Welcome to a new episode of Yahoo Finance's Opening Bid. I'm Yahoo Finance executive editor Brian Sozzi. Indeed, this is the podcast that will make you a lot smarter about investing and the leaders driving the markets, the economy, you name it. Please, if you're enjoying the podcast, hit us with those five stars on Spotify, likes on YouTube, just show us some love. Just show the podcast some love. There's a lot of work that goes into this. So real treat here in terms of our next guest has never been on Opening Bid, but I'm excited to welcome him to the show: C3.ai founder and CEO Tom Siebel. Tom, good to see you. Last time it was the World Economic Forum, we were freezing our asses off, but it's good to see you in what looks to be a warm house.
Good morning, Brian. There is a lot of hype. I mean, when I connected with you in January this year, there was hype around AI. Everybody at the World Economic Forum and Davos was talking about AI this, AI that, AI risks. But wow, since then things have really gone through the roof. How do you see it from your vantage point?
Well, there's a... you know, as it relates to kind of the AI writ large, I mean this is a secular change, this is not ephemeral. It's a genuine big deal, probably a couple trillion dollar addressable market. I mean this is big. Or a couple billion dollar addressable market. But what's going on with generative AI right now is getting pretty frothy. I mean, this is an important technology, it solves some very real problems. For those who are interested, I've been looking for a good book on this subject for the last couple years, and somebody finally wrote one. Steven Wolfram, who's a very important member of the Academy, a physicist from Caltech, wrote this book: 'What Is ChatGPT Doing and Why Does It Work?' Well, it's really not ChatGPT, it's about these large learning models and generative AI. He describes in the first 51 pages, it takes about an hour to read, exactly what these things do, the small class of problems they solve. He talks about the randomness and stochasticity and hallucination, and importantly explains that those of us who develop these things, even we can't explain how they work. There is voodoo involved. But this is a good book. But let's look at generative AI at large right now, in October 2024. It's crazy. They say that markets are going to remain irrational longer than a rational investor can remain solvent, and I think we're in one of those situations. Is this technology important? It's hugely important. Will it solve real problems? Yes. But come on, we have a company that's losing what, $1 billion a year, that just got financed at a $150 billion valuation. $150 billion, if I'm not mistaken, that would be on the order of Shell, which is one of the largest companies in the world. That company, OpenAI, could be gone next Monday. Very high probability. Nobody would be surprised if you read The Wall Street Journal that OpenAI had folded its tent. And if it were gone, nobody would notice. The world wouldn't change a bit. We have hundreds of companies being financed at multi-billion dollar valuations by my friends on Sand Hill Road. Now, we have three people out of Stanford or Illinois or Wisconsin or whatever, who are starting, who don't know anything about law or medicine or dentistry, and are starting generative AI companies to use a language model to assist lawyers or dentists or divorce lawyers. Hundreds at multi-billion dollar valuations. We have people at these companies, leaders of these companies, I won't mention names, you know who they are, who actually think they're building God in a box. You can't make this stuff up. God in a box. Really. So there's all this yap about sentient computing, that these AI models are going to take over your house. This is truly insane.
Tom, you really... I love that you've come out firing today on this hype. And it's important because investors are seeing these stocks go up every single day it seems like because of AI hype. But let me lock in on ChatGPT or OpenAI. So you're the expert in this field. What are they doing that's unique?
Of the various language models that we're using, which is all of them, right now ChatGPT has the hot ticket. They have the most useful language model that's out there. That being said, we have Google, Facebook, Anthropic, Mistral. These people are spending billions on out-innovating one another. And there's no telling where this is going to end, and there's no reason to believe that one of these guys is going to win. This is just not that hard to do. We could have the next company coming out of the Bronx or Cambridge or Shanghai or Palo Alto that nobody's ever heard of that turns out to be the leader in the space. It's a really exciting area, lots of innovation. But make no mistake, these things are useful and they will change our lives in important ways.
How do you see all these very big companies that now are getting these very large valuations? How do you see that? What's the endgame? What is their collective impact going to be on the internet, on the enterprise?
