The AI question every business leader is asking

There is a great storm cloud hovering over our economy in the form of conflict in Iran, as the word 'stagflation' (the unpleasant combination of rising prices and stagnant growth) infiltrates the media headlines this morning.

While the likely effect on oil prices is not yet clear, we can at least understand it in the context of previous energy price fluctuations, like the ones that followed the conflict in Ukraine, to give a recent example.

Once the hard data comes in, economists can try to model it. But there is another great unknown that has been stalking the global economy for some months now, which is a lot harder to pin down: artificial intelligence.

We don’t really have comparable models to help us to understand it and prepare for its impact, because what it seems to promise is so revolutionary. However, we are starting to see some clues. Veteran venture capitalist Marc Andreessen famously wrote in an essay in 2011 that “software is eating the world”.

Just over a decade on, is AI tech now eating software? That’s the thought that has been spooking stock markets, driving down tech stocks that seem particularly vulnerable, like SaaS firms.

If companies can use AI to write their own code and easily create the apps and platforms they need, then software doesn’t need to be an external service you pay for anymore, the logic goes.

Jack Dorsey, the exited founder of Twitter, recently announced he was halving his workforce at Square, because the latest AI models had convinced him fewer humans were needed.

People who were laid off, as well as some unhappy people who remain at his company, believe this was mainly done to appease shareholders and the stock market. They’re not convinced AI can do many of the tasks – so let’s see how it fares. It is one of many stories about AI-led downsizing that have grabbed headlines recently.

But mass white-collar lay-offs are not the inevitable outcome of the rise of AI. I met someone last week who works as a lawyer at a company in London, part of a legal team of nearly 50 people. He is fascinated by AI and says his team have embraced it.

They haven’t downsized; instead, they find themselves doing more interesting work, he told me. The problem, he acknowledges, is that the paralegal work that would be done by juniors has gone, so there is a future talent pipeline issue.

He also told me to look out for the upcoming test-case legal judgement in the class action lawsuit against Workday, happening in California, all about using AI for recruitment. A slew of human-made legal judgments may slow down AI adoption, in the short-term at least.

I also got an interesting perspective on AI adoption from Business Leader member John Readman, founder of Modo25 and ASK BOSCO. He is an expert in digital marketing and e-commerce and is at the cutting edge of using AI in his products.

“We have rolled out and trained Claude (with an external training company) for all our team of 40+ people,” he told me, “and expect to scale the business in the coming months but are hoping to do this without the historic headcount scaling inline.

“We are also talking to many of our ASK BOSCO clients who are planning growth in the coming twelve months and hoping to do so with less headcount growth using our AI solutions.”

The talk of growth is promising and “less headcount growth” is better than immediate job cuts...

Changing gears now. A leader has to think about growing the team, but also think about growing themselves. AI can help with personal development and some kinds of coaching, but arguably nothing beats another human giving you the motivation you need to change – face to face.

This is one important issue that Alex Wright raised on the Business Leader Podcast this week. Wright is the co-founder and CEO of challenger retail brand, Dash Drinks. You may have seen it on supermarket shelves.

Wright has a paid coach, he told us, who can give him “uncensored and non-judgemental” feedback. The drawback of informal coaching from people like friends or contacts in your industry, he explains, is that confidentiality can become a “barrier”.

He runs an interesting exercise with his coach once a year, he revealed. He asks him to collect 360-degree feedback from his leadership team, which is “anonymous and uncensored”.

He then trusts the coach to digest this information and relay it to him.

Could AI do that? It could certainly collect the feedback, but could it convey it in a sensitive way so that the recipient actually takes it on board? Maybe that’s something that still requires a human touch.

Watch the full podcast here.

Guess the company

• It originates from a company founded as a bike-building business in 1884
• It employs over 24,000 people and has over 700 stores
• It's in the FTSE250
• It's known for its Team Knowhow

You'll find the answer at the bottom of this page

What happened this week?

1. Revolut has secured a full banking licence from UK regulators, ending a four-year wait for a permit that is crucial to the international growth of Europe’s most valuable fintech. The Bank of England’s Prudential Regulation Authority, which regulates lenders, has lifted restrictions on the authorisation it granted two years ago, Revolut said on Wednesday.

2. Britain is likely to be hit by rising inflation because of the US war with Iran, the chancellor has said, as she suggested a “rapid de-escalation” would be the best protection against a jump in energy prices. Rachel Reeves stopped short of setting out any new relief for people who could be hit by rising prices, rebuffing calls to ditch a planned 5p rise in fuel duty in September.

3. British companies are struggling to afford to hire young people after a long period of rising costs that have hit profit margins and derailed recruitment plans, business leaders have said. Rising labour costs, including increases to the minimum wage and employer’s national insurance by the government have put young people at the back of the queue when employers consider recruitment, business lobby groups have told MPs.

4. The Labour government has set out plans for a scaled-back digital ID scheme that excludes children and personal data, such as addresses, as it tries to sell the controversial policy to British voters as a way of making public services more convenient.

5. London Underground drivers will stage 12 days of strike action this spring over a proposed four-day working week, the RMT union has announced. The action will include six 24-hour weekday strikes beginning at noon on 24 and 26 March, followed by further walkouts on 21 and 23 April, and 19 and 21 May.

Weekend reading

🪖 Goldman executive says private markets clients ‘glad’ about Iran war ‘distraction’

As the effect of war in the Middle East starts to ripple throughout the global economy, the co-head of the US bank’s international business said that the bank’s clients in the private capital industry are “glad” that the Iran war is providing a “distraction” from questions over the sector’s exposure to software.

👑 Reaching net zero by 2050 ‘cheaper for UK than one fossil fuel crisis’

Achieving the UK’s net zero target by 2050 will cost less than a single oil shock and bring health and economic benefits while insulating the country against future costs, the government’s climate advisers have forecast. Eliminating the UK’s reliance on fossil fuels by adopting renewable energy and green technologies, such as electric vehicles and heat pumps, would be the best and most cost-effective option for the future economy, the Climate Change Committee (CCC) found.

And finally

Have you ever gone to a business event on your own and felt excluded? Well, maybe the Pac-Man rule could help you, inspired by the iconic 80s computer game.

I heard about this from a friend, who had visited an exclusive, invite-only tech event in California recently. There were about 200 people there who didn’t know each other beforehand, taking part in a mixture of talks and networking events.

The organiser reminded everyone at the start of ‘the Pac-Man rule’. There should be no closed circles when you informally gather round to chat socially in breakout sessions.

Instead, you should form groups in a ‘Pac-Man’ shape (like a pie with a slice missing). This means anyone can feel like they can join the group, because it is not closed and there is still space.

You may join to take part, or perhaps a more introspective person wants to come in just to listen – at first.

It’s all too easy to close ranks in a conversation. So I love the idea of the Pac-Man rule! Why not try it?

The answer to our question is Curry's.