Episode Transcript
[00:00:00] Today I want to give you some insights on what's going on in the tech market on AI. Talk a little bit about the jobs number from Friday and then give you a sneak preview for a big announcement coming on Tuesday from us. So we just finished a couple of weeks of technology conferences. There's another big one in Europe next week or the week after next, and it's very clear to me, and hopefully to you, that AI is adding significant value in organizations now. You are going to have to cost justify it, but the value prop is very high. Agents are appearing everywhere and the external market is going nuts. OpenAI issued a fundraising round at $157 billion valuation. They believe that their $300 million a month business is going to double next year and double again the year after that. They are essentially now going to be competing with Microsoft by selling directly API services as well as chat GPT. Interestingly enough, Microsoft announced a whole bunch of new copilot features that are a little bit confusing, but more tools to integrate copilot into your Microsoft environment as a productivity system. But even while that's going on, the real world of AI to me is going in a different direction. And that is where we're going with Galileo. The real success of AI in the long run is going to be domain specific, job specific, role specific, entertainment specific systems that we rely on in our daily lives to do things. Apple intelligence will be one of those. There will be features in Google, but we're all going to have very intelligent agents to help us do all sorts of things that are relevant to our personal and professional lives. And that's certainly where we're going with Galileo. And we've seen this now with thousands of people using Galileo, the more we learn about how people use it in HR and L and D and other aspects of management, the better and faster we can refine it to be a fantastic coach, a fantastic tool, fantastic resource, a fantastic education system for this domain that we live in. The same thing will be true in legal, professional roles, in medical roles. By the way, I went to the doctor last week. My doctor told me he no longer needs to take notes because he turned on the microphone and everything we talked about was recorded into Epic. I didn't mind that at all because we didn't really have much to talk about. And this is going to happen in every domain of business. And for those of you that work in big companies, I think you're going to standardize on these specialized systems like Galileo and others because they're going to be the problem solving systems for you. Know the role that you're in. I think Microsoft will play a role for general productivity improvement across the Microsoft suite OpenAI. Time will tell. I don't know who the $300 million a month customers are of OpenAI. I think we're all playing with it and getting to know it. But frankly, there's a lot of other more specialized systems that are probably more useful than OpenAI. And eventually the dollar 30 a month is going to catch up with you and you may not decide to spend it. So stay tuned for more from us. On Tuesday, we're going to announce a significant enhancement, Galileo, that's going to give you, every single one of you, the opportunity to use it, have it and benefit from it in your job as an HR professional, an L and D professional, an executive, an HR leader, a consultant, a tech vendor, a salesperson, whatever you do, you're going to get your hands on Galileo starting on Tuesday. So I'm not going to tell you more about that. Okay. Now, generally, let's talk about the economy for a few minutes. We've got this election coming up in the United States, lots and lots of discussions. You know, it's pretty clear that coming out of the pandemic, which now is, you know, several years ago, we all suffered two things. First, we suffered a disruption to our personal lives through remote work, changing the way we consume things, losing access to our coffee shops and our hotels and our normal meeting places. This is coming back, by the way, but, but we had to deal with that. And the second is inflation. And the amount of inflation that we've lived through is really almost as high as it was in the seventies. I was around in the 1970s when we had much worse inflation, to be honest. But this is 50, 60 years later, and it's been bad food prices, energy prices, housing prices, rent prices, prices of everything. Now I live in a very high cost of living area, and we have more of a luxury goods market here, but everywhere in the world we're suffering from that. Us in the United States, the result of the strategy has been to raise interest rates. So we've had a lot of interest rate increases to the point that those of you that have mortgages or credit card debt, you know, you're paying a really high amount of interest. And it slowed down the car market. It closed, it slowed down the housing market. So, of course, a couple of months ago, the Fed reduced the interest rates a little bit to make sure we don't hit a recession. Well, Friday, what we saw in the United States was 260 some thousand jobs were created. That's a high number. And the us unemployment rate went down to 4.1%. Now, there have been debates about whether those were government jobs or private sector jobs. But in the United States, given the fact that we just allocated a trillion dollars to the Biden energy initiatives, a lot of that money is going into construction to hire people to build buildings and bridges and solar power plants and other things like that. And then a lot of it is going into economic growth. So we have basically avoided a recession coming out of this disruption. Of course, we never know what's going to happen next, but we're still in an economic growth period. So I put together a video for you guys to look at, which I'll link to that shows you what's been going on. A 4.1% unemployment rate when I was a young man was considered to be a very dangerous thing. It was an inflationary unemployment rate. There was a lot of discussion among economists in the eighties that when we lower the unemployment rate to low numbers like this, we create wage inflation because there aren't enough people to fill in jobs and wages go up. That is not happening because of the automation we have in our companies. We're