May 29, 2024 | AI, Governance
Most BBQ conversations about the future of AI end up as a discussion about jobs being replaced, new jobs created the balance between the two, and the pain of those being replaced by machine.
It is difficult to forecast what those new jobs will be, we have not seen them before, the circumstances by which they will be created are still evolving.
18 months ago, a new job emerged that now appears to be everywhere.
‘Prompt engineer’.
Yesterday it seems, there was no such thing as a ‘prompt engineer’. Nobody envisaged such a job, nobody considered the capabilities or training necessary to become an effective prompt engineer. Now, if you put the term into a search engine there are millions of responses, thousands of websites, guides, and courses have popped up from nowhere. They promise riches for those who are skilled ‘prompt engineers’ and training for those who hop onto the gravy train.
What is the skill set required to be a prompt engineer?
There are no traditional education courses available, do you need to be an engineer, a copywriter, marketer, mathematician?
This uncertainty makes recruiting extremely difficult. The usual guardrails of qualifications and past experience necessary to fill a role are useless.
How do you know if the 20-year-old with no life experience and limited formal education might be an effective and productive prompt engineer?
How many job descriptions will emerge over the next couple of years that are currently not even under any sort of consideration?
Recruiting rules no longer play a role. We need to hire for curiosity, intellectual agility, and some form of conceptual capability that I have no word for.
The challenging task faced by businesses is how they adjust the mix of capabilities to accommodate this new reality.
Do they proactively seek to build the skills of existing employees which requires investment? Do they clean house and start again, losing corporate memory and costing a fortune? Do they try and find some middle path?
Where and how do you find the personnel capable of building for a future that is undefined?
May 27, 2024 | AI, Governance
Nvidia 2 years ago was a stock nobody had heard of. Now, it has a market valuation of $US2.7 trillion. Google, Amazon, and Microsoft from the beginning of this year have invested $30 billion in AI infrastructure, seen their market valuations accelerate, and there are hundreds of AI start-ups every week.
Everybody is barking up the same tree: AI, AI, AI…..
Warren Buffett, the most successful investor ever, is famous for saying he would not invest in anything he did not understand.
He conceded many opportunities have passed him by, but he gets many right. Berkshire is the single biggest investor in Apple, a $200 billion investment at current market value that cost a small fraction of that amount.
Does anyone really understand AI?
Are we able to forecast its impact on communities and society?
We failed miserably with Social media, why should AI be any different?
Even the experts cannot agree on some simple parameters. Should there be regulatory controls? Should the infrastructure be considered a ‘public utility’? when, and even if, will sentience be achieved?
Bubbles burst, and many investors get cleaned out, but when you look in detail, there are always elements of the bubble that remain, and prosper.
The 2000 dot com bubble burst, and many lost fortunes. However, there are a number of businesses that at the time looked wildly overvalued, that are now dominating the leaderboards: Apple, Amazon, and Google for example.
The tech was transformative, and at any transformative point, there are cracks that many do not see, so stumble. From the rubble, there always emerges some winners, often unexpected and unforecastable.
Is AI just another bubble, or is it as transformative as the printing press, steam, electricity, and the internet?
Header cartoon courtesy of an AI tool.
May 24, 2024 | AI, Management
Management is all over the place, scrambling to ‘get AI’.
A common failure of that scramble is a reality: rubbish in — rubbish out.
Outcome quality depends on two factors:
- Data quality. The quality of the data that is used to generate that outcome. The quality, depth and breadth of the data is dictated by the databases on which the system was trained,
- Instructions given. The instructions you give the machine will drive the type and weight it gives to the available data in response to your instructions.
AI is a ‘machine’, an electronic warehouse of information it makes available on request.
They are machines, not people. They cannot ‘think, they do as instructed, using predetermined ‘training’ to prepare an answer.
Most people are radically unprepared for the changes coming.
The best known problem solving metaphor has always been Einstein’s.
He observed that if he had an hour to solve a life defining problem, the 1st 50 minutes would be spent defining the problem, the rest is just maths.
It is identical in the deployment of AI.
It seems to me that when a system ‘hallucinates’ it is a sign that it has been inadequately briefed. Think about the briefing as you would explaining something to any intelligent 10-year-old!
