WEBVTT - Former IBM Chairman & CEO Sam Palmisano Talks A.I.

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Let's talk about this

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<v Speaker 1>markets because things have been going crazy. We talk about

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<v Speaker 1>an SMP in an ASDAC right now around session lows

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<v Speaker 1>I was looking at the Philadelphia Semiconductor Index down seven

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<v Speaker 1>percent on the deck.

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<v Speaker 2>Yeah, it's pretty brutal out there. It's not just chips,

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<v Speaker 2>it's also some of the AI plays. We were speaking

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<v Speaker 2>earlier about some of those AI darlings getting hit with

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<v Speaker 2>some short reports. So investors coming out and saying, I'm

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<v Speaker 2>sure at the stock and this is why, and that

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<v Speaker 2>has lumen, for example, has gotten hidden in part of that?

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<v Speaker 3>Yeah?

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<v Speaker 1>Absolutely, And it raises the question super micro, symbiotic, a

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<v Speaker 1>lot of these other names here. I don't know. Is

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<v Speaker 1>this just a symptom of the fact that these were

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<v Speaker 1>the high flyers, So hey, if you made a lot

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<v Speaker 1>of money off them and you're stealing skittish, why not

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<v Speaker 1>just cash out? Or is this more symptomatic of people

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<v Speaker 1>rethinking that HOLYI.

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<v Speaker 2>Trade or with the idea of say super micro, is

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<v Speaker 2>that now it's not in the small caps, it's in

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<v Speaker 2>the SMP. So does that change who covers it and

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<v Speaker 2>how they look at it? And that changes how you

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<v Speaker 2>view the numbers. But either way you're laughing at me.

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<v Speaker 1>I'm laughing because it's some day we have to talk

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<v Speaker 1>about why super Micro is even in the SMP five hundred.

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<v Speaker 1>That's a whole on the topics, right, But.

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<v Speaker 2>That's also why the analysts can now look at it

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<v Speaker 2>in a different way, and then you have different analysts

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<v Speaker 2>covering that stock, and that winds up hurting. It does

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<v Speaker 2>raise the question in terms of the AI trade, what

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<v Speaker 2>a cyclical what a structural role? And then how do

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<v Speaker 2>you invest in that? Sam palm Asano, chairman of the

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<v Speaker 2>Center for Global Enterprise and former CEO over at IBM,

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<v Speaker 2>it joins us. Now, Sam, it's really good to get

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<v Speaker 2>your perspective. We very much appreciate this. How do you

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<v Speaker 2>how does someone who's been in the technology industry for

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<v Speaker 2>decades and understands innovation and understands a business cycle, what

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<v Speaker 2>is AI right now?

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<v Speaker 3>Well, that's a great question, Alex, and remain good being

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<v Speaker 3>with you guys. Again, it's always a pleasure to be

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<v Speaker 3>with you, especially in a beautiful afternoon. It's great to

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<v Speaker 3>be in my office not outside playing golf or something.

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<v Speaker 3>But on a more serious note, now, I think that

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<v Speaker 3>the best way to think about this that I can

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<v Speaker 3>draw parallels to the Internet if you like, but when

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<v Speaker 3>they're still in the early stations of AI. And if

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<v Speaker 3>you go back to the early days of the Internet,

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<v Speaker 3>what happens in phases. It begins with the enablers, and

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<v Speaker 3>that would have been back then that's scage on Cisco

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<v Speaker 3>and AT and T. Today you would put the enablers

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<v Speaker 3>is the Microsoft and videos, AMD, anthropics, the chip guys,

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<v Speaker 3>et cetera, the foundational model guys. And then it moves

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<v Speaker 3>to the adopters over time. But that's time and that

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<v Speaker 3>if they go back to the Internet, that would have

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<v Speaker 3>been Meta Amazon, DoorDash, Netflix, and then the next phase

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<v Speaker 3>with the people people that apply the innovation to the technology,

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<v Speaker 3>and that would be the ubers, the Netflix of the

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<v Speaker 3>Airbnb's et cetera, et cetera, in door dash, you know.

