Microsoft Bets $1 Billion On The Holy Grail Of AI (Artificial Intelligence)

Microsoft is back to its winning ways. And with its surging profits, the company is looking for ways to marshal its enormous resources to keep up the momentum. Perhaps one of the most important recent deals is a $1 billion investment in OpenAI. The goal is to build a next-generation AI platform that is not only powerful but ethical and trustworthy

Founded in 2015, OpenAI is one of the few companies — along with Google’s DeepMind  that is focused on AGI (Artificial General Intelligence), which is really the Holy Grail of the AI world. According to a blog post from the company: “AGI will be a system capable of mastering a field of study to the world-expert level, and mastering more fields than any one human — like a tool which combines the skills of Curie, Turing, and Bach. An AGI working on a problem would be able to see connections across disciplines that no human could. We want AGI to work with people to solve currently intractable multi-disciplinary problems, including global challenges such as climate change, affordable and high-quality healthcare, and personalized education. We think its impact should be to give everyone economic freedom to pursue what they find most fulfilling, creating new opportunities for all of our lives that are unimaginable today.”

It’s a bold vision. But OpenAI has already made major advances in AI.  “It has pushed the limits of what AI can achieve in many fields, but there are two in particular that stand out,” said Stephane Rion, who is the Senior Deep Learning Specialist of Emerging Practices at Teradata. “The first one is reinforcement learning, where OpenAI has driven some major research breakthroughs, including designing an AI system capable of defeating most of its human challengers in the video game Dota 2. This project doesn’t just show the promise of AI in the video game industry, but how Reinforcement Learning can be used for numerous other applications such as robotics, retail and manufacturing. OpenAI has also made some major advances in the area of Natural Language Processing (NLP), specifically in unsupervised learning and attention mechanism. This can be used to build systems that achieve many language-based tasks such as translation, summarization and generation of coherent paragraphs of text.”

But keep in mind that AI is still fairly weak — with applications for narrow use cases. The fact is that AGI is likely something that is years away. “In fact, we’re far from machines learning basic things about the world in the same way animals can,” said Krishna Gade, who is the CEO and Co-founder at Fiddler Labs. “It is true, machines can beat humans on a some tasks by processing tons of data at scale. However, as humans, we don’t understand or approach the world this way — by processing massive amounts of labeled data. Instead, we use reasoning and predictions to infer the future from available information. We’re able to fill in gaps, extrapolate things with common sense and work with incomplete premises — which machines simply can’t to do yet. So while it is interesting, I do believe that we’re quite far from AGI.”

Guy Caspi, who is the CEO of Deep Instinct, agrees on this. “While deep learning has drastically improved the state-of-the-art in many fields, we have seen little progress in AGI,” he said. “A deep learning model trained for computer vision cannot suddenly learn to understand Japanese, and vice versa.”

Regardless, with OpenAI and Microsoft willing to take on tough challenges, there will likely be an acceleration of innovation and breakthroughs — providing benefits in the near-term. “I love to see a company like Microsoft, which the market has rewarded with enormous returns on capital, making investments that aim to benefit society,” said Dave Costenaro, who is the head of artificial intelligence R&D at “Funding OpenAI, creating more open source content, and sponsoring their ‘AI for Earth’ grants are all examples that Microsoft has recently spun up in earnest. Microsoft is not a charity, however, so the smart money will take this as signal of how strategically important these issues are.”

What’s more, the emphasis on ethics will also be impactful. As AI becomes pervasive, there needs to be more attention to the social implications.  We are already seeing problems, such as with bias and deepfakes.

“With the fast pace of AI innovation, we’re continually encountering new, largely unforeseen ethical implications,” said Alexandr Wang, who is the CEO of Scale. “In the absence of traditional governing bodies, creating ethical guidelines for AI is both a shared and a perpetual responsibility.”

AI (Artificial Intelligence): An Extinction Event For The Corporate World?

Back in 1973, Daniel Bell published a pioneering book, called The Coming of Post-Industrial Society.  He described how society was undergoing relentless change, driven by rapid advances in technology. Services would become more important than goods. There would also be the emergence of a “knowledge class” and gender roles would evolve. According to Bell: “The concept of the post-industrial society deals primarily with changes in the social structure, the way in which the economy is being transformed and the occupational system reworked, and with the new relations between theory and empiricism, particularly science and technology.”

