Is AI Destroying Margins or Creating Opportunities? |ft. David Reid, CTO & CMO |@novglobal

Thanks, Rabia. It's good to be here.

I think all of my ideas were that way. So, what was the first one? I think the first big deal that impacted the company because it was happening all the time. I didn't know that was how I was wired at first. So, I had really good bosses who saw that in me. But the first kind of push towards something was probably in the late '90s. I would imagine the Y2K moment helped. But I was definitely that we need to go faster, deeper into computing systems and they need to connect everything that we do. That was crazy talk at that time. We didn't really have IoT at all. In fact, one of our presidents, I started to push towards fully integrated, fully designed systems so that we could rapidly automate, but that was 20 years before the day that was natural and we had all the tech and the systems to do that well. So yeah, that was out there. That was one of many out there things that led to other things that made no sense to people, which, you know, integration of systems was always the part that people couldn't fully get because they couldn't imagine why.

My titles were more along the marketing side and my work was more on the tech side. And so when they finally said, you know, we'd like to give you the CTO role, I was like, finally, yes, thank you. And they're like, do you want to give up the other one? No, no, I don't. I love them both. That's who I am. So I was very good on the, and I wouldn't say marketing traditional. It was more business thinking and structure and strategy for the company, but I was deep. I was very geeky early on technology. We were probably starting about '95, starting to design and develop massive robots that were, you know, 140-foot tall robots. It was just a dream of the CEO at the time. So I started designing and becoming an expert in that design and that led to a lot of change and a lot of immediate connection into the industry because people needed this thing but didn't understand it. So I had to run around the world every time someone wanted to build or design something. So yeah, very, very geeky. And I learned over my career to not let people know how much I know, otherwise I would have this job forever. There's people way back then when we started at the same place and then I moved up and they're like, I get technical questions and I send them to these people and they go, well, you could have answered that. And I said, I could have, but I don't want to and I don't want them to know that I know. It doesn't help me because that would be my job forever, you know.

That's a good question. I actually did sketch a lot for years. Like I was solving a lot of problems. When you're wired like this, you don't value it at all. You don't even get excited about it. It's a weird thing because everyone else is dreaming of the what if I invented something and they get really attached to and love the idea and then they fall in love with their ideas. Whereas when your brain is constantly solving things, coming up with ideas, it's quite cheap to you, which is really nobody can believe that because it's what they aspire to. But it's a very busy brain. And so sorting it out is the problem because what you learn, I've done sessions where they'll say, okay, we're going to brainstorm. We're going to put up different parts of the operation. I'd like you to write ideas. I can be there for three, four hours. Most people are done in half an hour. And it doesn't stop, right? So it doesn't stop. And eventually, I was originally an architect and I always thought, gosh, seeing it built, that would be the thing that I would love. And I didn't. I was like, I don't know why that's not satisfying. But you have to kind of work out how you're wired and what makes you happy. And we used to, I had this thing where people would come to me for brand new ideas. Can you give me 10 new ideas? And we would use them to run courses. I had a guy, this guy was developing some kind of think tank up in Canada. And he said, I hear you do ideas. And I'm like, yeah, I do. What do you want? He said, 10 ideas in this space. So, I just gave him 10 ideas, but it made his program blow up because they were great ideas to dig up on, just things we hadn't quite solved yet. So, yeah, it's a weird thing. So I went through quite a journey not worrying, ideas aren't worth anything unless they have a value. So you really have to filter that out and work out, well, when do I really want to apply this? It doesn't help to be in a group of people and constantly throw ideas out. It's actually confusing and messy. And I have books and books of sketches. So, most of the new things that come up in our company, I have a sketch of it somewhere. But it's not important to tell someone that we had this idea. Because I learned along the way that when someone loves something and they're growing it, you just let it go. Let them own it. It's not important that you've thought of it or someone else thought of it, it kills the life of it. So I actually moved from, I flew most of my career all over the world, so good 30 plus years. And I would sit on planes and sketch ideas. And I changed that to sketching to drawing people. Which was much better for me and healthy because it didn't matter that I had tons of ideas. So I kind of devalued that and had to go, when it's needed, it's a good thing. But getting other people to generate ideas and creating environments where ideas are business ready, that's kind of cool. So I like that. I like watching success is much better than ideas.

