Using Artificial Intelligence for a Competitive Advantage

Street's top pic for chat gbt mania. After all, Microsoft is investing ten billion in Open Ai, the company behind the AI tool chat GBT And I do feel like, you know, whether you look at major news, you know, the networks, the general network networks kind of just the general public. Everybody's like, wait a minute, oh AI is going on. I didn't realize it was that smart. Yeah, they should have checked in with our next guest, because then they probably would have known. Ray. Please step with us.

Tom Davenport, Professor of Information Technology and Management at Babson College. He's the co author of the new book All In on AI, How Smart Companies Win Big with Artificial Intelligence. He joins us via zoom from beautiful Santa Barbara, California. Right now, our professor, good to have you with us.

How are you, thanks, I'm great, happy to be here. Well, we're looking forward to going on this deep dive with you when it comes to a I I want to start with what Carol was referring to, this idea that you know, chat gbt GPT has been all over U when it comes to sort of like the conversation right the you know what we're seeing out in the environment right now with with with not just you know, the tech side of things and what happened on Twitter a couple of months ago when it was released, but this

idea that hey, this incredible technology is actually out there and it's a lot closer to prime time than a lot of people thought. What have your thoughts been around all this chat GPT? I've never heard of that could tell tell any more about it. Really little joke there. Okay, you have to be ripped, Ben Winkled, you know what I have to say? Though, up until a week or so ago, it wasn't necessarily mainstream. I think that's true.

I wrote an article for Harvard Business Review, I think in November on generative technology than what to do about them, and CHET GPT came out a couple of weeks later, and the whole category just exploded. Um So I kind of wish I'd waited a little while, but Yeah, I think that it's a very powerful tool, and I think it's going to have a lot of impact on a

lot of sectors of business and society. Um, I think we're gonna have to train everybody how to use it, or it will be incredibly unfair to those who do and those who what do you mean, what do you mean by that? Well, it's a huge productivity aid. It'll get only better. And so you imagine two kids in school and one uses it for preparing essays and the other doesn't have access to it. It's just really unfair. And you know, I think any business should be exploring

it aggressively. Now they're just so many different interesting I want to make sure I understand this right. It seems like you're saying the person who's who's using it to help prepare an essay? To me, you know what, I think to lot of teachers or school distructor school administrators would say that's cheating. Well, where I think we're gonna have to revise that traditional expectation. Um, it's a It

will be virtually impossible to tell. I guess um. The only way you could tell is if you know Johnny used to write bad essays and now he writes good essays. Um. But um, particularly if someone edits the output of chat, GPT or whatever generative a tool they're using. Um, you know, I think it'll be impossible to tell and really, um, not that ultimately different from you know, going to the library and reading books. This is the new equivalent of that. But does it get Hey, Tom, do we have to

think about it? It's interesting. I grew up and I had to learn penmanship. I remember practicing writing cursive. You know, Um that not necessarily was the case for my daughter because everything was being done on computers and is being

done on computers. And I do wonder is there going to be kind of well anybody because of something like a chat, g g BT or or other large language models l m s. You know that it's not going to be so important to be able to write an essay because a company can have you know, the chat gypt do it. So I just wonder, like, how does this change transform our world for the better for the worst. Well, you know, there are all sorts of possibilities for mischief

with it. Um. Right now, it's more the image oriented tools that are problematic. Although I have heard that hackers are already using um GPT three, the sort of a parent of chat gpt to create malware UM code, since they can write code. But you know, I think in general we're all going to become editors rather than creators of first draft and um will be UM, we'll have to be prompt engineers and you have to write a prompt to get these systems to produce something. We'll have

to be prompt engineers instead of first draft writers. And then we will have to edit it to make sure that um A, the information is actually correct. Often it is not now and um that it's not. You know, it can be a little boring at times. You might need to liven it up, but in almost every case my experience, uh, it comes up with things I hadn't thought of, and um, you know, I'm fairly well educated, so I think most people would benefit from it. Does this scare you at all? Uh? You know, I try

