Episode Transcript
[00:00:00] Good morning everybody. I'm going to give you some updates on a whole bunch of things today that are somewhat AI related and workforce and employment related. And then the next couple of weeks we're going to post some podcasts for some from some business leaders that I want to highlight in particular.
[00:00:16] So yesterday, Nvidia had a hundred billion dollar quarter up 106%. Now, I'm not sure Nvidia makes a big difference to most of you in hr, but it gives you a sense of the massive numbers we're talking about here in this AI space. At the same time that happened, Meta agreed to pay 17 to 18 billion dollars, rather tiny number for them for social media harm, which affects all of us. And the money now spent on data centers from the large AI vendors and I mean, the top five is now so large that, that there's a national outcry against any more data centers in any states.
[00:01:02] So I got a lot of calls yesterday. I had two calls with reporters on the economics of this and the perspective that we're bringing to market with you guys in the HR 2030 work. And we're doing workshops with companies now. So if you want some help, just let us know. We'll put together some time to come visit with you. Is AI is not a novelty technology for experimentation. It's a business tool. And if you're not thinking about it as a business tool to advance your customer experience, your time, to market, your hiring process, or whatever it is that you decide is the most important, then you're investing a lot of money in something that may or may not pay off, because the maturity of this technology is very young. So if you sort of buy a bunch of things now and hope that a bunch of good things happen, they might, but you also might find yourself with a bunch of tools that are obsoleted a year from now. So we're trying to be very, very pragmatic with the clients we work with to go after business problems that are easy to understand. Now in the human resources domain alone, which by the way, is not the only place to focus, you should really be focused on revenue generation and customer experience and, you know, things like that. But the number one business opportunity is the employee experience, simplifying the, the way employees get information and the way they go and do their daily jobs around training skills, their own personal careers, their own personal pay, their, their time off, their scheduling, all that stuff. And that's a huge, huge area.
[00:02:41] I, I think I've mentioned before that when I was at Deloitte, we did some Work with some different clients on large hr.
[00:02:48] You know, a lot of the clients we talked with were spending hundreds of millions of dollars per year on their HR portals. Well, if you imagine that being completely replaced by a system that is your personal experience to everything you need at work, huge opportunity. So I would start with that if you're looking at HR and we can help you with that. And we know a lot about the technologies and we're going to show you, by the way, how Galileo fits right into that layer. Because Galileo informs every employee and every manager as well as every H person on how to deal with their work life better. And then the other areas, of course, of high ROI might be recruiting, might be L and D or dynamic enablement, might be data analytics, might be other areas. But you have to decide which of those you believe are the most important. Now, in the context of your future architecture, these numbers are spectacularly high. I mean, I kind of joke about this where I live in California. A billion dollars now is kind of what a million dollars used to be when I was young. I mean, when I was a kid, you guys know how old I am, a million dollars was like something that you would maybe aspire to sometime in your career if you were really, really, really lucky. Now, a mid sized home where I live is more than a million dollars. In fact, a small home is more than a million dollars. So that gets me to number two, the labor market and inflation. So Ivan, you know, we're doing a bunch of work on frontline work and what's happening in the labor market is kind of on, it's kind of predictable. But it's very unique to this period of time where we massive amounts of inflation ordered some food last night to be delivered to the house and it was $78 for three things plus some rice. I mean, I thought, what, how did that happen? And then this morning I got up and went to Starbucks and the price went up by 5, 5% from yesterday. So, you know, 5% is a lot. It used to be a lot. It's not anymore, so. So wages are not keeping up. I've done some research on this and we're going to publish it and show it to you guys in the fall. But in the, in the frontline area and in most jobs, 60 to 65% of the 830 job titles in the BLS are not keeping up with inflation. About 40% are. And the jobs that are keeping up with inflation are either jobs where there's scarce supply, either due to licensing, or the number of people or jobs where the super worker effect is well understood. In other words, most employers believe that AI will reduce the need for people, whether it's true or not. But there are some jobs now where AI has already created a super worker effect, which is what our book Superpowered is all about. And those jobs are going up in salary. So those are the jobs that are staying ahead of inflation. In other words, if you're a marketing manager or an HR manager, or a recruiter or an L and D person or an org designer, or a data analyst or a mid tier manager or COE executive, whatever it may be, if you're not using AI, your salary may fall behind inflation. So let me throw that out as a challenge to you. And then from the standpoint of hiring, the new ADP data shows that the pay premium for switching jobs is now 150% higher than staying in a job. Wage increases are going up. They're not going up as much as inflation, but they are going up. But the premium of switching jobs is much higher. It's about 4% or so for staying in your job. It's 7.2% for switching jobs. So what that means for those of you that have, you know, sort of highly mobile workforces, particularly in retail, transportation, hospitality, so forth, front, front line in particular is people will be shopping around.
