Episode Transcript
[00:00:00] Okay, guys, I want to talk today about the future of AI and HR technology relative to the HR 2030 project. It's going to take me a few minutes, so bear with me. Two things I want to start with.
[00:00:14] First of all, the AI industry is way ahead of its skis. We now see articles in the Wall Street Journal about Walmart and Uber and other large corporations stopping their use of Claude code because it's costing too much money, not getting value out of all of the code that's being generated. Because the flurry of fanaticism about how exciting it is to build code by machine is beginning to wear off and companies are realizing it's very, very expensive. Because we as a society have decided to invest a trillion and a half dollars into, into chips, data centers, software companies, AI companies, energy cooling towers, nuclear power plants, just massive amounts of infrastructure. Because we're convinced as a society that all of this is going to pay off. Now, I'm not saying it isn't going to pay off because there's all sorts of miracles that are happening, drug discovery, new scientific inventions, solving math problems and so forth. But in the business community, this is a tool and the ROI of the tool has not been that high. In fact, there's many, many more stories of companies that have bought this stuff and haven't found the ROI yet than those that have. Some have, but most have not yet. So we're at this very early stage of implementation and problem solving with AI, yet the investment community has invested a massive amount of money. And whether we like it or not, we've created a casino of gambling where, you know, the valuations are so high, even SpaceX's evaluation, evaluation is based on the expectation 50 times revenue that they're going to build data centers in space, which I don't know that they know how to do yet. Maybe they will. And that you can say that about Anthropic and OpenAI and every other AI high value company cursor that you can put your hands on that the belief is there's going to be such a big market for this stuff that we'll pay 50 times revenue, a hundred to a thousand times earnings. By the way, most of the times the earnings are negative. And we'll just plow more money into this and let's get in there as fast as we can so we somehow get ahead of the market. And what that's also done is it's inflated the stock market. So somewhere around 15% of the stock market is now a small number of AI stocks. So we're all going to pay for this in our 401ks if it doesn't pay off. I see very high risk here from a financial standpoint. I see high risk from an investment standpoint. And of course, you know, 20 years from now we're going to find out who the winners are. And then the other issue that I don't think people have thought enough about is if you think about the Internet, which is the last one of these bubbles we were a part of, the early players excite AOL Ink. To me, Yahoo were completely, I wouldn't say destroyed, but upended by Google. Four years after they started. Those companies were 200 to $300 million companies before Google was even founded. And Google came along with a better model and a better idea and a better technology and destroyed all of them. And we don't know if that's going to happen.
[00:03:23] To me it's highly likely to happen that the vertical solution oriented AI companies and models could displace the horizontal ones. If there's an AI that's a hundred times better for genomic research than OpenAI, either OpenAI buys them or they give that market up. So there's things yet to happen here. Okay, Given all that, we also know that the community that we work with, the HR community, is very confused, rightfully so, because there's 500 startups per, per quarter, maybe more. Anybody with a copy of Claude can start a company now and try to build something and they're all building beautiful websites and they're all selling to their friends something that looks like the next generation of AI. Agentic AI this, agentic AI that, agentic HCM agentic recruiting, agentic learning, agentic career development, agentic skills assessment. And you know, I, I know a lot of these companies are great, they're smart people, but there aren't enough buyers in the world to buy all of those products. So some of those companies are going to get shaken out, some of them are going to get acquired and some of them are going to vanish. But the investors have no problems investing in them because some of the executives running these startups come from large companies and they're, they have a track record. By the way, Oracle, SAP Workday have yet to play their hands very well yet. So I actually think most of the AI technology we use in HR could come from the HCM vendors. I know we can have a big debate about that. There's a lot of reasons pro and con, but there will be mid sized companies that'll win out over the big ones and Then the big ones will win a lot of clients and then some of the new ones will turn out to be the big ones and then a lot of the new ones will disappear. So what we're doing to address this confusion and overhyping of the market and I, you know, I'm not trying to be negative on any of this. I think it's fantastic, fantastic stuff. But I do think it's way overhyped, especially if you listen to the, you know, frontier vendors that they seem to be making stuff up as fast as they can. We want to try to give you, the corporate IT and HR people, a clear, articulated, well thought out architectural vision of where this is going that you can use to plan your investments, to evaluate your internal development projects, to evaluate the vendor market and to evaluate and refine your operating model for hr. Because the operating model is dependent on the technology.
