Boom Time
AI spending is soaring. To what end is unclear.
The following post is an update to Chapter 12 in Perspective Agents, a section about using new instruments to better see and adapt to changes around us. The book, focused on human implications in an AI age, is available on Amazon. You can find more about the book here.
“Don't only evaluate the potential downside of action. It is equally important to measure the atrocious cost of inaction.” —Tim Ferriss, entrepreneur, investor and best-selling author
A couple of weeks ago, stock watchers and economists waited for NVIDIA's quarterly earnings report with bated breath. Seen as a financial barometer for AI spending, the company exceeded analysts’ lofty expectations. The results lifted the market and NVIDIA to all-time highs.
As of Monday, NVIDIA stock gained over 249% in one year, more than 66% since January, and crossed $2 trillion in market value. Despite the astronomical appreciation, analysts maintain a bullish outlook on the stock.
The bet is based on the view that AI will drive the greatest wealth migration in modern history. NVIDIA is a leading indicator. Bloomberg Intelligence predicts generative AI alone will become a high-growth sector, rising at a CAGR of 42% over the next ten years. Bloomberg added rising demand for generative AI products could add about $280 billion of new software revenue; a new services industry alongside it is expected to be a $70 billion category.
An incoming flood of generative AI tools shows the gold rush in motion. Microsoft has integrated Co-Pilot into its Windows operating system. Google followed suit, injecting Gemini into its search and Workspace suite. And it's not just the bellwether tech brands flooding the market. In 2023, venture capital investors poured over $36 billion into generative AI. New tools span search (Perplexity), text-to-video (Synthesia), programming (GitHub Co-Pilot), writing (Rytr), and thinking (Notion AI).
This range of applications is a small slice of a much bigger picture. During the mobile boom, Apple claimed there was an app for that. In the AI gold rush, there will be an agent for everything.
Enter the confusion boom.
The spending is there. Products are proliferating. The hype continues to soar.
But there’s a strategy gap growing in the acceleration. I sense that spending on enterprise-grade tools buys productivity in a box. You deploy the cash, check the box, and you're good.
Despite its transformative potential, I have yet to see generative AI deployed successfully without clear use cases and a load of human effort behind delivering demonstrable value.
It's unclear if leaders know how AI can be used practically and deployed to solve complex business problems. Recent research conducted by colleagues at Weber Shandwick outlined C-Suite priorities, with a specific view into how well-prepared leaders are to face a future where AI is everywhere.
The findings suggest a looming confusion boom is here.
Not surprisingly, the study confirmed generative AI is a top priority among business executives. 51% of respondents cited its potential to have a favorable impact on business operations and performance over the next few years. 70% also cited developing new AI products and services.
The data also uncovered a looming operating and human resource challenge. Only 24% felt prepared to reskill employees to use the tools effectively. 13% of executives feel equipped to transform their business with AI.
The numbers suggest a strategic void for realizing value from AI investments: how to ensure their businesses are operationally prepared for growth, people are upskilled, and powers are applied to strategic challenges they face.
A geopolitical and cultural shitstorm is blowing in.
This is one material business challenge becoming increasingly complex and fraught with risk—and whether AI is being considered to help address it.
It's not news that geopolitical and culture wars have intensified C-Suite leaders' headaches. What is new is how generative AI will fuel the intensity via coordinated social media attacks, deep fakes, and an avalanche of bullshit flooding the Internet.
The Weber Shandwick report found that 59% of business leaders believe companies are responsible for speaking up and acting on societal issues, even if sensitive or controversial. 64% of business leaders are confident businesses are taking the proper steps to solve societal challenges.
Navigating geopolitical conflict falls low on the priority list for CEOs (18%) and other C-suite leaders (21%). Few companies plan to increase their engagement around policy and regulatory issues or adjust their internal organizations or governance structures.
The numbers suggest another perspective gap — recognizing that ESG, geopolitics, and pro-social business are battlefronts in culture and kinetic warfare proliferating worldwide.
Communications breakdowns are looming.
Nearly a trillion dollars in annual corporate ad spending remains dedicated to broadcast-centric media and communications. The spending inertia doesn't reflect that social influence, now fueled by generative AI, doesn’t operate through media channels and ad placements. It runs through information networks where political operatives, grifters, state actors, and culture warriors often shape the discourse.
According to this year’s World Economic Forum Global Risk Report, misinformation and disinformation have become the number one threat facing leaders. Yet, according to our research, 6% of business leaders say misinformation and disinformation are top priorities, and only 1% feel it will impact their business.
The gap suggests another gap in leaders' strategic calculus — in this case, ensuring they understand the growing threat of narrative conflict before it becomes a material event.
AI can help them stay aware of risks and prepare communications teams to take pre-emptive measures. However, this capability is not currently among the enterprise tools dominating procurement teams' attention.
Material risk is rising.
Companies and brands spanning some of the top names in business remain in the crosshairs of online sparring, framing, and dismantling of corporate and product reputations. These include Google (woke AI), Starbucks (employee distrust), and Spotify (spread of vaccine misinformation).
The Starbucks case is worth a deeper look as it involves the cultural and geopolitical territories mentioned above. On a recent investor call, Starbucks CEO Laxman Narasimhan outlined "a negative impact" on its business in the Middle East, which then "had an impact in the US, driven by misperceptions about our position."
Narasimhan also expressed his concerns about misinformation in an internal memo. He cited its role in unleashing violence against the innocent, hate and weaponized speech, and lies. Locations worldwide saw escalating protests and incidents of vandalism. He suggested protestors were influenced by "misrepresentation on social media of what we stand for. "
Reggie Borges, a Starbucks spokesperson, told Yahoo Finance, "Our web properties were hacked and subsequently shut down in one of our international markets, and our customer contact center has been flooded with angry people seeking an outlet for their understandable rage."
The entanglement of issues management, social mobilization, and disseminating erroneous claims through social media is now an existential concern.
Five days ago, in a letter titled "The Soul of a Brand," Howard Schultz wrote that Starbucks is now at an inflection point. Posted on LinkedIn, Schultz called on leadership to address Starbucks' systemic issues and return to the brand's core values. He ended the letter with a bleak picture of the world: "Seemingly on fire, steeped in disinformation and so much hate, in which people are so disconnected from each other."
The systemic social challenge now transcends brand-building or reputation management. In their first-quarter earnings call, the company experienced "a significant impact on traffic and sales" due to ongoing conflicts.
What to do about it.
Beyond spending on AI tools, leaders must carefully consider adjusting strategy, budgets, and talent around them. In this case, to use human and machine intelligence to enhance strategic visibility, protection, and value creation.
AI can be used to defend companies from attacks, better understand underlying public concerns, and authentically relate to people. Turning to generative AI to make communications more efficient will compound broader, systemic PR risk.
More than content efficiency, generative AI is a means to understand and adapt to changing conditions. At the intersection of media, technology, and issues management, it's clear to me that one application for AI development is building a new sense-making discipline.
Companies will continue to be attacked, gamed, and used as pawns in culture wars. We can see the coordination, new playbooks, and operations at work. AI is a vehicle for doing so.
Companies facing cultural and media crises are one of many challenges where AI spending can be applied constructively. The issue is whether leaders are willing to explore AI's broader applications beyond reducing costs or whether they will choose a path of inactivity, hoping social, employee and geopolitical risks will go away.
Good thoughts Chris.
To what end…play with gadgets? more or less human responsibility?