Yeah. And it's not easy, you know, to find good ideas that can be a business. That's really hard. Ideas, you can have a million of them, but it doesn't matter unless it can actually become something. So that process of ideation to product to success, to adoption in a way that delivers returns, it's pretty cool.

Well, killing, I mean, I think AI in its sense is killing value. So it changes your thought process. It's really important because people are getting excited now but they forget we're at the very beginning. And everything that you produce that's a good idea in AI has absolutely no value. That doesn't make sense to people. They're like, hold on, no, it is. The stock market loves it. We just say AI and people give us money, you know, like people are excited because they have no clue what it really means. So, yeah, lots of times, I think by its nature it destroys value. I think when I, years back, we avoided going towards a service business for this reason. We deliver services to service businesses, equipment. But everyone was like, we should become them. We should, that's what we should do. I'm like, no, because they're going away because their main thing is human skill. It's human brain power and that's going to be worth nothing in the future, you know. So, it's really, not that all human brain power is going to be worth nothing, but the ability to compute, the ability to execute, that's going to become a labor job, you know. It's going to become something that's not highly valued. And I don't think that it's a, I'm not doomsday about any of this. I think it's really great, but it's just changing. So, you have to kind of play to do you want to be in a business where you're hiring lots and lots of people because of their knowledge, because knowledge is what's going to come from AI. But understanding AI is really important. It's like, it doesn't solve all problems at all. It just changes our world. It's the new calculator, you know? It's going to make things change and what you're learning and why you're learning and how you use it is going to be different going forward. But different doesn't mean bad necessarily, but it does for some because I love creative destruction because I love to look at history and how things have changed. And the human ability to disregard change as it's coming is amazing or to even imply the wrong things towards it. So, yeah, I think AI is a very destructive force and it will be an opportunity force as well.

I think people apply software, let's say, let's talk general software, they apply it to human problems thinking it's going to solve it and it doesn't. The whole understanding, this is part of my architecture background a bit, but the whole system thinking of all the different components and where things go and what they are, how you build, how even your interaction with AI is so important right now, understanding what you're talking to, what you're working with, its strengths and its weaknesses, these are all design things. Because what AI doesn't solve is, it is a big soup. You know, I like to think of it that way. Like, it's got access to lots of stuff and whatever is in the soup is really important for the way it tastes and what it can do, but it's still a soup. Like, it's not going to create something different than itself, you know. And so people are forgetting as they're going now and saying, hey, I'm going to apply AI to this and it's going to design this thing for me. It also would do that for someone else, you know. Whatever it produces is valueless. So you have to kind of, it's a really new way of thinking to understand that learning how the human brain is is still wildly necessary and can't be replicated. There are aspects that are really, really important and how you use AI, where you use AI. The cost, I do think efficiency and cost are byproducts. They're not the reason. And so how you adopt and adapt is you get people to start owning the journey. If you just deliver product from AI, you're doing the wrong thing. You're thinking in old thinking. Here's a thing that AI is doing for you. Please use it. They're not going to do that. But if you say, I want you to learn how to interact. Let me teach you how this works. Let me teach you how you can interact with it. What can you do? And that's what we've done across the company. We put everyone into kind of an open AI system and said, here's your basic training. What can you do? You know, which is, if you ask the software companies, they go, that's terrible. We're making a system that's structured so that we can manage all of your things so there's no chaos and no growth. But freedom is always where growth comes from. You know, bureaucracy starts to slow down growth and then, you know, command and control world kills it. You know, so it's just the cycle of things. And so freedom right now is so important because letting people learn the tools, use the tools, and deliver the value is very different than here's a tool that may take your job, which is what it sounds like to an employee. As opposed to I want you to interact with this and get the value out of it because there's so much you learn because it's like being given a child that grows really, really fast. And everything in us doesn't think that way. So, you know, if a lot of people think, well, it didn't do what I want. I'm done. It's like, well, it's a baby. Of course it didn't do, but tomorrow it's a teenager, you know, and then the next day, you know, it's 30 years old. And so you're just not used to that level of development but you do have to feed it, you know, you have to give it what you need. And so the interaction with humans and developing better systems is pretty important right now.