Among the many readers of the book was a young Tom Siebel. And yes, it would rock his world. It’s what inspired him to enroll at the graduate school of engineering at the University of Illinois and get a degree in Computer Science. He would then join Oracle during the 1980s, where he helped lead the wide-scale adoption of relational databases. Then in 1993, he started his own business, called Siebel Systems, which capitalized on the Internet wave, and after this, he launched, a top enterprise AI software provider.

No doubt, he has a great view of tech history (during his career, the IT business has gone from $50 billion to $4 trillion). But he also has an uncanny knack for anticipating major trends and opportunities. Bell’s book was certainly a big help. Keep in mind that he said it was essentially about “social forecasting.”

OK then, so what now for Siebel? Well, he has recently published his own book: Digital Transformation: Survive and Thrive in an Era of Mass Extinction

In it, he contends that technology is at a inflection point. While the PC and Internet eras were mostly about streamlining procedures and operations, the new era is much different. It’s about the convergence of four megatrends: cloud computing, big data, artificial intelligence (AI) and IoT (Internet-of-Things). All these are making systems and platforms increasingly smarter.

Siebel provides various case studies to show what’s already being done, such as:

  • Royal Dutch Shell: The oil giant has created an AI app that analyzes 500,000 refineries across the globe so as to allow for predictive maintenance.
  • Caterpillar: With an iPhone, a customer can easily get the vitals on a tractor. Caterpillar has also leveraged telemetry to monitor assets in order to predict failures.
  • 3M: The company is leveraging AI to anticipate complaints from invoices.

All these initiatives have had a major impact, resulting in hundreds of millions in savings. Of course, this does not include the positive impact from improved customer service, safety and environmental protection.

In fact, Siebel believes that if companies do not engage in digital transformation, the prospects for success will be bleak. This means that CEOs must lead the process and become much more knowledgeable about technology. In other words, all CEOs will need to deeply rethink their businesses.

Now there will definitely be challenges and resistance. Many companies simply lack the talent to transition towards next-generation technologies like AI. Even worse, the current technologies are often scattered, disconnected and complex.

Yet Siebel does point out that large companies have inherent advantages. One is that there is often a large amount of quality data, which can be a powerful moat against the competition. What’s more, large companies have the resources, distribution and infrastructure to scale their efforts.

But for the most part, CEOs can no longer wait as the pace of change is accelerating.

According to Siebel:  “New business models will emerge.  Products and services unimaginable today will be ubiquitous.  New opportunities will abound.  But the great majority of corporations and institutions that fail to seize this moment will become footnotes in history.”

Surprises With Tech Compensation

The IPO market continues to be red hot. This week, Medallia (MDLA) soared 76% on its debut and Phreesia (PHR) rose 39%. And yes, this bullish activity is driving up compensation in Silicon Valley, especially from stock option packages.

Yet this is also causing some problems. After all, non-tech companies realize they need to hire technical talent but have fewer resources to compete. Hey, even startups are feeling the pressures.

But when you look at compensation data, there are some other interesting trends that are emerging. Consider the findings from a recent report from Hired, which is a marketplace for matching tech talent. It is based on more than 420,000 interview requests and job offers across 10,000 companies and 98,000 job seekers.

So then what are some of the takeaways? Well, let’s take a look:

Boston, Austin and D.C. are gaining momentum: As should be no surprise, the San Francisco Bay Area is the highest paying market for tech workers (the salary levels rose 2% last year). But the fact is that the market is dynamic and workers are looking elsewhere. For example, tech salaries in Boston jumped 9% last year and Austin and Washington D.C. saw 6% increases.

“The salary growth in up-and-coming tech hubs is a clear sign of these cities doing everything they can to attract the best tech talent and compete with the Bay Area — and from our analysis, it’s working too,” said Mehul Patel, who is the CEO of Hired. “Our data shows that Austin, where average tech salaries grew from $118K in 2017 to $125K in 2018, is the most appealing place for tech talent to work.”

IPOs and equity compensation: Keep in mind that the IPO boom is not creating a frenzy for equity. “We also looked at tech worker sentiment around the importance of equity in a compensation package and despite this year’s IPO wave, our results found that more than half of global tech workers (54%) are on the fence about forgoing a higher salary for company equity, suggesting that added pressures could be boosting salaries,” said Patel.

