USC's Jeffrey Cole and Harlan Lebo on Google, AI, and Disruptive Innovation

0:00 All right, well, let's shift gears a little bit and talk about innovation, because the capital of American innovation should be in Rochester, New York, but it's not. Scientists, Carol, have been talking about AI since the 1960s, but it was only a few years ago that we really saw its potential. That's right.

0:13 Containerization, completely changing the global economy. Those are just a few of the themes that are highlighted in a new book. It's Disruptors at the Gate, When Visionaries, Trailblazers, and Two Guys in a Garage Talk. Turn the World Upside Down.

0:28 We've got the authors with us. Jeffrey Cole, director of the Center for the Digital Future at USC Annenberg. And Harlan Leidboe, senior fellow and historian at the Center for the Digital Future at USC Annenberg. Jeffrey joins us here in the Bloomberg Interactive Broker Studio. Harlan joins us out there in California. Guys, the timing of this book is perfect.

0:47 We've spent almost every day talking about AI. We do. We are in the midst of a major disruption, though. I mean, you guys highlight this literally on the first page of the book, you write that AI moving from science fiction to reality is one of the three disruptions that we've experienced in the last 25 years. Jeffrey, I want to start with you because this is unfolding as we speak. In the context of other disruptions that we've seen in the modern economic era, how disruptive is AI?

1:13 Well, first, it's the third major disruption in 25 years. And this level of disruption usually occurs about every 100, 150 years. The pace has accelerated. But for everybody who's listening, this is the slowest disruption is ever going to be for the rest of our lives.

1:31 So we should get used to it.

1:32 We should, to quote Betty Davis, it's going to be a bumpy ride.

1:35 And just for context, the other two that you highlight in the last 25 years, the emergence of the public internet and the shutting down of the world to COVID-19.

1:43 And we can already see the fourth walking up the path with quantum computing, which will be as significant potentially as AI. Right. And AI may be, when it first emerged, I thought was the most important innovation since the printing press. It now may be the most important disruption of our time.

2:03 Harlan, we want to bring you into this conversation because is the speed a good thing or a bad thing? We just heard Sam Altman of OpenAI earlier addressing the UN delegation. And one of the things he said is we have to be careful because we could lose control over the future because things are moving fast. too fast and because of the competition, whether it's between anthropic and open AI or US and China when it comes to AI.

2:28 So the speed of things, disruption, innovation, good or bad in your view?

2:34 Well, it depends on the innovation. In this case, AI is running wild and has been, except for the fact that people have started to put public pressure on on the large tech companies because of data centers and the environmental issues there, but also just the awareness now that there are so many unchecked issues about AI that really need to be explored. And it's a good thing, it's surprising, but it's a good thing that people like Sam Altman are beginning to recognize that, whether it's in self-interest or just generally a good idea is important.

3:14 Harlan, if— The book is— Oh, sorry. Please, go ahead.

3:17 No, I was just going to say that AI is one element here of what we're talking about. It puts a giant magnifying glass on disruption, but the levels of disruption that have been caused by other issues are equally relevant and have been for this whole century.

3:31 When's the last time you sent, I don't know, a fax for the most part?

3:36 That's right. Yeah, I know. Whoa, don't even get me started with these doctor's offices and faxes and CD-ROMs.

3:41 Unless you're a doctor, that's right.

3:42 Yeah.

3:43 But this is like a fascinating kind of part of this story. Jeffrey, come on back in. I do think about, and I feel like we think about Bloomberg, right? Business, we think about everything and things that are impacting the investing universe. And there are companies we just think that, well, of course Microsoft, I'm just taking a name, is gonna be around forever, or Amazon. But go back 10 or 15 years, there are companies that were giants in their field that we don't really talk about anymore, or are gone.

4:13 Look at what emerged at the beginning of the century. Amazon, Apple, Google, and Facebook, in 25 years, become four of the five biggest companies on the face of the earth. There's no reason to believe they're going to last another 25 years. I could build a case against Apple. I could build an easy case against Meta, a harder case against Google, and a really difficult case against Amazon. But we've already seen in the last three years the next set of these trillion-dollar companies. We have companies now emerging from their IPO as trillion dollars. Now we have to talk about not the big four. We have to put in Anthropic and Claude, OpenAI and Chat, SpaceX, NVIDIA, and the 100-year company is gone. If you take a look, one of

5:03 the things we do in the book, take a look at the top 10 companies by market cap in 1980, then again in 2000, and then again in 2020, not one made it from 1980 to 2020 in the top 10. In the 1980s, there were two energy companies and no tech companies. In 2020, there were two energy companies and seven tech companies, and only one made it from 2000 to 2020, Microsoft.

