During a recent visit on our Found podcast, Parker Conrad, founder of Rippling, an HR business valued at $13.5 billion, gave some intriguing insights into AI.
"No one actually wants to chat with their HR software beyond the sort of novelty of like, oh, my gosh, it responds to me," he told me.
He also believes that too many software businesses have incorporated not-particularly helpful, novelty AI elements into their products.
"There's just a lot of pretty insubstantial material out there non the AI realm," Conrad remarked, adding that "this is not to argue that AI will not be transformative. Many capabilities are quite crucial. I really haven't been impressed with many of the ones I've watched."
Nonetheless, he understands why businesses have been AI washing - claiming their goods are AI or employ AI in a substantial way when they aren't. Right now, there's such a tremendous rush to capitalize on AI that the entire tech sector wants to "sprinkle AI pixie dust" into all of their goods, he claims.
"They're like, 'Jeez, if I'm a SaaS company, my multiple is 7x, but if I change my name to whatever-my-name-was-before [with]."My multiple is about 50x," he remarked, alluding to how investors value firms based on their revenue.
His perception is not necessarily incorrect. According to PitchBook, AI businesses accounted for 41% of all deal value in the United States during the first half of this year. AI and machine learning businesses raised $38.6 billion of the $93.4 billion invested in US startups this H1. Furthermore, more than 40% of all new unicorns are artificial intelligence firms. According to the Financial Times, AI businesses collected $27 billion last year, with many of the funds coming from Big Tech companies that invested heavily in GenAI startups.
"AI touches almost every aspect of our lives," said Nekeshia Woods, managing partner at Parkway Venture Capital, a firm that specializes in AI. Her perspective is typical of Silicon Valley right now. She believes that AI is increasingly becoming the preferred method for organizations to automate regular operations, with AI assistants following suit and general-purpose robots on the horizon in the near future. "From the consumer perspective, engagement and demand will be centered on higher-quality products and services that can be hyper-personalized to make better use of their time, like some form of self-driving cars," according to her.
All of this highlights Conrad's uncommon status as a prominent skeptic. As Conrad has stated, while he is skeptical of the value of AI agents, he believes AI will be powerful not because it can write, but because it can read. This means it can process large amounts of unstructured data, which can help a company better understand its operations, he explained.
"That sort of solves the problem that these things are only probabilistically correct and not deterministically correct," he added of current AI models. "And that's fine in a world where the systems are identifying anomalies for management so they can say, 'Look, you don't have time to thoroughly review everything in your firm this month. But if you only have time to look at five items, these are the ones to focus on."
There's no denying that all of the AI washing - or, for some people, doomsday talk — becomes monotonous, a phenomenon called AI weariness, though Woods disputes this.
"I see it as less fatigue and more of a question that is starting to be asked about AI," Woods explained. She, like Conrad and others, wants to know when the significant investment in AI will pay off.
"It's sort of hard to see from here," Conrad added.