No, I think the biggest players are going away. I think they're panicked and I think inside their closed rooms, they know that the thing they sell is about to be worth nothing. So it's really, I won't let anyone write long contracts with anybody in this space because, and I'm encouraging small players to come along and disrupt because if you look at creative disruption, it's going to find the big costs. Someone's making a lot of money here and generally this is the history of creative destruction. If the people can rise up and do something they get to topple the big wealthy ones. So if you look at Europe after the Black Plague, Eastern Europe, they said to all the less workers, lots of people had died. They said to them, listen, there's less of you. You're going to have to take less money. And in the UK, a weird thing happened where the people said, hey, there's less of us. You're going to have to pay us more. And it began this journey that led to, you know, patent rights, land rights, and it was this uprising of people that became, you know, the industrial revolution. And the people who had money, didn't lose as much, but they definitely gave up a lot. That's what's coming to the big companies. Here's a thing here. These are companies who use people to consult or they use software writers to write code, but that's the core cost in their system. All of those things are going to AI and my data scientists don't write code. They use AI to work in codes they don't even know. And then they test it with AI. And once I saw that, it was like, oh, here we go. This is what's happening. And I in fact asked my head of data science. I'm like, you know, you're coding your job away. And he's like, yeah, yeah, we are. He said, in fact, we're not coding, just so you know. Someone says they're coding nowadays, then they're lying or they're about to lose their job because the speed that we're going has changed. And what we're doing is learning how to manage AI as we're learning because it is imperfect. And so you have to constantly be guiding the child, you know, to have it grow healthily and well. So yeah, I just love this creative destruction. So big companies, they need new values. And what they're doing is it's crazy. The software companies are increasing. So the Microsoft invention, which was I'm going to trap you in a compound and then I'm going to make you pay to be there. Then I'm going to charge you more and more and more and more. I'm way past my value case, but you can't get out of the compound. So you want to eat, you have to come to me. So that's the model of these big companies. So I'm excited for the young companies that are going to come and start eating away from the edges and destroy that. I mean like ERP systems. I was sitting with a large, I won't say who, large company on a stage and they were showing how AI had designed this car for them. Well, they're a software company. I laughed and was like, well, why aren't you designing an ERP that doesn't need the cost anymore? Well, of course, that's how you make your money. So, you're showing us a car over here so that you keep being hired by us to do something we don't understand. But surely that's the place. That's where the cost pain is, where you're making money hand over fist because we can't afford to get out of your system. So, I'm excited for this rapid movement and the place that the creative destruction goes after is where the big money is and there's massive profits in that space and they think they're too big to fail, but I think inside themselves, they know that they're a very, very high threat here because that's the cost pain.

