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Part 1 Preparing Your Company for the AI Revolution
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00:00So hello everyone, welcome to Viva Tech, as I'm sure you've heard a few times today.
00:05I won't embellish more on the wonderful introduction we've already had of John Chambers,
00:10who's Chair Emeritus of Cisco, of course, and the former CEO and founder.
00:16So, Chairman, rather.
00:18So John, thanks so much for talking to me.
00:20I think what we're going to try and do today is imagine we've got a big crystal ball here.
00:27All right.
00:27So you're going to give us your top predictions about where AI is going to take humanity and the economy.
00:35And I think you've got a past track record on making predictions.
00:41Can you give us an idea of your success rates so we have a bit of context and background on
00:47how good you are at it?
00:48Sure.
00:49As most of us know, when we talk about our successes, we don't mention the ones we perhaps missed on.
00:54But if you would just look at the track record, a speaker's currency is as simple as what has occurred
01:01before.
01:02So from the days of saying the Internet would change the way the world works, lives, learns, and plays,
01:07when everybody said no, you build routers, zeros and ones, it did.
01:11From the point of view from the service providers, voice will be free, which completely changed their business models.
01:17But it did happen from the concept of a digital country being the economic future and driving the economy of
01:25a large country like India or France,
01:27that has also come true.
01:29And for an ability to say that a country like France, that Canley was a very slow follower,
01:36a very difficult to locate business and to do startups to become number one in Europe, it clearly has.
01:43So if we look at this crystal ball, and this isn't a crystal ball that we've developed in the last
01:4812 months,
01:48once AI, people could finally spell it.
01:50I bet on AI eight years ago.
01:54Six companies in AI.
01:56Each of them, almost without exception, are leading their categories.
01:59Most of them are already unicorns.
02:01And so a track record of identifying the right companies, listen to customers, and the balance,
02:06in part because I bought 180 companies at Cisco, and I understand what it's like for growth and new market
02:12disruption.
02:13All right.
02:14So to make it very concrete for people, say we're one decade from now.
02:19Yes.
02:19Or maybe if it's a slight bit easier, five years.
02:23Okay.
02:23Where do you see AI?
02:26How do you see AI has changed society, has changed the economy?
02:30Give us the sort of big picture on it.
02:32I think when you look in a decade, it's the right scenario.
02:36I think we are in this run for over a decade.
02:38It would determine the market future.
02:41If you really look, it already has.
02:43Last year in 2023, the NASDAQ led clearly in the U.S. with 32% growth.
02:49The Dow was only up 20.
02:52The stock and FTSE were only up in low double digits.
02:56The companies that really drove the future of the market were the AI big players who were up three times
03:03the value of the average company in the indexes.
03:06And they contributed $4.7 trillion to the economy at that time.
03:11You're just getting started.
03:13So it will drive the stock markets, I think, for the next decade.
03:18It will result in startups, which we're all fired up about here, but I'll use an example.
03:23It will produce three times the number of decacorns that are between $10 billion and $100 billion in the next
03:30decade as well.
03:32Countries that get in line what this really means, much like Prime Minister Modi did with digitization of India,
03:38and he drove through where he's now got the fastest growing economy in the world.
03:42He's got the best startup engine by far and away in Asia.
03:46They will become the number one economy in the world.
03:48You'll see this playing out like we've not before, except changes that take place before,
03:54which would occur over three and five years, will take place in 12 months.
03:59How many of you are involved in startups in the room?
04:02Okay.
04:03It used to be that if you were going to come up with a great startup idea, you would get
04:08your team together.
04:08It would take you two years to develop the product.
04:11In the third year, you'd go to market.
04:13You would try to get five to six, maybe seven key companies to buy your product, get a run rate
04:19of about a million dollars.
04:20That allows you to get your next level of funding on it.
04:23And in years four and five, you'd go from one million to five million.
04:27What you're going to find now is startups who do this right with AI, with differentiation, will develop their product
04:34in two to three months.
04:36We'll have it in their customers' hands in month three and four.
04:40We'll be at a million-dollar run rate in month five and at a five-million-dollar run rate in
04:4718 months.
04:48That means disruption like we've never seen before.
04:51And you have to think of those new terms.
04:53I've got six of those companies who are very much on the pace of that with transitions that are less
04:58than a year old.
05:00Now, before everybody says, well, that's just the small startups, you're going to see the Fortune 500 get wiped out,
05:06both in Europe and in the U.S.
05:09Why?
05:09Because they won't change.
05:11They're going to be too slow to change.
05:12The CEO, she or he, will not take ownership of it.
