantifying these benefits in financial terms poses a challenge.
The implementation of GenAI follows a pattern familiar to other technological transitions. Predictable returns are associated with implementing existing models, albeit with some resistance from employees adapting to new technology. Conversely, more speculative ideas, such as restructuring organizational charts rather than simply accelerating customer service response times, yield less predictable returns.
Moreover, no definitive guideline exists on whether technologies primarily benefit their creators or customers. Historical examples like jet travel benefiting Las Vegas or air conditioning contributing to the economic success of Singapore and Dubai demonstrate the complex distribution of economic gains. It remains uncertain whether the AI dividend will be a widely distributed economic gain or one that a single company can monopolize.
ACTIONABLE INSIGHTS.
A generative AI reset in 2024: The initial enthusiasm and flurry of activity in 2023 give way to second thoughts and recalibrations as companies realize that capturing gen AI’s enormous potential value is harder than expected. The generative AI payoff may only come when companies do deeper organizational surgery on their business.
Key Insight: With 2024 shaping up to be the year for gen AI to prove its value, companies should keep in mind the hard lessons learned with digital and AI transformations: competitive advantage comes from building organizational and technological capabilities to broadly innovate, deploy, and improve solutions at scale—in effect, rewiring the business for distributed digital and AI innovation. Link
Implementing generative AI with speed and safety: Generative AI poses risks and opportunities. McKinsey offers a road map to mitigate the former while moving to capture the latter from day one. The risks associated with gen AI range from inaccurate outputs and biases embedded in the underlying training data to the potential for large-scale misinformation and malicious influence on politics and personal well-being. Link
Key Insight: In practical terms, enterprises looking to address gen AI risk should take the following four steps:
Launch a sprint to understand the risk of inbound exposures related to gen AI.
Develop a comprehensive view of the materiality of gen-AI-related risks across domains and use cases and develop a range of options (including technical and nontechnical measures) to manage risks.
Establish a governance structure that balances expertise and oversight with an ability to support rapid decision-making, adapting existing structures whenever possible.
Embed the governance structure in an operating model that draws on expertise across the organization and includes appropriate training for end users.
EAR TO THE GROUND.
Podcast Episode: Goldman Sachs Talks - The future of space travel
Guests: Gwynne Shotwell
Takeaway:
SpaceX President and COO Gwynne Shotwell discusses with Goldman Sachs' Susie Scher, delving into her leadership role at SpaceX and the dynamic landscape of space travel and commerce. The conversation highlights SpaceX's innovative technologies and the transformative impact of projects like Starlink on the industry. Shotwell's integral role in SpaceX's success is emphasized, showcasing her leadership and the company's vision for the future of space exploration and business.
“Starship is the vehicle that will take us to [the Moon and Mars]. It will be an evolutionary vehicle. Starship will reuse both the first and second stage [unlike the Falcon 9 that reuses just the first stage.] Reusing both the first and the second stage is critical to putting humans on other planets.”
- Gwynne Shotwell, SpaceX President and COO
$13 million
Cohere, a startup considered a strong contender against OpenAI, reportedly earned just $13 million in revenue last year. This highlights the ongoing challenge for AI companies to find the right market fit for their products. Link
PROFILE.
Steven Levy's article in Wired delves into the origins of "Attention is All You Need," shedding light on the team behind it and their subsequent experiences. The text explores the genesis of modern AI through the collaborative efforts of eight Google researchers who transformed neural networks into a digital system, culminating in creating the groundbreaking "Transformers" paper. Additionally, the narrative indirectly advocates for a return to office environments, highlighting the value of chance encounters and informal interactions in the creative process. Enjoy the read!
“Without transformers, I don’t think we’d be here now,” says Geoffrey Hinton, who is not one of the authors but is perhaps the world’s most prominent AI scientist.
ON MY RADAR.
The quantum computing sector has outlined a roadmap toward progress, yet the question remains: can it successfully navigate to its intended destination? Link