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Dan Loney: Well, as we head towards 2025,
the role that AI is playing in our lives feels like it's
increasing significantly each
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and every day. And to that end,
understanding how to lead in a landscape like this is going to
be very important as well. A new
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Wharton executive education
program will be focusing on that element specifically. It is
titled, "Leading in an AI Powered
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Future." It's going to be six
weekly sessions focusing on a variety of topics, starting on
January 27. Ethan Mollick is co-
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director of the Generative AI
Lab here at Wharton, as well as an Associate Professor of
Management. Great to see you
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again. How are you?
Ethan Mollick: I'm wonderful. Glad to be here. - It is kind of interesting for me, and
I'm sure it is for you, to see
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how everything in the last year
and a half, and AI has been around longer than that, but how
it has become really the
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main focus of so many people
in so many areas of business, our culture, our lives, whatever.
- We
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have a general purpose
technology that is, by definition, a technology that
touches everything that we do in
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different ways that aren't
predictable in advance. So it's going to affect every field. I
mean, AI is a real thing. It's
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really here to stay. We have
enough data coming in that it actually has real impacts on
performance and jobs. I mean, I
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think there's a reason why it's
the big topic. - So as we turn the calendar for 2025,
what do you think are some of
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the most significant changes
that AI might bring to a business in the near
future? - So
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there are -- there's sort of two
sets of things happening. There's a set of technology
advancements that are going to
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change things, and then there's
a set of organizational and leadership changes happening. So on
the organizational leadership
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side, I think that lags
technology. So the technology has been amazing out of the
gate. What's been happening is
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individuals have gotten access
to these tools, and they're getting individual performance
improvements. Those aren't being
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translated to the organizational
level. That's because individuals are hiding their
use. They're hiding it because
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they're either afraid that
they've been told they'll be fired if they use AI the wrong
way, so they're not showing
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people. They're viewed as
geniuses right now. So they don't want to show people that
they're not geniuses and the AIS
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being the genius. They're
worried that efficiency gains translate to being fired or
being assigned more work or they
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won't get credit for it. So one
of the big organizational challenges, how do we move this from
the individual level to think
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about how organizations can
benefit, and that's the big challenge for the next year,
organizationally. - So
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how do you think then leaders
of companies, what areas do they focus on in terms of
incorporating AI into kind of
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the organizational structure? - So we don't have easy answers. I
mean, one of my biggest fears
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about AI is that organizations
have, by and large, given up what they used to spend a lot of
effort doing, which was thinking
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about organizational redesign,
right? You look at how Ford was successful, right? Or even how
Salesforce was successful. These
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companies were successful
because they thought about how to redesign organizations, like
organizational structure. Now,
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most organizations don't do a
lot of R&D in their own organizational structure. They
count on outside consultants
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like McKinsey coming and helping
them, or they count on, you know, building, buying software
products that kind of impose
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their organizational structure
on them. You learn from, you know, Workday teaches you how to
use HR in the Workday kind of
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way. And as a result, they're
not innovating. Because nobody has answers right now. We have
to figure this out. So I think
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it has to start with
leaders embracing using AI personally, getting their 10
hours of AI use in, to find out
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what it's good or bad for
them. And then really starting to think at a fundamental level,
how are we doing R&D in our
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organization around this? - And so then that has the
opportunity to impact the, quote
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unquote, culture in and around
the organization, in terms of people really buying in and
understanding how valuable AI
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can be in various aspects of
their work. - So I think people are already
learning that. I think the
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question is, how do we capture
that, right? What does the organization that has AI in it
look like? It can't look the
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same, right? With the
organizational structure we have today, it is the exact same one we
had in 1855 when the New York
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Railroad invented the org chart, right? And it was designed to solve a
bunch of problems that the New
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York Railroad had, which was, how
do we coordinate work across a vast distance in real time? We
invented a whole bunch of new
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techniques in the 1910s around
these, around assembly lines, in the the early 2000s, run
agile development, but all of
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them were limited by people. It
all depended on people being the unit of intelligence and the
unit of action that things
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happened in. That's not
what's going to happen in the future. - So then, how do you see AI
impacting different business
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models as we move forward? - So I think that's where the
technology starts to come in,
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right? So one of the big things
that we're going to look for in 2025 is the rise of agents,
which are already a thing. So
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agents are AI systems that are
goal directed and have agency to pursue those goals on their own.
And that means they can use a
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computer mouse, they can do work
for you. That starts to look a lot more like a human doing work
than it does a chat bot that you
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ask a question to.
- Yeah. It has to be a challenge,
though, for a lot of companies,
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when you realize that your
competition is probably, you're going to be using these types of
technology as well, and you have
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to implement them and get them
working up to optimum so that you can remain competitive in
whatever field it is.
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- It's actually much larger than
that, right? Because, first of all, there's no company out
there that is listening to this
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podcast that's going to build
their own LLM. There's really -- it's too expensive to build
large LLMs, beat small LLMs, and
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there's six or seven companies
in the US that could do it, few more around the world. That's
it. So you're not going to build
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your own. So that means you're
going to be using a -- you know, whether you're using a closed
source solution, like an Open
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AI, or whether you're using
something with Llama, you're still going to be using someone
else's large language model.