Keep it simple.
Explicitly define what information is to be used.
Explicitly define the objective to which the information will be directed.
Explicitly give any contextual information that may be helpful.
Explicitly define the range of outcomes you might be looking for.
The key to leveraging the speed and depth of data made available by AI systems is in the preparation of the data and the matching of that data to the problem being addressed.
If you use this simple process, the one you should have practised on your children, you can dodge the expensive and largely useless ‘prompt engineering’ courses, books, and gurus that have sprung up like mushrooms after rain. They are there to drain your pockets by offering seemingly easy solutions to difficult challenges.
There is no such thing as an easy solution that negates the necessity to ‘do the work’.
Header credit: DALL-E.
May 21, 2024 | Change, Strategy
A short time ago I sat in a workshop where one of the featured speakers continued to conflate strategy and execution into the one process. Those who know me watched with amusement is I tried to maintain a philosophical silence. Rather than jumping up and pronouncing that such conflation is muddle headed at best, destructive at worst, I managed to maintain my seat.
This general lack of understanding that strategy and execution are separate processes has evolved from a number of sources.
Communication. Poor communication of the strategy, and separately, the role each function and individual have in the execution of the strategy via budgets and other means of resource allocation is unclear. Is unreasonable to expect those further down in an organisation to execute on a strategy they do not clearly understand, and even if they do, their role in the execution is unclear.
Size does matter. Organisations as they grow become more complex. As those complexities grow the difficulty of translating strategies into actual tasks that compound to deliver the strategic objective also compounds. Aggressive simplicity is the only antidote, and a huge challenge for management.
Technology overload. Technology often complicates clear communication, despite its ability quickly and efficiently to reach people. The fragmentation and complexity of communication channels serves to dilute the power of a simple message. In the absence of a clear articulation of the problem to be solved, job to be done, and recognition of existing conditions, people determine independently what a message means to them.
Turf wars. Unfortunately, in all organisations beyond about 30 people, politics and turf wars are common. In many large organisations, perhaps most, advancement and the trappings of that advancement go to the most effective political operatives. Merit in getting the job done often runs a long second. Turf wars by their nature work against a coherent collaborative strategic resource deployment.
Resources. In almost no organisation I have ever seen is there sufficient effort made to ensure aligned and consistent understanding of the strategies. That effort to communicate clearly is critical to enabling the allocation of necessary resources, at the optimum time, to deliver the envisaged outcome. Most often the communication morphs to resemble hyperbole.
These factors contribute to the general notion that strategy by itself is an exercise in obscure articulation, while execution is left to the ‘quants’ among us.
Effective strategic deployment requires that the causes of the mismatch noted above are reversed. This requires a culture that insurers feedback loops, flexibility, excellent and consistent communication, all of which come from a single source: leadership.
May 16, 2024 | Change, Governance, Innovation, Leadership, retail, Strategy
The recent declaration of “A Future Made in Australia” by the Prime Minister has put the future shape of the nation’s manufacturing sector back on the agenda.
There was however, nothing specific on the importance of agricultural innovation and value adding through the manufacturing sector, or the strategic value of food security.
The decline in Australian owned manufacturing in the food industry has been close to total. The FMCG manufacturing industry has seen input prices increase by 49% over the decade to 2020, while the wholesale prices received have increased by only 24% over the same period (Source: AFGC Sustaining Australia Food and Grocery manufacturing 2030 report) This downturn, and the 20 years prior which display similar trends has seen locally owned businesses either go bankrupt, or become subsidiaries of foreign conglomerates, relegating them to mere outposts.
From an era where medium-sized businesses thrived across various product categories, employing significant numbers in quality, engineering, the trades, and R&D, today these businesses have largely disappeared. This transition has been marked by a shift towards centralisation of product development and scientific research abroad, leaving Australian operations with minimal operational and decision-making authority.
This trend raises critical questions of how we feed ourselves, and make a useful contribution to the global food supply.
Notwithstanding the international ownership of most of food and beverage manufacturing, it contributes 6.5% of GDP, 32% of total manufacturing output, and employs 240,000 people, 40% of which are in regional areas. (source AFGC)
By any measure, the food manufacturing sector is profoundly important to Australians. Its future resilience and growth of sovereign capability should be paramount.