Tech workers will move: The situation in the Bay Area is creating something odd. That is, tech workers feel underpaid because the cost of living is increasing even more, the taxes are high and real estate prices are at extreme levels.

According to Hired, when you make adjustments for these factors, an average salary in Austin would be $208,000. In other words, a typical tech worker would need an $83,000 raise to get to parity.

Currently, the most popular cities to relocate include: Austin, Seattle and Denver. Oh, and 60% of tech workers plan to relocate within the next five years.

Age: Tech remains generally biased towards younger people. The Hired report indicates that the average tech salary plateaus at 40 in the US.

Education: The requirements are changing rapidly. For the most part, tech workers do not see as much value in advanced degrees. The Hired survey shows that 31% believe they could have the exact same job without their degree and only 23% of those with master’s or doctorates believe they command higher salaries because of their advanced degree.

Instead, tech workers are looking to alternative forms of education, such as coding bootcamps and online learning platforms.

The Hired report notes: “Tech giants like Apple, Google and PayPal have moved away from traditional education requirements and are increasingly interested in candidates with specific in-demand tech skills and on-the-job experience that may not be acquired through higher education.”

H. Ross Perot: His Lessons For Entrepreneurs

H. Ross Perot, who died this week at age 89, was a take-action person. While growing up in Texarkana, Texas, he ran a successful paper route (riding his beloved pony), was an Eagle Scout (after only 13 months) and helped his father with his business (he was a cotton broker). He would then go on to the Naval Academy.

But of course, as for his career, he would be best known for his run for the 1992 presidential election.  He got 19% of the vote, which was the most successful performance as a third-party candidate since Teddy Roosevelt’s run in 1912.

Yet before his foray into politics, he had been a highly successful entrepreneur. Keep in mind that he was the first tech billionaire, having achieved this milestone in the early 1970s before Bill Gates and Steve Jobs launched the PC revolution.

Now Perot didn’t start his business out of his garage.  Rather he got his tech chops while working for IBM during the 1950s.  The timing was certainly spot-on as the computer industry was accelerating – and Big Blue was the dominant player.

The experience was transformative for Perot. He wanted to learn everything he could about technology but also spent lots of time networking. As a result, Perot quickly became one of IBM’s top salesmen, having hit his quota during the first month of 1962. Yet the company really did not recognize his accomplishments.

What gave him inspiration was reading about Henry David Thoreau’s “Walden.  One quote stood out: “The mass of men lead lives of quiet desperation.”

So on his birthday – June 27th, 1962 – he started his own company, Electronic Data Systems (EDS). The initial capital was $1,000. And yes, it would be one of the best investments ever. In 1984, Perot would sell EDS to GM for a cool $2.5 billion.

It was an incredible journey and chockful of lessons. Here are just a few:

Have A Clear Vision: Through his experiences at IBM, he realized there were major pain points with customers. They would spend huge amounts on computers but not have the internal resources to use them properly. This often led to lackluster performance, losses and delays.

Perot thought there was a better way. EDS would essentially mange the computer processing for companies and for this, would get lucrative long-term contracts. It was a classic win-win. The irony is that Perot pitched this idea to IBM but the company saw the market as a meaningless niche.

But Perot was convinced that there was a large market.  Although, in the early days, it was tough convincing customers of his vision.  Why trust tiny EDS with their strategic technology assets? Consider that Perot got rejected 77 times before he was able to land his first contract.

But eventually the momentum would build.  After 1964, EDS would more than double revenues every year through the rest of the decade.

Commitment To The Team: It’s true that some of Perot’s policies were questionable (at least by today’s standards). He had strict requirements for women skirts and prohibited men from having beards.

But there was little doubt that he had deep respect for his employees. After all, during the late 1970s, he put together a commando team – which included executives — to rescue EDS employees from Iran (the amazing story is chronicled in Ken Follett’s book, On Wings of Eagles: The Inspiring True Story of One Man’s Patriotic Spirit–and His Heroic Mission to Save His Countrymen).