[00:06:45] I mean, if I could get a 7% raise for doing the same work I'm doing now, and I'm not that committed to my employer, I'm going to take a look. So maybe we need to talk about employee experience again. And the funny thing I keep joking about this is, I mean, we spent three years talking about employee experience after the pandemic, and that's all we talked about in virtually every meeting we had. No one even asks about it, no one even talks about it. Now it's all about productivity and AI and growth. So in the growth economy that we're in now, whether it's slowing or not, you know, you got to think about this issue of pay and retention. And we're going to do a lot more work on pay. But the new version of Galileo, by the way, is going to have a lot of new pay data in it. So you're going to be able to do a lot of pay benchmarking in Galileo. Are you keeping up with inflation?
[00:07:29] Are your pay levels or salaries by job keeping up with the new superpowered versions of those jobs? That data is hard to find. It's not clear. A lot of the academics are more, you know, producing more academic reports because it's actually kind of messed up where it all is. ADP has some of it, the BLS has some of it, and they have different models and so forth. But anyway, we're going to give you a bunch of that data and I'm still working on it with with Nihal and we'll get that to you in the next month or so. And that'll be in Galileo too. So you'll be able to look at the pay levels of various jobs and say which of these should we be thinking about bumping up and which of these should we be stabilizing? Okay, so that's all new. Another interesting thing that happened yesterday was the lawsuit by Meta. Now, you know, I don't want to talk a lot about social media because it's not super relevant to the corporate world, but it does tell you something important and that is that the way we use these tools is changing our behavior as a human being. And have had an interesting week having a series of debates with Galileo about the wages in the labor market using one of the models in Galileo. Galileo has access to all the models. I've been literally having a debate all week with Galileo about the labor market and wages and the impact on different jobs. And it's pretty good at debating with me. I'm a debater by nature, so I've been kind of getting a kick out of it. And then I realized I look back at some of the things it was telling me is it was kind of pretending to agree with me all the time when I actually wanted it to challenge me on some of these issues. So I'm not sure where this applies in our corporate chatbot world, but we've got to be sort of careful that the social media effect doesn't happen in AI where the system tries to accommodate the presumption that you have and doesn't tell you the truth. I mean, if you look at the HR 2030 demos we have and the blueprint, we're putting together a bunch of business cases that are very hard hitting business cases. How to do an M and A, how to grow, how to hire people, how to deal with workforce transformation, how to deal with product transformation, high turnover, et cetera. We don't want the AI to be nice to us. We want the AI to be honest. We want the AI to tell us what's messed up. So I'm taking away some of that Meta information and sort of thinking, hmm, I wonder if there's a corporate issue here too, and that gets into this issue of the context layer and how well we train the AI and tell it explicitly to be honest. Now, the pre prompt to Galileo, which is very long, tells Galileo that honesty, or rather accuracy is the number one goal, and examples and actionability is the number two goal, not obsequiousness or agreement, you know, with the user. So we've tried to train it not to do this, but it seems to just be built into the models. Okay. The other things that I would mention are, you know, in the area of AI and economics, is the M and A going on.
[00:10:28] So last month, ams, which is to me, one of the premier providers of recruiting services, was acquired, or at least the announcement was required by acquired by Korn Ferry. Korn Ferry is a very odd company.
[00:10:42] I've worked with Korn Ferry and I've had friends go to work there for decades. And it. It started a long, long time ago as an executive search firm, and somewhere over the last 20 or 25 years turned into a consulting firm and started buying up a lot of the L and D content companies that I'd worked with for many years and bought most of them, actually, and then started buying consulting firms in different niche areas of OD and then started buying and now bought a large outsourcing firm. And AMS is a very sophisticated firm because they have consulting services, they have technology services, they have a platform for recruiting that integrates all your existing recruiting systems. And then they also do outsourcing in a very big way. So they have a big bunch of outsourcing centers and they outsource recruiting for a lot of big companies, particularly a lot of banks. And so you look at Korn Ferry, and if you look at Korn Ferry stock, it hasn't been particularly good investment.
[00:11:37] And most of the people that I know, friends who have gone to work for Korn Ferry, went in there, made a ton of money in a very senior job, and then left a year later. And what it's indicating to me is that the AI era that we're in is really wreaking havoc with outsourcing. You know, a lot of HR stuff is outsourced. Call centers are outsourced, payroll is outsourced, recruiting is outsourced, training services are outsourced, content is outsourced, you know, a lot of things. And the reason it's outsourced is because there's, you know, as, you know, 95 niches or functional areas of HR and, you know, you can't be a specialist in all 95 areas. And if you can find somebody who's really good at it and get them to do it for you. You can focus on the things that are important to you. And the narrative that started two or three years ago when AI started was that all of the AI technology vendors would use AI, and particularly recruiting ones, and turn into outsourced service providers. And that the outsourcing companies or service companies, by the way, you know, Accenture and I don't know about IBM anymore, but I think even Deloitte doesn't really do that much service work in HR at the moment. They did for a while.