Well, what we don't do is we're not really in science. We're not in the researchy world. So, we don't do that. Some people do. And so, we do understand who we are and where we fit because if we do science, we can't, the people who further science are bringing things to us on a journey that when it's ready, it's ready. But other industries will adopt that before we will. So, for us, it's really, what I like the most is when some, because some people would say, well, you study the market and you find out where the needs are. The best products always had no market information and the best products people didn't know they needed, right? And so that's same for us. The best things nobody was asking for, but if you can understand pain, a group of really great inventors and put them in a room, we were looking at renewables and growth in that space. Big growth market, no one's making money. I don't know if they tell you that, but they all don't make money. They go out of business constantly. They're constantly getting funded from well-meaning people. They're collapsing, you know. So, I got some creative engineers and just said, okay, take anything in renewables and half the cost. Invent. And off they went inventing. And we found different things. Some looked like really breakthrough. But then when you looked at it, there's like a market barrier. So, you want to fail fast, but you also don't want to be like a startup. A startup has an idea, gets investment. Now, we're married to the idea. What I wanted to do was have them break things all the time. Keep breaking things in renewables. Go try something. Doesn't work. Push it over. Try something else. Push it over. So, you know, hundred ideas. We got two really good ones. And they were just obvious things that people weren't looking at. When you look at the cost of wind farm installation on land, what's the biggest cost? I don't know. What is it? The answer is cranes. Why? Well, because it's windy. Oh, so they rent expensive cranes and wait for there to be less wind in a place that you are because of the wind. So we designed a crane that can work in high winds. Nobody had done that. They were just using existing cranes and it was simple design to say how do we get in high winds and work all through the year worth a lot of money. So you have to understand problems. Someone asked me yesterday that had a spider robot and they said look at the spider robot instead of the dog robot right here's a spider robot. I was like, they can climb up walls. And I was like, great. And he said, do you have a problem that this could solve? And I was like, please don't come to anyone and ask them that if you didn't have an idea why you were designing it. Like, don't design it. We have one of our startups I work with just was really mad that they were trying to do a free proof of concept for us. And I have to be careful. I don't want to say who it is, but they found a part of our business who said, no, it's too expensive. And then they found another part said, yeah, we'll give you a free proof of concept. And I said, you probably should ask these people just so that there's no confusion. So they went back and said, hey, we're going to be talking to this country about doing this. And he said, did you tell them how much you're going to rent it for? And he said, he was really mad like, oh, this is politics. And I'm like, no, that's a really important question. Is there a willingness to pay the money that you want to make? If there isn't, don't do a free proof of concept. Your model's not going to work. You know, so people get lost in that. So yeah, I'm all about the business side and you take risks, you spend a lot of money. I mean R&D is betting and risking, but you need enough intelligence behind it. A lot of these companies are like kids who, you know, these investors are building extensions to their parents' house so that they can still stay at home, you know, so they build these great incubator labs so that companies don't die. It's like, well, maybe they should, you know, maybe if they had a great idea, someone would invest and pull, but now you're letting them live longer. So the venture capitalist can sell it to someone and then it collapses, you know. So it's that business side, that basic sense of I can turn this quickly into value and if I can't I need something that will give me value to keep me alive. So that's the shiny objects are absolutely, they're fun. I love listening to every pitch. Like I enjoy it and but I'm quickly into like, because if you're not trying to kill your idea, you're not in the game at all.

Yeah, I mean, and that is, I mean, you know, AI we throw it around but we've been doing AI for 20 years with my team. I mean, it's, and that is listening to machines, right. So it's listening to, sometimes actually listening to the machine, sometimes listening to signals AI, it doesn't even, because that's such base AI or ML really, machine learning is what you're doing in most of that cases. I think the application of AI is usually beyond that. It's usually in the space of I hadn't thought of this and that's where people need to get the tools as quickly as possible because there's so much invention that can happen. There's simple things that you're going to do much faster but listening to machines, the machines should self-heal, right? So, there is a, I'm dealing with a problem with another large software company out of Silicon Valley who they're looking at completely autonomous systems. What I'm loving is the arrival of humanoid robots or maybe it's this spider robot, I don't know, but looking at one of the problems you have in automation is you have to redesign systems so they can be automated. And that's had us go down really bad roads before we end up with expensive things that can't be put into the market. If you're trying to automate something, you can be out of business really fast because a human's going to do it cheaper. So, it's a great problem to have. But when you start having humanoids, it gets really interesting. So, can you get cheaper robots to do more stuff or do what humans are doing. So, don't redesign the machines, just have them still, you know, creating humanoid systems is really, it's an interesting space for me. I'm really excited to, if you say I want no one, you know, because we, I've been running a rig with industrial robots. In 1997, I designed this system idea. Back to the sketches. We actually made drawings of it. And here we are, you know, four or five years ago, we're actually doing it. And in the interim, we were designing custom robots and just buying industrial mining robots was the answer. And having them do what humans do, whereas we were like, if you designed a dishwasher, you wouldn't design a robot to, you know, wash plates. You make a washing machine, right? So dishwashing machine. So that idea that you got to change the process, we got enamored with it. And we were creating additional value, but it is much cheaper to buy simple robots and repeat the human work. And that's what we ended up doing. And it's a fascinating journey because we've been able, once you see proper robots working that are designed for that kind of wear and tear, you immediately realize we don't have to be here anymore. We're just watching something boring. It does the same thing all the time. So it's really an interesting journey. I think working out, you know, the right balance of when to do what, but willingness to pay is probably the number one thing that really matters in any design. Does someone like it? Yes. How much would you pay? That value equation is really important.

