This Week in AI: Claude 3, India Requiring Approvals for AI, Perplexity Doubling Valuation, Musk/OpenAI Drama, Boards in Transformation, and More
Issue #5
👋 I'm Joyce Li. Welcome back to "AI Simplified for Leaders," your weekly digest aimed at making sense of artificial intelligence for business leaders, board members, and investors.
On February 27, I presented the Athena Alliance AI Governance Playbook with my fellow co-chairs of the working group. It was a collaborative effort by senior women leaders and directors with different backgrounds and expertise. This Playbook provides a human-centered framework for boards on their approaches to AI and represents the female voice that has heretofore been insufficiently included in shaping the conversation around AI governance. It will be released on March 12.
In this week’s newsletter, I cover some notable AI news, implications of OpenAI/Musk drama for leaders, and takeaways from two articles addressing boards’ challenges in today’s environment.
I hope to provide news and insights of lasting significance in each issue, and invite you to explore the past issues here.
Notable AI News in the Week
This week's AI news underscores the rapid pace of AI advancement, the increasing regulatory scrutiny, and some recent funding news that illustrates investor interest in AI-driven solutions. As business leaders and board members, staying attuned to these developments is essential for making informed decisions.
1. Anthropic Claude 3 Release
On March 4, Anthropic announced its Claude 3 model family. The most intelligent model, Opus, outperforms GPT-4, most notably in math, code, and reasoning-over-text. Interestingly, Anthropic seems to optimize its model performance for potential enterprise customer use cases, many of whom rely heavily on PDFs, tables, charts, and presentation files. Anthropic continues to build upon its signature strength of enabling a large context window, which allows users to include a vast amount of knowledge and context in interactions with the AI models—a useful feature for business applications.
The inclusion of four major AI model releases (Mistral's Mixtral, Google's Gemini, OpenAI's Sora, and Anthropic's Claude 3) within five weeks of starting this newsletter further demonstrates the cut-throat competition among the best-funded AI model companies and the upward spiral of rapid AI technology advancement.
2. India Requires Government Approval for New AI Models
India has recently taken a significant step in regulating AI by requiring tech companies to obtain government approval before launching new AI models. The Ministry of Electronics and Information Technology issued an advisory on March 1, 2024, mandating that all "significant" tech firms must seek explicit government permission before deploying new AI models, particularly those under testing or considered unreliable.
This regulatory shift has been met with sharp criticism from many within the tech industry, who argue that such regulation could hinder India's competitiveness in the global AI race. However, like it or not, more government regulations across different countries will come. For business leaders and board members, it's crucial to establish clear guidelines and oversight mechanisms to ensure that your AI initiatives align with regulatory requirements and societal expectations.
3. Microsoft Launches Copilot for Finance
Microsoft's introduction of Copilot for Finance marks an interesting development in AI-powered productivity tools for corporate finance. This tool integrates with Microsoft 365 applications and major financial systems like Dynamics 365 and SAP, aiming to transform finance workflows through automation and AI-driven insights.
The launch of Copilot for Finance could have several implications for stand-alone AI startups in the corporate finance space (there are many! Vic.ai discusses 18 of them in an article.), including increased competition, a push for innovation, collaboration opportunities, and market expansion. As we discussed in previous issues of this newsletter, incumbents have a natural advantage in go-to-market and trust in corporate workflow improvements. It remains to be seen if Microsoft, as an incumbent in office tools (especially spreadsheets) but a newcomer in corporate finance software suites, can succeed here.
4. Funding News: Perplexity, Figure AI and Glean
Perplexity, the AI search tool I featured in my first newsletter issue, is said to eye a valuation of $1bn, merely two months after its last raise at a valuation of $520m. The popularity of its app is unquestionable, and as the company charges $20 / month for its pro version, the same price as the cost of an OpenAI ChatGPT Plus subscription, I suspect both capital investments in Perplexity’s model and infrastructure and the operating expenses paid to AI model providers such as OpenAI, Anthropic, and Meta probably necessitate this earlier-than-expected raise. After all, Google has $1.6 trillion in market cap and investors hope Perplexity could be a credible challenger for the behemoth.
However, as the monetization model based on membership is most likely insufficient to cover costs, what might be other monetization models? Are we going to see certain advertising models? Will content creators in news media start to pay attention and demand their share of revenue? I can’t wait to find out.
Figure AI, a robotics startup developing humanoid robots, recently secured $675 million in funding from high-profile investors like Jeff Bezos and tech giants Nvidia, Microsoft, and OpenAI. This investment suggests a belief in the potential for humanoid robots to address labor shortages and perform tasks that humans are unwilling or unable to do.
Glean, an AI startup providing an AI-enhanced work assistant and enterprise search capabilities raised $200 million at a $2.2 billion valuation. This funding reflects an investment thesis that values the company's ability to improve workplace productivity through AI-powered search and knowledge management.