learning how to run our companies with fewer people. Now, not all managers understand this, or not all organizations are ready for it. But as you read about in our research on the dynamic organization, you can create talent density, very high levels of productivity, very high levels of performance, including profitability, by thinking about your company as a network of people, a society, a business that doesn't necessarily need to grow through constantly hiring, skilling, productivity enhancements, or redesign. Focus understanding what matters and what doesn't matter. Those don't require more and more and more people. And so this low unemployment rate environment that we're in, which is going to be true for a long time because of the low birth rate we have in the developed economies, is going to change the way we run our companies. And that's really been my perspective on this, is I don't really care what the economy does that much. It's going to go through cycles. And we haven't really had a recession for a long time, a real one. We had the pandemic, of course. We haven't had a real recession since 2008, which is maybe the longest period I can remember. But regardless of that, this labor shortage that we're living in is forcing us, whether we know it or not, to learn how to redesign our companies for what we call dynamic high talent density business models. Talent density simply means we're going to focus on the skills and capabilities and performance of a smaller group of people. And we're not going to try to grow the company through additional incremental additive human beings. The normal way that we've always thought about hiring is if I have four salespeople who can do a million dollars a year, if I hire a fifth one, if the four existing salespeople are doing 250k each, then the fifth one will do two hundred fifty k and we'll have 1.25 million, and then the 6th one and et cetera, et cetera, et cetera. It's a linear growth curve mentality. We now have a multiplicative growth curve mentality that if I'm going to hire a fifth person, if I even can afford it, can I possibly use this person to make the other four people more productive so that we're not only getting the incremental additive effect, but we're getting a multiplication effect. That is what's going on today in the labor market and our roles in managers and in Hrtaine. And if you look at the GDP growth in the chart that I'm going to link you to in the video and how fast the GDP is going up in the United States, this is us data. But it's true in the other developed economies, it is going up orders of magnitude or many multiples faster than the size of the labor market. The size of the labor market isn't really going up at all.
[00:09:31] It fluctuates a little bit with the unemployment rate. But generally speaking, we're running our companies with fewer people per dollar of output. And that is creating what I call the super worker effect. The super worker effect, which I've talked about at our conference now for a year or so, is essentially a fact that every individual in your company, in your team, is adding more and more and more value as an individual. That of course, means we need to take care of those people, train them, retain them, give them the tools they need and so forth. And you know, I'm not saying that every single human being gets to experience this, but I think truck drivers, longshoremen, welders, contractors, craftsmen, all these people that work in maybe non college educated roles, nurses, people that work in hourly roles, are going to experience and are experiencing the same thing. Now, you know, you might ask yourself, well, what about wages? If this is true, are everybody's wages going to go up? Well, in aggregate, when you look at the data in the US, they are going up. The problem is they're not evenly distributed. The data that comes out of the BLS and the Biden administration is very proud of this shows that wages are going up at the rate of inflation or higher now that the inflation rate is down by 2.5% or down to 2.5% or so. But it's not even so. What we need to think about in our companies is the, what I call internal society effect of managing the organization as a whole. And that brings us to the topic of things like pay equity and wages. If you have an organization where the frontline workers are making one 10th as much money as the white collar workers in headquarters or whatever it may be, you're setting yourself up for a problem. Because in this labor market, where there are a lot of jobs, it's not that hard for people to go on strike, to quit, to quietly quit, or to do other things that ultimately hurt your company. So this low unemployment environment that we're in is actually pushing us into some new areas. It's pushing us into further investments in people and employee engagement and retention, obviously. But it's also pushing us into wage and pay equity, gender and other aspects of pay equity. And this sort of hairball problem of Dei. I had a really interesting interview this week with a woman who runs a culture business. And we did a long, long, long video interview, which will come out soon enough. And we talked about Dei. And what I was reflecting on when I was talking to her was what happened to Dei was in the seventies and eighties, when I entered the workforce, it was a really positive driver of success. We had affirmative action. We had a lot of things that companies did to teach and force managers to bring disadvantaged and minority people into the company to create a more inclusive environment. And then for some reason, over the decades and going into the George Floyd era, it became a social mission. And the DEI agenda in HR became a crusade to teach people about what was wrong with society and what was wrong with their behaviors and what was wrong with our history. And that did not go over well. We have all sorts of, you know, reasons why we don't like to hear those stories. They alienate people. They don't always give people the right responses. And that blew up. And it blew up with the affirmative action decision by the Supreme Court and all sorts of other things that happened. So now we're situated in an environment where we have a 4.1% unemployment rate, hard to find people, a lot of jobs. People tend to unionize or leave if they're not happy. And inclusivity