Yeah, that's a huge number.

Autonomy. You need to allow people the, the idea of corporations is an anti-human idea. The way I think of that is you don't find corporate babies. You never meet someone's kid and go, it's very corporate. It's not a, it's an anti-human behavior. So human systems are really important. So we always apply our minds to non-industrialized, bureaucratic, like heavy systems. You have to allow independence and so at the same time bad things can happen when you let people do what they want to do. So it's a really weird balance but so the answer is really work on good people to lead and let them express themselves, you know, let them be different. There is, if you travel different cultures and you see companies say this is our company culture. Well it's not possible because no country has the same culture. You're saying one company across lots of countries probably not. But base values, yeah, you can have the same base values and we do. We measure across every single country and place and it's weird once people start traveling and seeing our company they go, but everyone's like us. So there is a culture thing but we didn't tell them that's their culture. We just continue to allow small company thinking because that's how families work. Small units, they have connections, they have bigger family but they don't connect as strongly to the bigger family, they connect to the local family. So when you think in those terms that's what you're doing with tech as well. So, for example, if you tell everyone, we're adopting this technology. I would like you to do it. They'll be like, no. But if you sit with someone side by side and go, hey, check out what these guys did. What do you think? Oh, can we try that? Oh, yeah. It's a good idea. Very different conversation. And so, we even train people on purpose. So, we get them together from different parts of the world, give them problems to solve across the whole company. They stop thinking all the negative things they thought about each other.

I asked my teams, 'What do you think our most efficient thing is that we do?' And they're like, 'Oh, is it our software?' They had all these ideas. I said, 'No, it's Friends Day Friday.' And what that is is we have someone, or we did back then, we changed it now, it's Thursday lunches, but we did a breakfast where someone brought in their family and they made us their favorite breakfast food. And I said, 'When we do that, the people that you sit across from and look at and think bad thoughts about, or you think they think bad thoughts of you, they become human beings. Get to know them. They're family. You might not love them, you might just like them, but you definitely are not paranoid anymore.' And I said, when you break down those barriers and systems humanly, and you're choosing it, I'm not making you do it, things just get better. And this is how you solve world problems: you get people together, get them to work on things together, get them to trust each other, let them know we're not bad people. And that's really efficient because we waste time in our heads thinking about each other or thinking about the politics of work. So when for our leadership team, all this time we are on the road, it's painful, but if we're not there, people assume the worst. They think bad things about the company or what we're trying to do, they don't know us. If they know us, they'll go, 'Oh yeah, you would never be that way. You're good people.' So that's really what got me into podcasting and videos, because we've got so many people, 35,000 people across multiple countries. So how do we do that? You have to have really normal, connected videos where you're being yourself and they go, 'Oh, we're not corporate.' They're laughing at each other in a comfortable way. They're not cruel, but they're connected and you go, 'I like this.' Anywhere I go, people know me because of the podcast, but they think they know me well immediately. And it takes them a minute and then they get weird and go, 'Hey, someone said yesterday, you're really tall.' Like I said, 'Well, not on television. I'm short on television.' And it's very funny. And someone said, 'Do people say that all the time? It's funny to see you in real life.' Well, you're the first person, but not normally. But that bond when there was no bond, really, really important. That's how you do big country, big company. You got to let people choose a path that says I actually feel better about the people I work with.