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<v Speaker 3>So that's the phases of this thing and so far

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<v Speaker 3>to repeating itself. And we are in the early phase,

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<v Speaker 3>there's no doubt about it. So the enablers are going

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<v Speaker 3>to continue, to my opinion, anyway, do well now, I mean,

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<v Speaker 3>you guys know markets. I can't speak to evaluations of

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<v Speaker 3>what happens day to day but long term trends. I've

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<v Speaker 3>seen this thing. I saw in the early days of

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<v Speaker 3>Client So I've been at this industry a bout fifty years,

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<v Speaker 3>so this isn't my first time to kind of view

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<v Speaker 3>these transitions.

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<v Speaker 2>So, Sam, is the real boost and efficiency going to

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<v Speaker 2>come from Romaine and I using it on our phones,

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<v Speaker 2>or is it going to come from like entirely new

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<v Speaker 2>business lines and re thinking the way we fundamentally do.

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<v Speaker 3>Things, Alex, I tell you that's a very interesting insight

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<v Speaker 3>because if you look at what's going to happen short term,

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<v Speaker 3>if I quote the Kinsey estimates of this sort of thing,

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<v Speaker 3>they value the GENAI that's got the adoption in the

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<v Speaker 3>early stages of it in four key areas. That's customer operations,

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<v Speaker 3>marketing and sales, software engineering in R and D. I

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<v Speaker 3>ete productivity in the word, so they're saying the first

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<v Speaker 3>phase will be productivity. That also could be productivity to

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<v Speaker 3>the user on the phone, by the way, as far

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<v Speaker 3>as their user experience booking, reservations or whatever it happens

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<v Speaker 3>to be, it could be simplified by the application of ANI.

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<v Speaker 3>But in the enterprise itself, it's going to be more

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<v Speaker 3>around productivity Now having said that, the real innovation comes,

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<v Speaker 3>real value creation comes in the next phase. And I

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<v Speaker 3>go back to my analogy to the Internet. That's what

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<v Speaker 3>I mentioned earlier. Uber, Airbnb, Spotify, Netflix, That is the

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<v Speaker 3>next phase where this thing is going to take off.

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<v Speaker 1>Go ahead, Yes, so you're seeing a lot of paly.

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<v Speaker 1>I didn't mean to cut you off, but I want

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<v Speaker 1>you to kind of on that because, I mean, your

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<v Speaker 1>experience is relatively unique. I mean, you came of age

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<v Speaker 1>at least share in your career at IBM at a

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<v Speaker 1>time when corporate computing was really taking off, then personal computing.

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<v Speaker 1>You were still there when the sort of the Internet

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<v Speaker 1>age came about, and now you're not with IBM anymore,

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<v Speaker 1>but you're still around here investing in what a lot

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<v Speaker 1>of people think is going to be that next big

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<v Speaker 1>new technology. I don't think anyone is doubting that this

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<v Speaker 1>might be the next big thing. I think people are

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<v Speaker 1>kind of doubting who the winners and losers are going

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<v Speaker 1>to be. And right now all the bets seem to

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<v Speaker 1>be with such a small core the companies.

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<v Speaker 3>Well that's I mean, that's exactly right, and that's how

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<v Speaker 3>it was. To go back to the Internet, it's a

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<v Speaker 3>small core that benefited initially and then it broadened out,

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<v Speaker 3>and it broadened out when it got to the adoption phase,

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<v Speaker 3>not the enabling, I mean the infrastructure build out. That's

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<v Speaker 3>why these guys are sold out, because everybody's chasing the

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<v Speaker 3>infrastructure buildout, I EI the hyper scalers, and they're ordering

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<v Speaker 3>GPUs and chips lay crazy because they want to be

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<v Speaker 3>ahead of the curve as this adoption phase or demand

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<v Speaker 3>increases on the cloud providers Amazon, Google, Microsoft Is or

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<v Speaker 3>et cetera, et cetera. That's kind of where we are

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<v Speaker 3>in the phase. I really do think that the hard

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<v Speaker 3>thing to predict, I mean go back in time. Even

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<v Speaker 3>in the early days of Internet when companies were digitizing,

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<v Speaker 3>did people think it will be impacting how you take

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<v Speaker 3>a ride in a car a uber or get a

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<v Speaker 3>room someplace, or get videos media to place and all

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<v Speaker 3>that sort of stuff from music? Nobody really conceived in

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<v Speaker 3>the early days of the Internet. It was more about

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<v Speaker 3>digitizing things and putting your information up from the web

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<v Speaker 3>and maybe doing a little bit of commerce. Did anybody

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<v Speaker 3>think that a little bit of commerce would be Amazon?