5:32 Except it's really fascinating that you say that. And Harlan, I'm listening to Jeffrey talk. What's funny is we've talked more about energy than we have in a long time, rare materials, critical minerals. It's interesting how... Something as high tech as AI, speak about innovation and disruption, is kind of getting us back to raw commodities like we've never talked before. So these cycles, which can wipe out certain companies, can also bring certain industries and companies or different companies in the same industries back.

6:04 Oh, yes.

6:04 I mean, they can transform companies or transform entire industries. I mean, think about the cargo container, an empty box and what it has done. And sure, it's great for shipping and that's really wonderful. But the real transformation, the real disruption from the cargo container came from how it opened entire new industries, employment opportunities overseas. I mean, look around your studio. There's probably nothing in the studio that was made in the United States. And 50 years ago, it all would have been made in the United States.

6:32 So all of those opportunities, whether it's raw materials or tech or retailing, are all a function of disruption and how that's emerged over the years.

6:43 Yeah.

6:43 I'm looking around the studio. I think maybe my pants, maybe I got some, these, these jeans are made in the U S maybe. Um, I do live in Brooklyn. Okay. So come on, you gotta give me some credit. Uh, Jeffrey, I, I, I, what are the, um, what are the lessons that, uh, Mark Zuckerberg or, um, you know, Larry Page and, uh, Sergey Brin can take from the demise of some of the most storied companies in American history to make sure that they are around in 25 and 50 years.

7:19 They can try to find where disruption's coming from, but it's almost impossible to do because it comes from unexpected places. But Google's a great example. What Larry and Sergey did in their garage was they didn't invent search. They refined it. Search before that had been AltaVista, AskJeeves, Yahoo!, So they knew that what they did to Yahoo could be done to them. And they spent years preparing to be disrupted.

7:49 It took 22 years. It happened with ChatGPT in October of 2022. And even then, with 22 years of prep, they weren't ready.

8:04 Harlan, Mark Zuckerberg on this. It seems like Meta... has done a pretty good job of pivoting over the last few years. It's zigged and zagged, and sometimes it's been successful, and sometimes it hasn't. I think many people would say it was not successful with the metaverse. That did not... You think? Yeah. Jeffrey says you think. But they pivoted quickly. Yeah, they pivoted quickly. And I think it's, you know, we're close to all-time highs for meta stock. People are loving this Muse agent. You know, more than a decade ago, Mark Zuckerberg identified that people were using the quote blue app less and decided, Hey, we got to go buy Instagram, which is everybody was using and then copying these, these

8:48 things from snap and from Tik TOK to make it more engaging. Is it fair to say that Mark Zuckerberg gets it?

8:56 Well, one of the things that we talked about in the last chapter of the book is how you can succeed and succeed in spite of disruption. And one of the great ways is to have almost absolute control of your organization. The companies, and especially the tech companies, that are either controlled directly or indirectly, as Apple was controlled for so long after Steve Jobs' passing, they were top-down controlled organizations with support or at least acceptance by all the major stakeholders. So Mark Zuckerberg has... he doesn't own every share of stock in the company, but he certainly controls the company. And that's the primary way of avoiding, of making decisions that can avoid disruption or at least

9:46 keep you in control.

9:48 I would argue that's been one of the weaknesses of Meta, that he is in such control. It gives him the opportunity to be nimble, but he's being nimble in the wrong way. Meta has now become, the tobacco company of the 21st century. It's considered to be harmful to its users. They've conceded it in court. They've promised to make changes.

10:10 We'll see how serious they are. And they're starting to lose multi-billion dollar lawsuits. And it's just begun.

10:17 We talk about this a lot. Our colleagues have reported on this and are part of the reporting that has led to some of these lawsuits. Jeffrey, I hear you, but I've been shocked with the reaction that people have had to Muse in the last couple of days. There's a New York Times reporter who hooked his bank account up to Muse and gave it all its personal information.

10:45 all his personal information. Um, and this is a company that has been clear about reported missteps, like with Cambridge Analytica and customer data in the past. But does that matter to consumers?

10:57 Yeah.

10:57 Well, I think for Facebook and Meta's concerned, it does. I think people really, if you look at the impact Jonathan Haidt has had, the success of the argument that this is harmful.

11:08 To kids, the author of the anxious generation.

11:10 That Meta has known, and there's memos that, uh, everything that's happening they knew about, and the remake of The Social Network comes out next month, except this, in the first film, The Social Network, he was just a nerd, just a nerdy, out-of-touch guy. Now, in The Social Reckoning, he's a genuine villain. Incidentally, just one thing, I think, I used to work in film and television, if you look at who the enemy, if you go back to James Bond movies, and the enemy, when Goldfinger and From Russia With Love came out, They were Soviets, because everybody could get behind hating the Soviets. Then we made detente, and then all of a sudden it was Islamic terrorists.