05:15They won't make the moves that are really needed for this transition, and they will get left behind at a
05:20speed that we've not seen before.
05:22That is certainly a big prediction.
05:24The Fortune 500 wiped out.
05:26Two-thirds.
05:27Or two-thirds of it wiped out.
05:29That's out there.
05:30So I can – so if we take, for instance, the launches we had from Google, from OpenAI last week,
05:39there was some fear that the kind of exponential rate of returns actually on the technology could be perhaps slowing
05:47down.
05:47I think, if I'm not mistaken, you are really believing that it's the smaller players who will emerge in greater
05:56numbers
05:57and be the force that is actually flexible enough to adapt to this tidal wave of air.
06:03So three questions, breaking it down into the three.
06:06In terms of the direction, if you watch venture capital investment, in the U.S., currently, out of all the
06:13venture capital investment,
06:1538% is going to AI companies.
06:18By the way, the AI companies get 50% higher evaluations from the VCs than software as a service or
06:27fintech.
06:29As you begin to watch the growth, the multiples that we saw as an exception with WhatsApp, remember?
06:34$19 billion.
06:36We all said, wait, that's crazy money.
06:39Only 50 people.
06:40Turned out to be a brilliant acquisition.
06:42And more recently, OpenAI with Microsoft and what's been done at $80 billion.
06:48They will become more the rule.
06:50That creates those unicorns and decacorns we talked about before.
06:55To the third part of your question, historically, when you went from mainframes to mini computers,
07:00to client servers, to the Internet, to the cloud, and now to AI, no companies who led in prior generations
07:07lead in the next one.
07:09This might be the first time that happens.
07:11But out of the big six, I would expect two or three to not make the cut and will have
07:16below the current market capitalization.
07:18But if you watch at how successful these companies can be, and let's use an example of Microsoft and Satya's
07:24Play,
07:25he's got the whole company refocused on this.
07:27They're putting a huge amount of money into it and the changes.
07:30So this might be the first time ever that out of the three to five players who end up being
07:34the,
07:35I don't want to use the word dominant, but the leaders by far,
07:39one or two of them might come out of the prior incumbent group.
07:42So I think it's an open playing field to see who wins.
07:45We're talking about where the companies are prepared for the AI revolution.
07:50Where do you rank France, the EU, China, the U.S., perhaps the Middle East,
07:57in terms of where companies are most prepared for what's going to happen?
08:02Well, this comment may surprise me not.
08:05I think there's almost no company very well prepared.
08:08If you really watch, I think it starts with the CEO where she or he decides on the strategy for
08:13their company,
08:14how do you make it happen?
08:16If you want to know how well a company is prepared, you're sitting in front of Wall Street.
08:20Any of you who are public companies or hoping to go public shortly,
08:23they're going to ask you not what is your strategy for AI and your vision and are you prepared.
08:28They're going to say how far in the implementation are you.
08:31They're going to say is your productivity growing at 10% a year,
08:34which it should if you do AI across your entire company.
08:37They're going to ask where are you on areas such as customer service,
08:41which should get 50% to 70% increase in productivity over three years in terms of its implementation.
08:47They're going to ask you about your coders, whether you're in technology or the CIO organization.
08:52Your coders should be able to produce these products that they used to do in two years,
08:56can only in a month or two, and sometimes in a weekend.
09:00They're going to say how do you use sales and marketing.
09:02In other words, it comes down to how well the companies implement.
09:05No one has a lock on how does this evolve well.
09:09To your specific questions, I like it where you've got a structure at the top of the country driving it
09:16through.
09:16I think Macron's done a very, very good job here in France.
09:19He outlined a digital vision for his country, said here are the number of unicorns we're going to have by
09:242025.
09:25We accomplished that two years ago in terms of the numbers.
09:29A vision of how do you change education, et cetera.
09:32In France, well, let me reverse that.
09:36Do you know probably the best company in Europe that is prepared for this change?
09:43Form it in your mind.
09:44How many of you would have said La Poste?
09:48A government agency that delivers mail as the most progressive implementation of AI in Europe.
09:5865 startups going from 18 billion pieces of mail to 3 billion pieces of mail.
10:06Developing a brand that delivers in terms of capabilities to delivering packages, but even food.
10:13Takes on a number of the startups we've talked about before.
10:16Trained all 250,000 to 280,000 people on AI over a year ago.
10:21is acquiring major big data companies, AI companies, has 65 startups working with them.
10:30And now they're actually training their workforce again with certification of training in terms of the approach.
10:36They are the model.
10:37And what I'm saying is there's no industry that AI can't both enable or disrupt.
10:42And for the first time, they're all going to occur at the same speed.