Well, the market, when it sees important innovations, it tends to overvalue them. Be it transcontinental railroads in the 19th century, or urban electrification in the beginning of the 20th century which brought on the Great Depression, or the dot-com era in roughly 2000. Was the internet overvalued in 2000? No way, no how. Whoever had the biggest number... but these markets, when there's something important happening, and this is important, it tends to irrationally overvalue these things, and then it resets by 10 or 15 or 25%, and we get on with the game. When that reset happens, we have a couple thousand companies go out of business, and that'll happen here. I'm not calling the top, these things can go on for a while, and this might go on for a while. But it's pretty frothy now. People are conflating generative AI with the use of kind of meat and potatoes and social media AI with what C3.ai does, which is a little bit different. We're involved in kind of meat and potatoes: run the business, supply chain optimization, production optimization in oil wells, smart grid analytics, contested logistics for the military, predictive maintenance for the Air Force. So what we're doing is a little different. We're about companies making money, saving money, increasing productivity. We're a little bit grounded. It's just kind of old school stuff. We're not doing God in a box.
Well, I should mention too, if you're watching Opening Bid and you're interested in AI, hit us with those likes, comment. I'm very curious what you think about what Tom's talking about, what we're talking about here. Very important topic. I'm waiting, Tom, for somebody just to tell me: look, all this AI is going to lead to job loss. I mean, can you say that?
Oh, I think it leads to job increase. Job increase. I don't think there's any question. It makes you more productive. It makes a taxi driver, a production worker, a school teacher, a lawyer, a doctor. We're all more productive. People predicted great job loss from the Industrial Revolution. Come on. For every person that lost their job working on a jacquard loom, we created 100,000 jobs on production lines. So this is a job creator, and it's huge.
I'm really interested in some of the lessons that you're applying from the days at Siebel Systems to now, this moment. I can see the parallels, but what did you learn back then that you're building into C3 now?
I think the biggest change actually, Brian, has been in the change in the nature of the workforce. If you go back to the 80s and the 90s, we were dealing with Baby Boomers. Baby Boomers are easy to motivate. You just write a compliance plan and they do what the compliance plan says. They have a common sense of history, they have a common purpose, a common work ethic. Today we have this very rich and complex tapestry of multiple generations: Baby Boomers, Millennials, Generation X, Generation Z, and what have you. They have different senses of history. Some people think we're still fighting World War II, some think World War II is ancient history like the Peloponnesian Wars. Different sense of history, different reason for work, different motivations. So it's a much more interesting and complex problem to take a large number of people and organize them with a common purpose to a high-performance result. I think that's the biggest difference in managing a company in the 21st century: the nature of the workforce.
That's a really good point. Have you had to evolve as a leader, and what are some of the principles you've baked into C3?
Absolutely. I think about this more than anything: how do you unite, how do you motivate, how do you organize all these people? It's much more complex in terms of ethnically complex, culturally complex, these different generations of people. It's a very interesting problem, and you have to change the way you work. You remember Siebel Systems? Come on, we showed up in coats and ties back in those days when everybody else was showing up with Rolling Stones t-shirts and their Labrador retrievers at work. So it's different now, and you have to acknowledge that to be able to give people what they want out of work. Each of the people sitting next to each other have very little in common. So it's an interesting problem.
Well, we've got a lot more to talk about before we go to break. What's your advice to that sub-25-year-old nowadays where they maybe want to get involved in gen AI? How do they at some point get in your seat?
Develop. Take the time to develop some expertise in the domain. Whether it's generative AI, whether it's learning models, I think there's a lot going on. Prompt engineering is hugely important. Whether we're dealing with medicine, bioinformatics, distance learning, whatever your domain area is, take the time to develop some expertise. Become a domain expert so that you can really add value to your company, your customers, your colleagues, rather than just kind of winging it.
All right, hang with us, Tom. We're going to go off for a quick short break. Really enjoying this conversation with C3.ai founder and CEO Tom Siebel. Hang around, we'll be right back after this break.
All right, we're diving into the world of all things AI with C3.ai founder and CEO Tom Siebel. I like that you busted some of that hype. It needs to happen. So what's the... I see what NVIDIA is doing. They're making real chips that people need. Should they just be cast off to the side? The hype on that company is warranted, and some of these other players, I think investors really have to drill into and realize that this hype might not come to any fruition.