11:55 And then as we started being more sensitive, it was South Africans, because of apartheid. Then it was Eurotrash, General Eurotrash. Most recently, it's been North Koreans because nobody's going to. Now it's the tech bros. If you look at all the documentaries, the dramas, they have become the bad guys in American society. And there's not a good spokesperson there.

12:22 or representative among them. For a while, Bill Gates got beyond the nerd to really be a great, sort of blew it. There's not a.

12:31 Well, it is fascinating to see even just on the political landscape what we have seen in terms of Silicon Valley, in terms of some of their perspectives. Harlan, one of the things I'm curious about is my husband and I talk about Kodak because he had family who lived in Rochester when it was booming. And it was the economy.

12:51 It is no more.

12:52 And you think about a company that you think cannot be disrupted.

12:57 And I don't know.

12:58 Is it as a company gets too big? too much bureaucracy, it's harder to be disruptive and innovative. Why is Kodak a good example to really kind of understand?

13:10 All the issues you cite certainly play a role in it, but the biggest role is when an organization believes it can't be disrupted or it ignores the concept that disruption might be out there. That's the big one. And you look at Xerox and Kodak, both of them were headquartered in Rochester. Both of them controlled 80% of the global market for their products. Yet they were both, they're now inconsequential in any way you define a consequence in the business world. Primarily because for different reasons, they ignored the possibility of disruption. And when they eventually accepted it, they resisted it, especially Kodak, which continued on the analog path.

13:51 Even though the company developed the digital camera, They stayed on the analog path and on printers and on chemicals that they had relied for more than a hundred years on. So that's where the fault is. Bureaucracies can be shifted and they often are, but it's that top-down mindset that things don't need to change because we are so successful.

14:15 Lesson to be learned. Like I think about here we are talking so much, Harlan, about AI.

14:19 I don't know.

14:21 How do you apply it to kind of the current environment today? Or is it, What Jeffrey was talking about, like some of these giant companies that we just take for granted that were started kind of in the early 2000s or late 1990s, early 2000s, that we just assume, you know, they're behemoths, their market caps are gigantic, that we shouldn't assume that they are going to be here forever because.

14:44 We shouldn't. We can't even assume they'll be here very long at all, although I'm not making any predictions that, you know, the chat GBT is going to collapse tomorrow. But the big issue about AI, and we focus on this in the chapter on AI, is when you think about the internet and when the internet started or when television started, they were assumed to be beneficial, interesting, exciting, lots of potential. And there would be some job shifts, but they were very positive. And AI not only is one of the largest disruptions ever, it comes to us with huge uncertainty and many negatives attached to it. So all of those will play into its near future as well as its long-term future. That's very different in the

15:24 world of disruption.

15:25 I mean, hopefully there is a long-term future because that's what everybody's concerned about.

15:30 24% of the people we talk to in our World Internet Project.

15:34 Think it's the end of humankind. Are they right?

15:37 No, I don't think they're right. The researcher who just leaked from Anthropic says there's a 10% chance by the end of the decade If I were betting on a stock and I knew it had a 90% chance of succeeding, I'd buy it in a minute. But 10% of humanity being extinct, that's terrifying.

15:59 I don't love that, those odds. No, I want it.

16:02 00009.

16:06 I just think about on a day where we've talked a lot about climate and green and we talk about disruption. I mean, our world is being disrupted and you think about the existence going forward, what it means. I've only got about 30 seconds for each of you. Harlan, 30 seconds. I mean, come to the end of this book, top of mind, like how should we all be thinking about disruption?

16:23 If you're a head of an organization or a decision maker in an organization, expect to be disrupted. Make that as much a part of your daily operation as HR or your competition, especially. And everything that you do in an organization should be geared around the idea you could be disrupted and why. And get a thorough assessment and get buy-in, if you can, from everyone who's a stakeholder.

16:50 Jeffrey saved 25 seconds for you.

16:51 Building on that.

16:52 The biggest enemy to succeeding disruption is denial. Refuse to acknowledge that someone's found a weakness. Music industry refusing. Beginning to accept that people are not going to pay for music they don't want. And sort of move into the disruption. Understand it. Stop denying. Don't try to have your competition or disrupt.

17:14 Don't deny climate change either.

17:16 That's a whole different.

17:19 That means we're going to bring you back. Jeffrey Cole, Harlan Lebo. Please, please come back. The book is Disruptors at the Gate. There's so much more we can talk about. We hope you will join us again.