Trend-Watching: Perot was hyper-aware of emerging inflection points in business and society. This ability not only allowed for robust growth for EDS  but helped align his team on what was important. For example, while Perot was skeptical of big government, he did not allow this belief to get in the way of recognizing opportunities, such as when Lyndon Baines Johnson launched the “Great Society.”  Perot knew this would be a boon for technology outsourcing. So he struck major contracts for the massive Medicare program. Ironically Perot would sometimes be referred to as America’s first welfare billionaire.

Clear Communication: Perot knew how to explain complex subjects (just imagine how tough it was during the 1950s and 1960s to talk to customers about computers). He liked to say that a puzzle should have only one piece. But Perot also would add a good dose of common sense and humor.

And some of his quotes are gems:

“Business is not just doing deals; business is having great products, doing great engineering, and providing tremendous service to customers. Finally, business is a cobweb of human relationships.”

“Spend a lot of time talking to customers face to face. You’d be amazed how many companies don’t listen to their customers.”

“Life is never more fun than when you’re the underdog competing against the giants.”

“If someone as blessed as I am is not willing to clean out the barn, who will?”

Alpha Girls: Women Upstarts Who Took On Silicon Valley’s Male Culture

Venture capital is one of the most amazing drivers of growth in the US. It has helped to propel iconic companies like Apple, Facebook, and Uber.

But of course, the VC industry is not without its faults. Perhaps the most egregious is the so-called “bro” culture. If you take a look at VC websites, you’ll notice that most partners are white males. It’s really that simple.

“Progress isn’t happening fast enough and credit in Silicon Valley still flows disproportionately to men,” said Judy Loehr, who is the founder of Bayla Ventures and one of the early product managers at

But there is a silver lining – that is, there has been more and more exposure of the culture and this is leading to some change. A good example of this is an excellent book from Julian Guthrie, Alpha Girls: The Women Upstarts Who Took On Silicon Valley’s Male Culture and Made the Deals of a Lifetime. It is a story of the success and struggles of four top VCs: Mary Jane (MJ) Elmore (she was one of the first partners of a VC firm), Sonja Hoel, Magdalena Yeşil and Theresia Gouw.

Often they were the only women in the room. But they certainly made a huge difference. Keep in mind that these four women were instrumental in funding companies like, Facebook and Trulia.

Now some of the stories in the book are downright horrific. When Magdalena worked at AMD in the 1980s, she was at a sales meeting that had topless women as entertainment … who engaged in sex acts!

Even though speaking up could have easily led to her swift termination, she went to the CEO, Jerry Sanders, and confronted him directly.

Yet many of the other examples in the book are subtle and nuanced. It’s really about the culture where expectations for men are often so much different than for women.
Here’s a look:

  • When launched its IPO in 2004, Magdalena decided to stay home with her sick son instead of ringing the bell on the NYSE. This was something she would regret later because no male would have done the same.
  • As like any good VC, Theresia was a constant networker while at Accel Partners. But this stirred up rumors. Was she sleeping with founders to get deals? Even worse, the rumors continued when she was pregnant. Then again, it’s understandable that there would be jealousy. She helped snag the $12.5 million investment in Facebook. According to, her networth is estimated at $580 million.
  • Something else about Theresia. Her partners denied her taking a sabbatical. But of course, other male partners had no pushback with theirs.
  • Sonja adopted a baby while she suffered from breast cancer. But none of the partners visited her.

Given all these engaging stories, it should be no surprise that the “Alpha Girls” book was the subject of a bidding war for the film and TV rights. Welle Entertainment won out against Amazon, Universal, Brett Ratner and Smokehouse.

But for the most part, “Alpha Girls” fills an important part of the history of Silicon Valley, which has been mostly ignored. This has also provided a way to impart critical lessons, which often take years to evolve and realize. As MJ has noted so eloquently: “Don’t be a martyr; be more selfish about your own needs; keep your foot in the door of a job you love; and whatever you do, don’t leave to make someone else happy.”

Endeavor IPO: Turning The Agency Business Upside Down

In 1990, futurist George Gilder published Life After Television. He set forth a vision where a global network of computers – supercharged with fiber optics — would wreak havoc on mass media, leading to user-generated content, distance learning and even smart devices. Keep in mind that he wrote this book five years before Netscape went public, heralding the Internet revolution.

One of the readers of Life After Television was Ari Emanuel, who was a senior agent at ICM (International Creative Management). According to him, in a letter to shareholders: “[The book] changed the way I thought about content and distribution. That book was a catalyst that led me to leave a large, established talent agency to start a new and nimble one.”

