TLDR:
Analytics firm FactSet found that many companies are using the term AI without actually utilizing the technology. This practice, known as AI washing, creates a breakdown in confidence between vendors and consumers. Microsoft’s venture arm M12 recommends scrutinizing startups based on data, dividends, distribution, and delight to ensure sustainable longevity.
Key Points:
- AI washing is a growing concern in the corporate world, with companies making false claims about their use of artificial intelligence.
- Experts warn that tacking on the acronym AI has become commonplace across industries, leading to a breakdown of trust between vendors and consumers.
- Microsoft’s venture arm M12 evaluates startups based on data, dividends, distribution, and delight to ensure long-term success in the AI landscape.
Article:
The artificial intelligence landscape is teeming with players, and they’re not all legitimate. Some are practicing something called “AI washing,” which Securities and Exchange Commission chair Gary Gensler explained in a video includes “false claims to investors by those purporting to use those new technologies.” In the financial space, the SEC fined two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., a total of $400,000 in March for what the SEC described as marketing AI-enabled investment predictions to their clients when they were not actually using this technology.
It’s not just the financial services space that is seeing this phenomenon. Analytics firm FactSet dug through earnings call transcripts of S&P 500 companies for the three months ending in mid-March and found that 179 companies used the term “AI,” which exceeds the five-year average of 73 companies. While it’s not clear which of these companies are being disingenuous about the depth of AI technology in their operations, experts say tacking on the acronym has become commonplace across industries.
“It actually isn’t that hard to put AI into a slide deck, or to even just use AI because you can use it very easily through any of the platforms without having to build it into the business,” said Michael Stewart, managing partner at Microsoft’s venture arm M12, who focuses on AI, gaming, and deep tech. “Yet, there’s no sustainable competitive advantage to that,” he added.
Bates says to look at the model the company uses for an AI offering. “It’s really digging into the company itself and finding out, have they generated their own models [or] are they completely dependent on a third-party model?” And if they are dependent on a third-party model, uncover their service-level agreement or key performance indicators over the next one or two years, he said. “These prompts that are being sold as AI companies, they have to be maintained and monitored and adjusted in order to work.”
Microsoft’s venture arm M12 evaluates startups by using what they call the four D’s : data, dividends, distribution, and delight. “If you don’t, as a startup, have access to your customer’s most important data that relates to what the AI will operate on, then any other competitor can have access to the same data,” Stewart said. For the dividends piece, it can be helpful to identify whether the output of the AI is the work product itself. In other words, is it contributing to the bottom line?