The YC W23 AI landscape is an illustration of the booming/crowded AI startup scene in every vertical. How do investors determine which startup to invest in when every idea seems to have multiple AI startups working on it? Technical talent and the ability to raise capital over competitors seem to be most important right now, an approach that comes with risks down the road.
Elon Musk's Lawsuit Against OpenAI
On March 1st, Elon Musk filed a lawsuit against OpenAI, alleging breach of contract, breach of fiduciary duty, and unfair business practices. He claims that the company has strayed from its original mission of developing AI for the public good and is now prioritizing profits through its relationship with Microsoft.
OpenAI responded on the evening of Mar 5, maintaining its commitment to ensuring that AGI benefits humanity. The company argues that its transition to a capped-profit entity and partnership with Microsoft has allowed it to scale its efforts while focusing on safety and ethics.
“We're sad that it's come to this with someone whom we’ve deeply admired—someone who inspired us to aim higher, then told us we would fail, started a competitor, and then sued us when we started making meaningful progress towards OpenAI’s mission without him.” - OpenAI’s Response
The blog post sheds light on early discussions between Musk and OpenAI's leadership about the need for significant resources to achieve AGI. Disagreements arose over control and governance when creating a for-profit entity, leading to Musk's departure and the founding of Grok. But it also clarifies what ‘open’ in the ‘OpenAI’ really means:
Although partly driven by various motivations and incentives for those involved, this legal battle and drama highlight the challenges surrounding the development and deployment of AI technologies and the importance of transparent governance, clear communication, and a commitment to ethical principles.
For business leaders and board directors, this case presents critical lessons:
Ensuring alignment with a company’s mission and values
Navigating the complexities of transitioning from non-profit to for-profit models
Maintaining robust governance practices and monitoring for conflicts of interest
Staying informed about industry trends and competitive dynamics
Carefully considering the implications of AI partnerships and investments
As the lawsuit unfolds, it will be crucial for business leaders and board directors to stay attuned to developments and consider their potential impact on the governance and strategic direction of AI-driven companies.
For impact investors and philanthropists supporting AI companies, this case underscores the importance of conducting thorough due diligence on a company's governance structure, mission alignment, and potential conflicts of interest before investing. Establishing clear expectations and guidelines for maintaining mission alignment and regularly monitoring the company's adherence to its stated principles can help mitigate risks associated with changes in business models or partnerships.
Navigating the Future: Boards in the Age of Transformation
Today’s board directors and business leaders find themselves at the helm of navigating through storms of volatility and waves of innovation. The insights from McKinsey and Ernst & Young (EY) emphasize the evolving role of the board in today's business landscape and the transformative power of technology, particularly artificial intelligence, in reshaping boardroom dynamics.
The McKinsey report underscores the expanding responsibilities of board directors, moving beyond traditional governance to become strategic partners and catalysts for change.
This shift is driven by the need to address a plethora of new challenges, from geopolitical tensions to the rapid advancement of technologies like generative AI. Directors are now expected to engage more deeply with management, offering their expertise not just in oversight but in strategy development, risk management, and talent cultivation.
The concept of a "catalyst board" emerges, highlighting the board's role in facilitating rapid organizational change and adaptation in an ever-evolving business environment.
EY's findings complement this perspective by shedding light on the practical implications of these shifts for board operations.
The report highlights the importance of streamlining board-management communications and leveraging technology to enhance board efficiency and effectiveness. It points to the potential of generative AI to transform the boardroom by enabling directors to ask better questions, create more compelling scenarios for strategic exercises, and streamline board packages and preparation.
This technological empowerment is seen as a key factor in evolving the boardroom for the future, ensuring that directors can focus on critical discussions and strategic decision-making.
Both reports converge on the necessity for continuous learning and adaptability among board members. As the business landscape undergoes rapid transformation, so too must the competencies and perspectives of the board. Engaging with external experts, staying abreast of emerging trends, and embracing new technologies are essential for boards to remain effective in their governance roles.
In conclusion, the role of board directors and business leaders is more crucial than ever in guiding organizations through an era of complexity and change. By fostering a collaborative relationship with management, leveraging technological advancements, and committing to ongoing learning and development, boards can ensure they are well-equipped to navigate the challenges and opportunities ahead.
Closing
As last time, I will leave you with a thought-provoking article on Gen AI’s potential impact on New York City, this time from McKinsey:
“Generative AI will accelerate automation adoption of up to 29 percent of work hours in the New York combined statistical area by 2030.”
This week I will attend the Mutual Fund Director’s Forum in DC. If you will be there, please make sure we connect in person. I am happy to share some takeaways from my recent conferences and events if that’s of interest. Please feel free to reach out and let me know.
Thank you.