to look on the positive side. I think there could be some really problematic aspects. But this is UM with us. Now. We's not going to go away. We might as well get used to it and the cats out of the bag, you know. Yeah, it's better than having chips implanted in our brain, which you know may happen at sometimes. I was going to say that's actually you know, if Elon Musk has his way, that's that's coming pretty soon thanks

to you know, what he's working on. Well. It's interesting though, you know, there's been a lot of stories about things like AI, and I think in terms of the medical community, where it can help screen in an emergency room, right and help a doctor, um, kind of prioritize or deal

with more patients in a smart way. In the investment world, you know, startup companies that were maybe deemed too small and not worthy of spending some time to you know, research whether or not that they were even maybe a possible good idea that with the use of AI, that can be used as a screening force to allow an investor to kind of look at more companies. Like I think we have to be smart, right with all of

this stuff. That technology has its pluses and its minuses, but there are things that can maybe benefit the world more broadly. Oh yeah, a huge potential applications and healthcare, although the adoption in clinical practice has been quite slow. You know, Um, once a week you get an announcement of research that since an AI system is as good as are better than a radiologist or I don't know, internal medicine specialists at detecting some UM ailment. So um, yeah,

lots of of potential value. And you know, I think it's going to change a lot of jobs. I don't think yet it has reduced UM employment much outside of you know, maybe robots and manufacturing UM. But you know, the people who are going to lose their jobs will

be the ones who refused to work with AI. Well, Sam, you and I were talking about in terms of the healthcare community, right, Like you think about all the research that gets constantly you know, done and results and you know papers and stuff like how can a doctor who's taking care of patients possibly read it all? So you think about if AI can be used as a tool to help screen through some of this, I mean think about the benefits of it. Yeah, I mean I think

that's really important case. But I also think, you know, one of the problems is is you know what Professor Davenport talked about, and it's the idea that okay, well you can use chat GPT too. Also you know, create malware or or write malicious code. There's you know, there's sort of two sides to every coin, professor, So do you think there needs to be any sort of regulation

in this type of technology? I think that for the momentum, individual organizations will have to decide, you know, what's our policy on the schools. As we were discussing earlier. UM, I don't see the US government regulating effectively anytime soon. You know, possibly we can see something in Europe, although I think this is going to be really difficult to regulate, um,

even for you know, highly regulatory societies. And I think we've already seen apparently some student who used to work for open ai has come up with a system that the text whether or not a passage was written by chat GPT. So um, you know, maybe we'll have a sort of ongoing arms race in that regard. Hey, we're going to come back with Tom Davenport, professor of Information Technology Management at babs In College. His book. He's co author on the book entitled All In on AI, How

Smart Companies Win Big with Artificial Intelligence. And in the book, you know, gets into some cases, whether it's a Disney, a Walmart, a Capital one of Fiser and Eli Lily, how they've been using AI. So we'll talk about that. On the other side, Carol Master along with Tim Stanivic live in our Bloomberg Interactive Broker studio. Tim just reminding me, I've been saying chat GPT, Where the hell did it come from? GPT? Potato potato, Carolo tomato coming out of

my brain. Maybe if you had more experience with AI, you wouldn't have made that mistake. Maybe if a I was running me, I wouldn't. That's definitely true. All right, let's get back to our guest. Tom Davenport, Professor in Ormation Technology Management at Babson College, co author of the book All In on AI, How Smart Companies Win Big with Artificial Intelligence, Still with us via zoom from Santa Barbara, California. You know, tell one thing I do want to go

back to, and it's funny. Um. In the break, I went and actually was doing some additional googling and searching. Came across the story by Ardina Bass and a colleague on kind of what is artificial intelligence? Not so long ago when we think about artificial intelligence and sounds so sci fi if you will, but it's really not, is it. No, It's in you know a lot of devices that we use every day. Um. You know, it's I don't think

there's anything terribly mysterious about it. It's just using technology to do things that were ordinarily just done by the human brain. And I suppose arguably we've been doing that since you know, calculators did long division for us. Who's doing this really well, you know, with a lot of the attention is kind of Microsoft because of its huge and vest smith in open ai and chat GPT. But