and diverse and inclusive hiring practices are now a mandate. Now they're a real business issue. So as we talk a lot about in elevating equity, the research we've done on this in the last couple of years, including the course in the JBA, this is really not about a social crusade at all. This is about a pragmatic solution. So there's some offshoots here of this economic experience we're in that lead us right back to HR. The other thing I want to mention is there's going to be an announcement this week. I won't mention the name of the company because I let them do their announcement first, and then we'll talk about it the following week in career pathways. And for many years we've written about this and we've showed you guys that one of the important strategies for companies to succeed is to build developmental experiences. We call them academies or capability academies, so people can move from point a to point b inside the company across a career, from a role that's declining in value to a role that's increasing in value. If your call center is about to outsource 20% of the people, chances are many of the people in that call center are really good at sales and customer service and maybe consulting and other things, project management, change management, they could be good at all sorts of things. If you don't give them the opportunity to do those other things, you're going to lose them. You're going to have to rehire somebody else, probably pay more to get them, and it'll be costly in terms of productivity, just getting people in the door. So it turns out you're going to see an announcement later this week by a vendor that I have a lot of respect for that's doing some really cool stuff around capability academies and internal development. Interestingly enough, the L and D market, which is a 300 plus billion dollar market, is just beginning to adapt to this. I've been extremely frustrated, to be honest, with the pace of change in L and D. For the last five to ten years. We've had lxps, we've had lmss, we've had a lot of course catalog companies, masterclass and Coursera and LinkedIn and Skillsoft and on and on and on and on. But we haven't really moved the needle that much on transforming people's careers from point a to point b. Our HR career navigator is one of the ways to do that, but there's going to be more. So you're going to see some cool announcements there, which I think are very relevant in this tight labor market.
[00:15:33] The last thing I want to conclude on is what are we going to be doing next year in our world of HR relative to AI? And I'm in the middle of actually starting to think about the predictions for next year, which is a report that I write every fall. And so as we prepare for our big announcement on Tuesday, let me give you a couple things to think about. We're not going to be thinking about AI as AI too much longer.
[00:15:56] We're going to think about it as a new tool. If you look at the, the way AI is permeated our educational experience, our ability to generate content, our ability to find things, it's already kind of happened. And I wouldn't be surprised if we don't even use the word AI a year from now. It'll just be a platform with a name of whatever the product name may be. It'll just be Galileo or the copilot or, you know, whatever product name you have. And these weird, kind of hard to understand tools will become part of everyday life. And what that means to you in HR is that you're going to be in the business of job re engineering. We did a lot of research and built a series of courses on design, which a lot of you have taken, but a lot of you have not taken, because design is kind of a little bit of a backwater domain of HR. I think it's going to be absolutely central to a lot of the work you do next year as a manager or an HR professional or an executive. Because when you start automating tasks and you start bringing in workflow engines that can handle multiple step projects like performance consulting, content development, recruiting, interviewing and so forth, and you start automating groups of activities, you have to rethink what human beings are doing. And the way to do that is nothing necessarily to build a new chart and just design a job and think it up. It's to do what we call accountability analysis. Given a change of the technology environment that changes roles in an organization, the way our design research basically works is you. You start to look at who's going to be accountable for what, the bot's going to be accountable for this. And if the bot's accountable for this, who's going to be accountable for training the botanical, who's going to be accountable for watching the bot, who's going to be accountable for supporting the bot, who's going to be accountable for making sure the bot is up to date? Who's going to be accountable for the edge cases where the bot didn't perform correctly? All of those kinds of conversations are not chart conversations. Those are accountability conversations. So I would suggest maybe over the next couple of months during the holidays, go back to the JBA, go back to the Josh Versen Academy and take the masterclass in design. Because what you'll see in there is that a lot of what AI is doing to our jobs and our companies is going to result in new accountability and or design analysis. New jobs and new roles. I actually think we're going to be creating job titles almost through AI. To be honest, I'm not sure the titles are going to be that standardized anymore because they're changing so fast. We're going to have responsibilities and roles and tasks and skills, but the titles aren't going to be as meaningful. So design kind of strikes me as something that will be big next year as I think about the predictions for the year to come. But let me stop there. This is about 20 minutes of meanderings. I cannot tell you how excited I am about next week. We're preparing a lot of launch materials for Tuesday. Get ready for something really big for everybody who's listening to this podcast, it's the most significant announcement I've ever made in my professional career as an analyst, as a researcher, as a consultant in HR, and I've been doing this for 26 years. Stay tuned for more. You're going to have plenty of time to hear about it and have a great weekend, and we'll talk to you guys next week.