10:45Who's best position?
10:46I like France's hand in Europe.
10:49I look at the math.
10:50You basically look at the capital investment in France from the VCs this year and private equity.
10:56It and Italy are the only two countries that have increased in terms of the direction.
11:00In Asia, clearly, again, I'm Prime Minister Modi.
11:03He teases me about being his global ambassador, and I'm head of the U.S. Industry Partnership Forum.
11:07He is not only driving his election and his economy off of the strategy of a digital country, but AI
11:14implementation.
11:15Watch out.
11:16There are tremendous power, by the way, for the companies in this room, regardless of where you're from in Europe,
11:21think about India as your partner.
11:23Somebody that can really have a second world headquarters for you in terms of the transaction.
11:28If you aren't moving on innovation, you aren't paranoid about this, you're going to fall behind.
11:33But there's nobody that has a privilege to be the leader.
11:36Are there some things that are simply beyond any one company's control?
11:41I'm thinking of if there's a false measure, if there is something like a chip shortage all of a sudden,
11:48we know that there's a bottleneck with the chips.
11:53We can't be prepared for every single eventuality as a company.
11:57Well, first, I think your question is right on.
12:00Are there going to be train wrecks?
12:01Absolutely.
12:02Are some of the leaders going to fall from grace?
12:05Absolutely.
12:05Some of the hot startups have a run or two for a year, then fall off?
12:09Yes.
12:10So if you're an investor, you ought to invest across the portfolio, almost a traded fund that focuses on AI.
12:18They, in total, will do well.
12:19Betting on one company is going to be hard.
12:22Is there going to be bottlenecks in the supply chain?
12:25Absolutely.
12:25Talk to me about writing down $2 billion in inventory on routers in 2000 based upon demand we couldn't keep
12:33up with, and then it slowed.
12:34But those are just normal courses of the interactions that's going to occur.
12:38And I think the key outcome, not based on optimism, because there are going to be a lot of bumps,
12:44will be that every CEO will know she or he has to drive their company with an AI strategy.
12:49Every country leader, over time, will learn they've got to have a digital strategy and AI strategy for the implementation.
12:56As a startup, you've got to think no longer five years.
12:59You need to evolve your strategy every 12 to 18 months.
13:02If you're not, you're going to get left behind as well.
13:05Are there any sectors which are simply not long for this world?
13:11The answer is no.
13:13But does every sector have to change?
13:15Health care, it's our personal passion.
13:18I was at Lucille Packard's Children's Hospital, their major event for the year.
13:22A year ago, I really leaned on them hard.
13:24Their AI strategy was not far enough along.
13:27They, this time, presented their AI strategy to all their group.
13:31They will cure many forms of cancer, along with their counterparts, because of AI.
13:36The same thing will be true of consulting.
13:38The same thing will be true of accounting.
13:40Every area is going to have major AI implementations.
13:43But unlike the Internet, where this occurred, or the cloud, where it occurred over 5 and 10 and 15 years,
13:49it's going to occur in 2 to 3 years.
13:51And I think a lot of the winners by sector will be well able to be identified, at least most
13:56likely, 3 years from now.
13:58Same thing with those that get left behind.
14:00And so this is one I think we all have to embrace.
14:03My biggest worry actually is the reverse.
14:06Always before with new technology changes, we've been able to create new jobs that have paced faster than the technology
14:14changes destroyed them.
14:15True of mainframes, true of the Internet at my level, we destroyed a lot of jobs, but we created many
14:20more.
14:20This transition is going to occur so quickly that if we do not get ahead of it, retrain our workforce,
14:26like the example I used with LaPost, rethink about how do we position our universities in terms of how they're
14:32training the students and the skill sets needed, that we're going to have a real problem in front of us.
14:36So with the tremendous positive growth of tremendous productivity, GDP implications, survivorship, the Spartan approach will determine which companies win
14:45or lose.
14:46But I think we've got to think a lot more about job creation that used to occur over 3 to
14:515 years, now it has to occur perhaps in a year to 18 months.
14:55John Chambers, we've had a look in your crystal ball.
14:58That is your vision of the future.
15:00Thank you very much for speaking to me.
15:01Peter, it's a pleasure.
15:02By the way, if you agree with everything I've said, I feel I want to make you a little bit
15:06uncomfortable.
15:07I want you to think moving faster.
15:09I believe, however, there's a lot of excitement in front of us, and I think France will lead the way
15:14in Europe, but I'm a little bit biased.
15:16Thank you very much for that.
15:17Let's give a hand to John Chambers, former chairman and CEO of Cisco, Chairman Emeritus.
15:22Thank you.
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