what companies are deploying this technology really well? Well, we focused in the book on not on the digital native companies because you know, it's relatively easy for them. They've been doing it for a while. They didn't have a kind of a technical debt, uh, a base of previous technologies that they had to deal with. They didn't have to UM persuade people that it was important. So UM in we found a variety of companies in different industries

in UM consumer products and retail. There's Unilever um uh uh. Kroger quite good at this is this Are they using this to help identify what demand is going to be in a certain area of the country based on and every area, Yeah, and every area of the country. Basically, Kroger does a prediction of every skew, every stock keeping unit in every store every night to make sure they don't have stockouts, and you know that they get the product to the store. So that's just too much data

to ever do well with a human brain. So you have to use machine learning to to make those kinds of predictions, and they're quite successful at that. They do UM over a billion loyalty offers a year based on you know, what they think you might want to want to buy, if you remember their loyalty program, based on what you bought in the past, So they're really good

at it. Of course, some banks Capital One historically that wast analytical bank, and and I think probably the best certainly for its size, at Ai Shell air Bus, UM, Elevant's Health which used to be Anthem is a health insurance company that's really focused on this UM and then UM in Canada. Lob Laws are just retailer in Canada. UM a couple of banks we found Coacher Bank is quite good, UM, DBS Bank in Singapore really fantastic. And yeah, I mean less than one per cent of companies, i'd say,

but good number. But a lot of the big ones we've heard of well and what's interesting is you shared with our producer Paul. You know. Um, over the last five years, companies integrating AI extensively throughout their organizations have experienced stock prices averaging four times the performance of the S and P five hundred. Yet this AI field group accounts for less than one percent of large companies, so little perspective. Where's this research? Who did this research in

terms of the share prices? That was done by Deloitte? Um, my co author is the head of AI for Deloitte. So why do you think that's happening? Well, you know, AI pays off. It means that you have better pricing of your products, better offers. Increasingly, AI is and bed it into products and services. Um. We talk about Morgan Stanley using it for quote next best Action for their financial advisors to their to their clients. Um Uh. Some companies I think probably couldn't even do what they do

at all. We talk about a small to medium sized company called c c C Intelligent Solutions that can give you through companies like USA, can give you an estimate of what you're crashed car will cost a fix in less than a minute based on image recognition and AI and a vast amount of data. I also feel like, you know, when we talk about anything data related, Tom is that the data is only as good as the input, right. And we've talked a lot about biased nous or bias

excuse me, in terms of in data. And we talked about this a lot coming off of the death of George Floyd and lack of diversity within our world. I mean, it's been a continued story for many, many years. But now the data is involved. You know, you do worry about how things are skewed. How do we ensure that

AI is pure? Well, the best companies now, you know, UM, you have to move beyond the kind of proclamations that we we're going to be you know, responsible with our AI and a few policy statements we talked in the book, for example, about Unilever, which reviews every AI application before it's developed to make sure that it's transparent and fair

not biased. UM. They have a they have a policy that you can't really make any final decision for UM a customer, employee, or partner without a human being involved, and they make sure that that happens before they build the application. M does that work, UM? It has? It

turns out you know, UM. We keep hearing the same bad stories of highly biased UM programs like the Amazon one that had a preference for male engineers, where with them over and over again, UNI Leaver has only had two out of over I think two hundred that really violated their policies and they had to go back and redo them. All right, we're gonna leave it on that. Hey, listen, Tom,

thanks for sticking around. We were looking to do a deep dive into it since it feels like everybody's talking about chat GPT now that I remember how to say it UM, but it does feel like all of a sudden AI it's getting a lot of attention, and it helps to really kind of understand exactly what's going on. Tom Davenport, Professor of Information Technology and Management at Babson College, his new book All In on AI. He's co author All In on AI, How Smart Companies Been Big with

Artificial Intelligence? Joining us via zoom from Santa Barbara, California. What are you thinking? I'm thinking this is going to be a serious challenge for parents, for teachers. I still think about the academics of it.