[00:05:57] You know, a lot of the work we did in the past is we defined operating models and jobs alone and then we added technology to that. In this case, what's happening is the AI is transforming work so fast that we are designing our organization and operating models around the technology. And I don't think that's a bad idea. I think we have to redesign the process and the technology first and then decide what jobs we have. And so all of your operating model decisions about hr, reducing headcount, reducing staff, shrinking call centers, shrinking L and D and so forth are dependent on these tools. So what HR 2030 has turned into, and we've been doing this for at least a year now and I, I described this at our conference in the keynote and I'll be doing some more webinars for you guys on this is a clearly articulated end to end agent to super agent vision of how HR in particular HR we're not going to do everything in the world is going to look in a way that you can educate yourself, that you can define what's the highest priority project for you, that you can select vendors, that you can evaluate the ERPs or the HCMS that you have or the other tools that you have and that you can make really good business decisions that, that have high returns on investment. Because I while the early days of AI and in the enterprise were a lot of experimentation and enablement, now that the costs have shot up, that's not going to be as useful. You know, even for me using Claude or Galileo directly, we don't charge per token used for Galileo. So Galileo, you're a sense getting unlimited capacity for free. But if you go and buy Claude as a consumer or even OpenAI and you pick one of their advanced models, it's not going to let you use it willy nilly. It actually limits you. In fact, I just talked to somebody yesterday who told me that because they're using Opus4.8, it keeps telling them to wait 15 minutes for their query because it won't do it for them. So you multiply that out by what goes on in your corporation and you see these comments from big IT departments saying $1,500 a month is your budget. You can't spend $10,000 a month on cycles because you're an engineer and we don't want you spending that much money unless you're a senior executive.
[00:08:10] So we, we are going to have to prioritize our energies around high value use cases. And you know, an AI that makes it easier for you to book your vacation or easier for you to evaluate your goals against the company goals is fine, but if it costs you $50 to run it, the company might say, nah, sure, just do it the old way. For now we're working on something more important which I think is a good business decision. So more and more of the use cases, applications, vendors decisions that we're going to be making in the HR domain are going to be the old fashioned kinds of decisions. But we had to build a business case and we had to look at the long term architecture and we had to work with it, which most companies are pretty good at doing anyway. So anyway, so we're very far along with this. The blueprint that you can get from our website, by the way, there's two blueprints. There's a high level one that's free. There's a more detailed one for members of our corporate membership or people that have licensed Galileo. And then there's going to be a very, very detailed one that'll come later in the summer that will be for corporate clients or people that want to use us for advisory. And we'll go through that with you. And what it's designed to do is not only help you see the pictures of the future and evaluate how these things work together, but evaluate vendors, but also apply use cases. So for example, in HR 2030, if you say to the architecture, I'm going to do a merger with, you know, the company that I'm running in the US with a company in Germany, and I want you to build me a talent strategy for all of the training, job descriptions and job overlap and layoffs and redeployment and redevelopment and reorganizations and things we need to do, to do that. That's a big project that you would typically hire a consulting firm to help you with. We're going to show you how the agents would do that for you or they would do a lot of it for you. If your scenario is we, we're losing money or we want to be more productive and we need to reduce costs, how do we change performance metrics? How do we decide who to hire? How do we decide where to flatten the organization? That's a scenario we could run by the model. You could have a scenario where a vendor says to you, we're end of lifing this product.
[00:10:17] We want you to buy a new LMS and we're going to give you this whole new shtick here.
[00:10:22] What is the impact of that? That's another scenario you can run through the model.
[00:10:26] This thing is going to be an intelligent HR 2030 model that you're going to be able to use for a lot of use cases.
[00:10:31] And it's also an education tool for people in HR that are just a little bit confused as to what all these systems are capable of doing. And by the way, who are the vendors? Now we're not going to mail out every single vendor because we can't. But when, once we get the framework finished, we'll go out to the market and we'll fill it in with as many vendors as we can.
[00:10:50] Now, the, the second sort of part of the future here is your own education and skills. And if there's anything I've learned, the two things that I've learned that have stuck with me for decades now, number one is culture is always more important than technology or strategy. So those of you that work in companies that are talking about culture, you're probably outperforming in this time of confusion. We have a podcast coming up with SharkNinja, for example, which is a really fascinating company in the consumer products category. And it's all about culture. It's all about the culture of how they operate, the behaviors, the decision making process, the passion, the energy, who they hire. It's not about the technology they use or really about the business strategy because the business strategy evolves as they move into new markets. And so, you know, we're going to talk a lot about culture and management philosophies and super managers and superworkers as part of HR 2030. And the second part of HR 2030 is your skills. I have a unique situation in that I'm an engineer, I have a lot of technical background, I worked in a Database company. I worked at it. I've learned a lot about this stuff over time. Most of you don't have that kind of experience. Some of you do, Some of you have experience in recruiting, some of you have experience in learning, some of you have experience in assessment or other areas of hr. This world begs the question of do you see the big picture and can you understand in your role, whatever it may be, how to add the most amount of value? And we are going to use the HR 2030 program as an education program. We've already built one course in Galileo Learn for this, which you can get automatically in Galileo, but we're going to build it into the global HR Excellence certification. That's starting in September. So for