IBM Vice Chairman Gary Cohn Talks AI Finance | Bloomberg Talks

Thanks for having me. I don't even know where to start with you because you cover everything, but I actually do want to start first off because we haven't talked a lot about technology. There are a lot of disruptive forces going on from what's going on in the Middle East and obviously we talk a lot about private capital, but AI, I think by anyone's measure, is going to be transformative.

Because you're here.

No, it's look, we do have our largest conference of the year going on right now. Our Think conference in Boston as you said, thousands and thousands of clients. They are rolling out a lot of our new technology, showcasing our new technology. But look, we're a global company and a lot of our most important clients are here as well. So I made the decision to be here. The rest of the IBM senior leadership team is in Boston right now and some of my team is actually going out tonight to get to Boston for tomorrow.

Well it's an interesting question. I'll leave the capital piece of the side. But when you talk about the AI architecture of the world today, because we are really redefining what AI architecture is, it's hybrid cloud, multicloud all over the world. It still has on-premise computing and it's data and data management. You know, we talk about AI all day long, but really what is AI? It's a system that goes out and finds data and does the research and does the computation on the data. So at the end of the day, being able to manage the data wherever your data is, and that's hard. Sometimes you have very organized data, sometimes you have very disorganized data, but being able to pull from that data real time to make sure you get the right answer. We're sitting in the middle of the data management business as well as the on-premise computing as well as the hybrid cloud structure. And those are we think those are three very important components of where the world's going.

It's changed dramatically. So when I got to IBM as you said five and a half years ago everyone in the world was convinced that the world was going to cloud. Everything was going to be in a cloud and every model was going to be a SaaS model. You were going to basically pay for consumption. Well, guess what? It didn't really work out that way. A lot of things went to the cloud and people found out the cloud has enormous amount of advantages, but on-premise computing and the mainframe still is a vital important piece of equipment in the United States. Over 90% of financial transactions in the United States go through an IBM mainframe every day, every minute of the day. So this whole move that we're going to put everything in the cloud and the cloud is safe and the cloud is perfect. It's not worked out that way. Now we've got this hybrid architecture. So being in the cloud is part of it. Being in hybrid cloud is part of it. Being in the mainframe is part of it. And that's the way the world's evolving here. Then you bring in these large language models which are a whole new set of technology. And you're right when I got to IBM, you know, the world of AI was it's kind of interesting. Maybe we should look at it. You know, sometimes it hallucinates, sometimes it gives you a great answer. And I think we all sat there and said, you know, probably get this worked out. Not crazy, but I'll tell you something. Now, we're at the exact same place with quantum computing. Today, we're in a world where quantum computing kind of works sometimes, might not give you the right answer, but it's going to get better and better over time. So in my short period of IBM, I've seen this sort of ebb and flow of new technology come in and even go back earlier in my career, you know, when we brought in new technology, you tend to see these ebbs and flows and what you think at the beginning of the cycle is not what the end of the cycle is going to look like.

So the world is not prepared for quantum but the world was not prepared for AI 3 years ago. That's why I think the analogy is interesting. Three years ago people said like AI I don't know if it'll ever affect me. I don't know if I'll ever use it. No one would have ever talked about how many LLM are downloaded per day, per hour, per second. So, Quantum is in a very similar place. I think today people are saying, 'Okay, interesting. Not sure what it is. Not sure what it does. Not sure it will affect my life.' But I said, 'We've seen this movie. Quantum is going to be real. It is going to affect people's lives. It may not affect people's lives in a real time consumptive pattern the way people are using large language models today, but it will have dramatic effect in the health care system. Will have dramatic effect in the risk management system and pricing for banks. It'll have portfolio optimization in some of the chemicals and science and physical science world. What can go on in the quantum model is just nothing short of extraordinary.' But we're still getting there. I don't want anyone to think we're there today. We're evolving. We're going through error correction rate and the machines get better and better every day. We've got about 85 systems out in the world today with over 300 clients using our quantum system and it's you know it's people you would think it's the Boeing airlines, it's the JP Morgans, it's the Cleveland Clinic looking at human genomes. So all different parts of the ecosystem are in the quantum world playing around with it, experimenting with it, getting really interesting data out of it.

This is not a unique discussion. Every time we've gone through a seismic technological invention in the world or in the country, we have obsessed about job loss. And by the way, we will see job loss in jobs that are employing people today. But what we have seen historically, and I don't think this time will be different, what we see is massive productivity gains. When you see massive productivity gains, the economy grows. As the economy grows, we still need to put people to work in different types of jobs. So you can go back in history and look at all the technological advancements and you'll read stories that are horrifying saying all these people are going to lose their jobs. Oh my god, what's going to happen? And miraculously the economy grows, people get jobs. Like today we have a massive shortage of people in the trades. You know, if you're a person that can put down a cement floor and get it perfectly level for a data center, you're earning hundreds of thousands of dollars. If you're a person that can wire that data center, you're a person that can bring in the heating, ventilation, air conditioning system, those jobs are massive payers today and there's a huge shortage of people. So some of the people that are doing tasks that they may not love to do because the AI machine is better at menial tasks, they can go from potentially doing an unsatisfactory job to a very satisfactory job in the trade.

Look, AI is a true accelerator. You don't see the productivity gains day by day. You're going to have to measure them over quarter or month or year by year because companies are adapting. You know, we're sort of going from the interesting science experiment of AI to the economic value. We're in that transition from science to economic value. We at IBM just to be honest, we have used ourselves as client zero meaning all the AI tools that we're out selling to our clients we have implemented them on ourselves. We have saved over $4.5 billion of expenses and our headcount has not gone down. So, we have been able to take people out of jobs they didn't like doing, move them into jobs with much higher value added to them. So, take someone in an HR department. You know, historically, you're buying a house, you're renting an apartment, you need a reference letter. You need to know how long you've worked there, what's your job title, how much you earn. You know, before AI, you would call up somebody. You would get them on the phone. You'd say, 'Hey, this is so and so. I need you to send a letter to so and so.' They would have to go pull your data out of your file and send out the letter. And you'd hope and pray they'd do that quickly. Now, you go to an HR bot, you put in your information, you tell them to send to as many places you want, and after you hit send, it's going back out, right? The people doing that work, that's not highly satisfying work. We've taken people that were doing that work in HR, and now we have them out recruiting new talent to the firm. We have them out mentoring people to the firm. So, we're getting much higher productivity out of that.

Well, look, we have a fairly massive wealth effect going on. You know, I look at the economy today as asset owners and non-asset owners. You know, if you own assets today, your assets probably appreciate whether it's a house, it's a car, it's an investable asset. Most of these underlying assets are going up in value versus the other side of the K which is a large predominance of our country who's really suffering and really having a difficult time as their input cost, meaning their food cost, their energy cost, their insurance cost, their price of cars, price of used cars are all going up every day and their wages are not keeping up with that. This is a problem. I mean we can't sweep this under the rug. We have to understand that we've got a fundamental problem going on in the country and look, it's starting to resonate with more and more people. I think that AI is part of the solution. AI can train people. AI can move people into higher paying jobs. Like I said, the jobs are out there. We just have to figure out how to train people.