The lack of sovereign control of the resources and capital needs to generate growth is disturbing.
Central to an innovative and resilient manufacturing industry is the capacity to generate intellectual capital that translates into manufactured product. The progressive ‘internationalisation’ of company R&D noted above, has been matched by a progressive emasculation of the sovereign capability to generate the Intellectual capital necessary for long term growth. There is a significant number of SME’s in the sector, but collectively they contribute very little to the total of manufactured product. They are typically mixing often imported ingredients in low tech environments with a few employees and casuals. Distribution is largely through secondary channels like farmers markets, and local retailers and food service. They do not have the resources to compete with the R&D capability of multinationals, and the previously available intellectual assistance from federal and state institutions has been removed.
Take for example the CSIRO that in the past worked closely with business. Often this was in an informal and personal collaboration between individuals that enabled a thriving environment for problem solving and innovation. CSIRO’s sites in North Ryde, Werribee, and Canon Hill have either been downsized or sold off, and skilled, experienced employees made redundant. Contributing to this erosion of the collaboration that in the past generated much of the ‘ideation’ that sets the stage for innovation, has been the demands of successive governments for a ‘productivity dividend’. This was typically 2% annually which compounds quickly to a killer blow to capability. It is code for removing those informal but fundamental creative collaborations with domestic companies, and encouraging the multinationals to centralise R&D elsewhere.
The power of the supermarket chains, currently under scrutiny has also played a key role in this process. SME’s simply do not have the deep pockets required to generate and maintain traction through the retail FMCG oligopoly.
To be successful, SME’s need to be able to absorb the reality of this gross power imbalance with retailers. Financial capital is necessary to enable the generation of the Intellectual Capital that underpins genuine innovation. Further investment is required to design, build and install the equipment to produce the innovative product. Deep pockets are then required to meet the retail trading term and promotional demands, as well as investment in the advertising necessary to attract consumers to a new product. As the power of the retailers has overwhelmed the diminishing group of domestic suppliers, we have been left with multinational suppliers and retailer house-brands, themselves often manufactured offshore.
The focus of government policies remains short-term, driven by electoral cycles rather than the decades required to bridge the gap between science and commercial success. Differing jurisdictions follow their own nose, resulting in a siloed and fragmented effort across the country, rather than a coherent and coordinated effort. The outcome is a mix of differing priorities, investment plans and initiatives around the country, sometimes used as incentives for business location. The commercial equivalent would be if a conglomerate allowed divisions and locations to compete for resources with declining levels of investment in the total absence of a coherent strategy. No sensible commercial board of directors would put up with such a self-defeating arrangement.
Grant programs send the wrong message and encourage behaviour that rarely delivers the outcomes touted in the press releases.
Culturally and politically risk is toxic to the body politic. However, the acknowledgement and management of risk is a fundamental element in successful innovation.
Successful risk management becomes a function of the extent to which a whole range of data, combined with qualitative assessment of what the future will look like is considered. Removing the capacity to make those assessments severely compromises the value of any conclusion reached.
The only potential solution to those institutional blockages to innovation in manufacturing industries generally is a confronting one.
Government needs to ‘upskill’ itself to be in a position to substitute early equity funding for grant funding.
Such a change requires a cohort of skills and experience not currently available within government and bureaucracies, but selectively available in industry. The early equity would be recoverable by those that are successful at a pre-agreed point, at a pre-agreed rate. This removes the inertia and rent seeking evident in grant funding, replacing it with a modified form of Venture Capital.
In addition, FIRB needs to adjust the guidelines that currently rely on an intense focus on the economics of ‘Comparative advantage’. These rely on projections of current and past quantitative models of industries that usually bear little resemblance to what ultimately evolves. They never reflect the strategic value of sovereign manufacturing.
In the absence of meaningful strategic change, what remains of the domestically owned food manufacturing industry of any scale will disappear, and current and new SME’s will have no hope of replacing them.
Notes.
- The budget delivered on Tuesday night included a number of measures that should serve to give manufacturers some confidence that the government has recognised there is a problem, and that action was long overdue.
- A slightly edited (and improved) version of this post was published on Wednesday morning on the AuManufacturing website and Linkedin group.