The result was the creation of the Endeavor Agency in 1995. But for the most part, Emanuel focused on building a traditional operation and amassed a powerful line-up of clients.

However, during the past decade or so he has transformed the company. In fact, he is now in the process of taking the company public.

This is certainly unconventional as the last talent agency to be public was ICM, back in the 1980s. Let’s face it, there’s a natural aversion to disclose compensation packages, which could provide valuable information to rivals. Another issue is that Wall Street generally does not like labor-intensive businesses. They can be extremely difficult to scale and remain profitable.

So what makes Endeavor different? Why might investors be interested? Consider that Endeavor has been aggressive in building an entertainment platform that includes a myriad of revenue streams. The IPO filing points out the following: “media rights sales, pay-per-view programming, sponsorships, subscriptions, license fees, ticket sales, profit participations, profit sharing, pay-per-view programming, commissions and strategic consulting fees, data streaming fees and tuition.”

All these come from three business segments:

  • Representation: Endeavor is the largest talent agency, providing services to over 6,000 clients – whether talent, brands or IP (Intellectual Property) owners. Note that last year the firm represented more Academy Award and Grammy winners than any agency. A key boost to this segment was the mega merger with the William Morris Agency in 2009 as well as the $2.4 billion acquisition of IMG in 2014.
  • Endeavor X: This business – which came through the acquisition of NeuLion – is primarily focused on streaming for customers like the NFL, NBA, WWE, UFC and PBR.
  • Entertainment & Sports: This is perhaps the most important business – at least for Wall Street. The segment includes the ownership of brands like Ultimate Fighting Championship (UFC), which cost a hefty $4.1 billion, the Professional Bull Riders (“PBR”), the Miami Open and Frieze. With these assets, Endeavor puts on hundreds of live events every year.

To get a sense of how all this works together synergistically, let’s take a look at the UFC. At the heart of this is the representation business, in which Endeavor helps with movie roles, book deals and modelling. Then there is the development of original content like “The Contender Series” and “UFC: Destined.” Next, the UFC gets the benefit of marketing, distribution and sales. This involves licensing arrangements, such as for apparel and fitness, and the securing of media rights – say the 7-year deal with ESPN and ESPN+. Oh, and then there is the direct-to-consumer segment, which includes the FIGHT PASS streaming service

Really doesn’t look like a typical agency, right? Definitely not. Endeavor is instead a global entertainment powerhouse. In 2018, the company was able to generate $3.6 billion in revenues, up from about $3.02 billion in the prior year, and net income of $231.3 million.

The Risks

There are certainly nagging risks with the company and the public offering. Endeavor is a complicated organization, which could make it difficult for Wall Street to understand. Usually investors prefer pure plays (say a company like Pinterest).

Endeavor also has taken on significant debt. As for the end of last year, it was at about $4.6 billion along with roughly $3.7 billion in contingent liabilities for guaranteed media payments and other obligations.

Something else: There is a history of disputes and strikes with entertainment talent. The latest involves a fight with rule changes of the Writers Guild of America.

Then again, Endeavor has the benefit of a diverse platform and massive scale – so it should be in a better position to manage these problems.

Bottom Line On the Endeavor IPO

Gauging the prospects of an upcoming IPO is extremely difficult. The markets can be fickle. Hey, how many people predicted that Beyond Meat would be the year’s highest-performing offering?

Not many.

Instead, the real test for a company is not how it does on its IPO day. Its instead about the long-term.

Now with Endeavor, it’s easy to criticize the company. And yes, there will likely be a good amount of volatility when the company trades on the NYSE.

Yet Emanuel understands that the entertainment industry is undergoing disruptive changes and that he knows that doing things the old way will no longer work. More importantly, he has a clear vision for the company – and is not afraid to pull off bold moves to make it a reality.

Summer Reads From Tech CEOs

One of the keys to Bill Gates’ success is his voracious appetite for reading books. Keep in mind that every summer he lists some of his favorites on his blog.