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<v Speaker 3>So the point is now your point is predicting where

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<v Speaker 3>it will go. I'd tell you that's really I'm not

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<v Speaker 3>an investor in this space, and you know, we're focused

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<v Speaker 3>primarily in areas around healthcare and around cyber and those

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<v Speaker 3>sorts of things.

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<v Speaker 1>And you're seeing the substantive use or potential use of

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<v Speaker 1>this technology. Because even when you go back to the

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<v Speaker 1>Internet age, and I know there was a lot of

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<v Speaker 1>hype and a lot of folks who were predicting things

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<v Speaker 1>that never panned out. But I think for a lot

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<v Speaker 1>of us, at least the layman out there, you can

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<v Speaker 1>actually see the tangible qualities of what they at least

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<v Speaker 1>were trying to build. AI just seems a lot more Ephemerald.

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<v Speaker 3>Well, I mean, there's a couple of things. First of all,

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<v Speaker 3>let's take about the Let's talk about the enterprise adoption.

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<v Speaker 3>Right where can great value can be created in these

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<v Speaker 3>enterprise companies and s Guys running these companies realize they've

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<v Speaker 3>done the pilots, they've experimented, they've done these things, and

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<v Speaker 3>they're going to chase productivity in the short term, but

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<v Speaker 3>they're going to drive innovation in the long term. And

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<v Speaker 3>that's the innovation and the enterprise. There are still limitations

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<v Speaker 3>in the technology I mean, for example, accuracy and transparency

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<v Speaker 3>and validity. If you're doing financial services, or you're doing

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<v Speaker 3>national security, or you're doing healthcare and you're worrying about

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<v Speaker 3>people that are going to live or die, you need

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<v Speaker 3>those issues to be addressed, and they will be addressed.

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<v Speaker 3>And there are a lot of startups trying to address

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<v Speaker 3>a lot of those and those areas of inadequacy that

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<v Speaker 3>exist today. So therefore you see things being applied to

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<v Speaker 3>what I called a simpler use case like marketing, like

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<v Speaker 3>customer service, et cetera, et cetera. You believe that now

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<v Speaker 3>these cycles, as I go back to the Internet, they're

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<v Speaker 3>like ten to fifteen year cycles, you know, right, So

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<v Speaker 3>I mean we're in the year what three maybe depend

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<v Speaker 3>upon how you count this stuff. So I mean we

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<v Speaker 3>have a long way to go. And from an investor,

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<v Speaker 3>I mean I'm basically a VC today. I'm not involved

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<v Speaker 3>in large companies. I'm an advisor, but I'm not really

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<v Speaker 3>involved day to day. Fundamentally, from a VC perspective, we're

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<v Speaker 3>making bets in those industries where the technology you can

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<v Speaker 3>have a massive impact, for example, the delivery of healthcare

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<v Speaker 3>or therapeutics and those sorts of things, massive impact, to

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<v Speaker 3>improve the system, to drive productivity, to improve outcomes that

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<v Speaker 3>could be significant. Financial services. There's a lot of things

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<v Speaker 3>that can be done in financial services again to improve

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<v Speaker 3>the value to society and value to the companies themselves.

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<v Speaker 1>All right, Sam, have to leave it there, great insights,

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<v Speaker 1>as always, have a wonderful day.

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<v Speaker 2>Sam.

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<v Speaker 1>Paul Masano is the chairman of the Center for Global Enterprises.

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<v Speaker 1>He said, a vc funder in the AI space, and

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<v Speaker 1>of course a long time IBM employee EU rose to

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<v Speaker 1>the top of the mountain there