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And that large language
model is ubiquitously available around the world. Every kid in
Mozambique has access to the
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exact same tool that your top
analysts do. So it's about thinking about structure and
approach and how to leverage
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what you already do to be more
successful. You're not going to win by technology play alone.
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- How then do you look at not even
just next year, but the next several years, in terms of how AI
could potentially have an impact
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on business? - So I think that we're going to see --
you know, there's this -- there's
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Amara's Law, which says that
people overestimate change in the short term and underestimate
change in the long term. I think
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that, you know, you're not
going to see an instantaneous 50 percent improvement to ROI, but
you're going to start seeing
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that in the next few years, not
the next year or two. So the next year or two is still
experimentation, but that's
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going to set the groundwork for
whether or not you succeed in the long term. Every piece of
evidence we have is that this is
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indeed the big one. Like, all the
control experiments, a lot of my colleagues at Wharton and I
have been doing research on
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this. The impacts are very, very large. - You mentioned a moment ago about the leaders,
the managers within the company
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getting their 10 hours, getting
that experience. How invaluable, though, will that component be
as we move forward and we try
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and expand AI in throughout our
organizations, of the leaders having the understanding and the
background around AI? - So
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you don't need a lot of
understanding to make this work. You just need to use it. I mean,
I talk to executive audiences all
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the time. Maybe 10 to 20 percent of the
audience has spent 10 hours with a Frontier model trying to get it
to do real work. If you don't do
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that, you have no idea what
these systems can do. You cannot have your direct reports tell
you what to do, because these
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things are already operating at
a high enough level that it is executive in a lot of ways,
right? We have some research.
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There's some research showing
that it gives us good advice as strategy professors at top
business schools, you know, when
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you ask the AI multiple times.
We know that, you know, already high performing entrepreneurs in
Kenya who get advice from the AI,
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only advice, not extra help, but
advice, have an 18 percent improvement in profitability. Like, these are
real things. And so if you're
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not using it, you're not going to
know what it can do. And it's not a technology that works like
tech. It's bad software. AI
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doesn't work like software.
Software shouldn't argue with you or refuse to do work. AI
does all those things. It works
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like a person. If you're a good
manager of people, you'll be good with AI, even though it
isn't a person. - So
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how important then do you think
bringing this type of a course forward now is in kind of the
landscape of where we are with
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AI, but truly diving deeper into
the leadership side of being able to implement and build it
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out? - So I think that we don't
have a perfect pathway to getting to AI implementation,
right? So I'm not going to claim
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that this course is going to be
something where it's like, okay, now you learn how to implement
AI. We're actually -- and it's also
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multiple people at Wharton,
because we have different viewpoints, and outside of
Wharton, all kind of discussing
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this, because we don't have
answers yet. Really good research going on, but no
answers yet. But I think the
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most important thing is to
demystify. I mean, it is the weird and strange and mystical,
but to demystify using it at
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least. To get people on board
with understanding the implications of this, to see
that it's a very big deal, and
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to get agency over their own
use. And that's really what I hope this course will accomplish.
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- And I think from, you know,
doing the show that we do on Sirius XM every day, you hear
the conversation about, you
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know, who all will really
benefit from AI as we move forward, and it seems like there
are elements of this that are
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working for multiple
generations. It's not just the younger generation that's going
to come in and have the greatest
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advantage. Older generations are
being able to dip their toe in this water and see the
benefits as well. - Actually,
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it's worse than that. We
actually have a study that I did with my colleagues at Harvard, MIT, and
the University of Warwick, where we
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went to Boston Consulting Group,
and we found massive improvements in productivity,
but we also found that junior
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employees were actually much
worse at explaining how this technology should be used than
senior people, because they
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don't understand how work works.
They don't understand how management works. So they -- it's
not a technology problem. Like,
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that's the most important thing
to get across to people. There is a tech element to this, but
it's mostly a management
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teaching and -- you know, and
structural problem. It's an executive problem, not a IT
problem. And if you assign this
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to your IT department as your
first go, this is not the right way to approach AI.
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- But then it will have a
significant benefit moving forward in terms of how
leadership kind of runs an
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operational perspective of a
business, because you'll have the component of AI in the mix.
- Right, I
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mean, it's not just a component.
Like, I've already done -- you know, you can have AI watch a
scene and give you feedback on
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what's going on. You can have --
it's good at advice. It's not like --
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I think, again, there's a lot of --
another problem executives have is they're anchored on AI prior
to 2022 with non-generative AI,
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which was all about making
predictions about the future. These OMS are not good about
predictions. What they're really
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good at is about acting like
people and doing people-like jobs. - Great to see you again, Ethan. Thanks
very much for your time. - Thanks
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for having me. - Ethan Mollick from
here at the Wharton School, who is co-director of the Generative
AI Lab and also Associate
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Professor of Management.