those of you that really want to make sure you not falling behind, you can get Galileo, you can sign up for the GHRE and we will certify you on these things going forward. My commitment to you in this area of HR 2030 is the reason I wanted to call it HR 2030 is we're sticking with this for at least the next four years. I mean, we're probably going to stick with it forever. But I think this is a journey. This is not a project or a destination or a research report or a finding or a listicle. It's much more than that. And that's the reason we do advisory work, is that we are an advisory company and we want to talk to you. So any of you listening to this podcast that have a funded or even unfunded idea or project that you're working on and you want us to come in and do a workshop, we'll show you what's going on. We did a workshop. We did, we did actually three workshops at Irresistible for all the clients, Everybody grouped into one of the three. And we did a 90 minute workshop on work redesign, job redesign and some others. And we're capable of doing that for you. So if you're an HR leader or a COE leader and you want to make more sense of where things are going and get a roadmap in place, we will be happy to come out and do a workshop for you. It takes usually a couple days, maybe a week between the fact finding and the actual implementation of the workshop and you'll walk out of there with a much clearer picture of what's going on in the market and where, which direction you should go. And it might even get into the vendors and the technologies that are the most appropriate. And I suggest we do these workshops with it involved because almost everything in HR is somehow looped into AI or technology at the moment. And as much as you may want to redesign your performance management process or your leadership development values or your culture, you're probably going to want to think about how you're going to manifest that in the company, how you're going to implement it and measure it. And so oftentimes, any of these projects, whatever they may be, involved it now, you know, for me as an analyst, and I was just on a podcast about this last week, I'm very bullish on this stuff. I think the AI market is way ahead of itself. I think there's going to be some people who get badly burned, but those of you who are buying and implementing things are going to be really thrilled. Our experience with Sana and Galileo and Galileo Learn and the products like Eightfold and others that we've worked with is when they are applied in the right place, they have massive returns on investment. And the reason for that is because what we do in HR is very data dependent and very imperfect. As I like to sort of think about it and talk about.
[00:15:19] There are no right and wrong answers in hr. There is no perfect hire, there is no perfect training program, there is no perfect assessment, there is no perfect pay model, there is no perfect employee engagement model. The way we do our jobs is it's an iterative process of making things better and better and better and learning along the way. And by the way, every couple of months or years, the job market changes, the economy changes, the culture and needs of individuals change because of various factors, political and otherwise. And so we got to adjust our human capital practices regardless of what's going on inside of our companies. And then you have a company like Boeing or Intel that's going through a turnaround and all of the HR and talent and leadership things we're doing because of that are very different and new than they were before because we drifted into some dead end by accident. So I love this space because it is so human capital dependent and so judgmental dependent. And what AI does in a very miraculous way we've seen this in Galileo, is it takes the data and the history you have in your company and it allows you to better make these imperfect decisions, whether it be hiring, pay, promotion, redesign, reorg, management development, or so forth. We now have, by the way, we're working very hard on this. We have a simulated company that is a global sort of retail, distribution, manufacturing company that we've modeled in detail. We have 16,000 employees with job titles and pay and levels and financials and stuff. And we're using Galileo to prove to ourselves and for demos to show you how an AI platform that knows a lot about human capital can really, really do amazing things to deal with all of these issues. So I am really bullish on this technology. I know all of you have IT departments that are making various vendor decisions. We are, we are now introducing Galileo for Copilot in a early pilot. We have a few companies working with us. If you are a big co pilot shop and you've been dying to get something like Galileo into your infrastructure, let us know and we'll get, we'll go through this with you. This is an enterprise class implementation where you can now take the intelligence of Galileo and give it to every employee and every employee can make better decisions and learn about management and training and skills and performance and self improvement and career growth on their own with the support from your company. Because in the copilot, Galileo exists in the Microsoft graph. So all of the information you have in your training department and your policies and is integrated with Galileo and Galileo basically gives it a level of intelligence on top. So it's big. That's going to be a really big deal for us. And then of course we've got a really cool implementation of Galileo on SuccessFactors that we've demonstrated this week and another massive implementation that we're doing with Workday, which we'll tell you more about later in the summer, in the fall. So, so I'm all really high on this stuff and so I'm not trying to be negative, but I think we exist in a world of overinflated expectations, unfortunately and, and overinflated investments where somebody's going to pay the piper here. The. As we've seen from the 2008 financial crisis, the financial community always somehow gets protected and the rest of us pay for it. So we want to help you make judicious decisions so that you're spending your money on the right things and you're getting value from it. And there's a lot of great stuff out there. There's a lot of great products and a lot of great companies that have really working solutions and that's really the purpose of HR 2030 is help you move into this new world in a, in a clearly deterministic, well informed, positive way. I think maybe I'll stop there for today. We have a lot of material from Irresistible. It's going to be published soon. I will be doing my keynote online and a webinar over the summer so you'll have more chance to talk to us directly. And if you're a client or you want to be a client, just reach out to us and we'll talk to you directly about all this stuff. Have a great weekend and we'll talk more next week. There's some really exciting news coming in the learning space next week, and I'll tell you about it on early, early in the week, probably Tuesday, Wednesday. Bye for now.