But hey, what are other CEOs recommending and why? Well, here’s a look:

Origin Story: A Big History of Everything

Bryan Murphy, CEO of Breather: “This is an amazing book for two reasons. Number one, if you’re the type of person that loves how stuff works, this book is for you. David Christian deftly takes us on a journey from before the big bang, zooms through the Universe’s history and into the future in a cohesive narrative that will make you rethink your perspective on our place in the universe and will blow your mind away at the simplicity of it all. Second, a leader’s job is to make the complicated simple. David is an inspiration to me the way he weaves data and narrative and distills it down to make the complicated simple. I strive to do that every day at Breather as I communicate with customers, partners and teammates.”

The Martian

Jennifer Fitzgerald, the CEO and co-founder of Policygenius: “The Martian by Andy Weir is a parable for what is critical to success in business, but also in running a startup. It’s the story of a stranded astronaut trying to get off Mars before running out of food and oxygen, which is a useful metaphor for creating a successful business from scratch. You have to figure out how to scale a good business model before running out of money. The book really showcases what it means to have grit and be resourceful, as well as how to effectively solve problems, which are such important skills. In fact, because this book speaks so well to many of the Policygenius values, we give all new employees a copy of the book preloaded on a Kindle when they start.”

The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

Pini Yakuel, the CEO and Founder of Optimove: “This year, I read The Hard Thing about Hard Things by Ben Horowitz, which introduced me to the concept of ‘management debt’ that has really resonated with me in both my professional and personal life. Based off the term ‘technical debt,’ Horowitz discusses how quick short-term solutions that act as a ‘loan’ to buy time, always come with an expensive, long-term consequence. While some loans are worth paying in the future, others can become too expensive to justify — and if management does not account for this future interest, they run the risk of becoming bankrupt in the future. What I found particularly interesting about this analogy was that it can actually serve as a model for multiple facets of life. Once I began thinking with this framework, it became a lot easier for me to fully think through my solutions and understand the implications of each decision.”


Fred Stevens-Smith, the CEO and co-founder of Rainforest QA: “This book revealed moving and important insights into what it’s like to be a person of color living in America. The author tells an incredibly compelling and lyrical story while sharing eye-opening anecdotes and lessons. More than anything, this book reminded me that, in the era of Trump, America is still deeply racially divided, and the intense privilege that some of us benefit from continues to create barriers that prevent a meritocracy from being realized. The book was a great reminder of the privilege I walk around with, and helped refresh my humility. More broadly it reenergized me around our values and culture. We spend a huge amount of time and energy creating an intentional culture at Rainforest, and Americanah served to inspire me to continue to push harder on this – it’s easy to focus on the short term in our business, and culture is one of the most important long-term investments any company can make.”

Patton: Ordeal and Triumph

Craig Walker, the CEO and founder of Dialpad: “One of my favorite books is Patton: Ordeal and Triumph by Ladislas Farago, which is about how WWII General George Patton fought against overwhelming odds. One of his most recognizable quotes happens to be my favorite – ‘A good plan violently executed now is better than a perfect plan executed next week.’ I’m constantly reminded of this as a tech entrepreneur. While old guard legacy players have more resources and recognition, smaller tech startups have an advantage if they take Patton’s advice. Disruption happens by building tech that is more useful, efficient, adaptable — the list goes on. We win when we act quickly. Brains and determination can overcome even the most formidable opponents.”

The Winner Within: A Life Plan for Team Players

Scott Scherr, the CEO of Ultimate Software: “A few years after founding Ultimate Software, I received a copy of The Winner Within, a leadership book by legendary basketball coach and current Miami HEAT President Pat Riley. I’ve made it a point to re-read it almost every year since. In the early days of Ultimate, Pat’s words guided me and he became a mentor, if only through the book. Years later, I met Pat when he gave the keynote at our Connections customer conference in Las Vegas. In 2017, we became teammates in business. Ultimate’s now the official HR/payroll provider and jersey sponsor of the HEAT.

“The Winner Within resonates strongly with me, and Ultimate’s commitment to putting people first. I see many parallels between a team’s success in business and in sports. Your employees are your players. You work together to build an all-star team and win championships. There’s nothing better than being on a team—winning together, learning from losses together, getting stronger together. Pat’s book really helped shape Ultimate’s culture. We continue to coach our players, set goals, and earn championships. Today, we give our people copies of The Winner Within when they join our team. We encourage everyone to read it and learn from Pat’s principles — just like I have.”

The Score Takes Care of Itself: My Philosophy of Leadership