[00:12:49] And anyway, the idea was that since this AI was going to be so automated, people would use the AI and there would be more outsourcing firms because the outsourcing firms could be specialists in streamlining a lot of these processes. That doesn't seem to have happened yet. I don't know why. You know, I'm not sure why AMS did this deal, probably for, you know, variety of management reasons. But I mean, I would have thought that the vision of AMS was to be the Google of outsourcing, or rather the Google of recruiting. In other words, to be the world's largest, most scalable recruiting outsourcer. You know, that's a very tough road to hoe anyway. But it seems to me that a lot of the AI values going into companies because it's so unique to them. And so let me sort of close a little bit on that. A couple of calls I've had so far this week on internal technology.
[00:13:42] I think that the level of sophistication that large companies have about AI has gone up a lot. I think many of you have had a lot of experience with these things. Now you've used the personal versions, the Copilots or the Claude or OpenAI. You've built agents, you're grappling, you're using MCP in some fashion, you're grappling with content development and how do we make it more real and less kind of obsequious and how do we build training content and how do we build assessments? And you've seen this stuff, it's not black magic anymore. And it's only been three or four years and all of a sudden people are like, oh, okay, I kind of understand what's going on. So now the issue is architecture and strategy.
[00:14:28] And since the economy's still doing really well and there's a lot of money still being poured into this, the number of tools and the maturity of them is on a just a tear. So what a lot of you are probably dealing with, and I hear this all the time is, should we buy this, should we buy that? What about these guys? What about those guys? And I think we're actually. I just talked to the Wall Street Journal about this. I think we're actually moving to a world that nobody predicted, which is the SaaS apocalypse, which basically the narrative was that all the existing software companies were going to be destroyed is absolutely not happening. In some sense the opposite is happening. The big vendors or software companies in HR and tech, the Oracles, saps, workdays, I wouldn't say the LMS companies because they have a little bit of a bigger struggle, but they're thinking about it too. In fact, even Docebo had a pretty good quarter this quarter. The content companies are all very clearly moving in this direction and they're going to leverage the assets and the content and the engineering teams they have to build the HR 2030 type of experience you want. And they're going to use OpenAI or Microsoft or Anthropic or their own models to deliver that. And they're not going to let the model companies take their business away and they're going to incrementally add function to you and try to get you to use the Systems they have. Day 4 so talk to them too. So this idea that somebody's going to come out of nowhere and build a new HCM and you're going to replace Workday is really ridiculous to me.
[00:16:12] I don't think it's going to happen anytime soon. I told this Wall Street Journal folks yesterday that my experience in this market for almost 30 years is that, you know, most companies will replace their core HR system maybe once every seven to 10 years because it's a huge, huge project. There's little to no ROI for doing it. Perhaps there's some, but it's very hard to measure it. And the main reason they do it is because the vendor they're working with has just fallen off the edge and they can't deal with the issues anymore. So if these big companies really do reinvent themselves effectively, which I think they're really doing, you may not have to throw this stuff away. Now those of you out there that are building next generation atmosphere solutions on AI, I mean, I'm a big fan. I encourage you to do that because you come up with a lot of good ideas that other people can learn from. But I don't think you're going to find it easy to replace this stuff. And even in the mid market, if you look at hibob, who we spend a lot of time with, they're growing like mad. They're, they're, they're not getting displaced by an AI thing. They're building AI right into their system. In fact, hibob is going to embed Galileo right into their system and we're working on that with some other vendors, too. So I think your world is going to be a little bit more rational and maybe understandable than you realize. The question of how to use the copilot versus Claude versus somebody else's chatbot, you know, those are, those are kind of typical technology evaluations. And so we're more than happy to help you think this through and kind of walk through the opportunities and the options here. One more thing.
[00:17:47] This week is the last week you can sign up for the GHRE inaugural session. This is the most valuable, high performing, exciting learning and development thing that we have ever built. I am really proud of this. This is our masterclass in all aspects of senior HR and technology. It's a 12 week program, about 50 hours of training. You will get a certification. You will be an alumni of the Josh Person Institute. We will take care of you for the rest of your career. We have about 60 companies joining already. There's a, there's seats left through the end of this week, so go to the GHRE part of our website and sign up. This week you're going to be busy. It's a little bit like a master's degree. You're not going to be able to just take a few clicks here and there and then leave. You're going to have to spend some time on this, but you're going to get access to some incredible HR technology. You're going to get your hands dirty with some simulations. You're going to learn all about Galileo, of course, and you're going to use it in the class and it's going to cover every aspect of hr, including AI and technology. So please sign up. And we're starting the roadshow of vendor conferences and big announcements starting in September, which is right around the corner. So I'm really excited about all that too. So that's it for today. And then the next couple of podcasts. I'm going to give you a chance to hear from some really amazing people. Talk to you guys later.
