Don’t be fooled by AI washing: 3 questions to ask before you invest

Let’s face it: tech advertising has muddied the waters for buyers in search of actual AI corporations. As we’re all conscious, not all AI corporations have precise AI as their core worth proposition. 

You possibly can escape AI corporations into two classes: ones that use AI as a medium, or as an add-on to automate a sure perform. And others whose whole raison d’être is determined by AI.  As an AI practitioner and investor, I’m biased. I consider corporations that do actual AI are being unfairly grouped with corporations that merely use AI as a perform, typically couched underneath “automation.”

We’re all learn this story earlier than. It’s harking back to the early cloud days, the place a bifurcated ecosystem of corporations emerged. On one aspect, we had the businesses that had been born pre-cloud; on the opposite, we had the “cloud-first” batch.  The latter is the equal of what we’re seeing at this time with AI — corporations born far sufficient into the maturity lifecycle of AI that they may construct corporations which are solely powered by AI. These are corporations that suppose in another way and that unlock true innovation. 

Phrases matter — you’ll be able to’t merely tack on ‘AI’ to your answer and name it actual AI

To not introduce extra business jargon, however I’m going to — as a result of we want readability on this house. Firms that do actual AI are what I name AI-native. And if AI will not be the explanation it exists; it’s not AI-native. Plain and easy.

Let’s take a fast quiz. Is YouTube AI-native? If sure, you’re disqualified. If no, ding, ding, ding! YouTube merely makes use of AI as a medium to drive consumption, nevertheless it’s not central to the consumer expertise like it’s for, say, TikTok. TikTok determined to place AI to work for creators too, with modifying instruments and enhancement ideas that resonate with the viewers they need to attain. 

By making AI central to its service, they’ve created a brand new progressive class for making movies that allow folks to alter their faces, management video parts with facial expressions, and so forth. That’s what makes many TikTok movies practically unimaginable to not watch repeatedly. 

For an additional instance of AI-native, take Insitro, which is an AI-native firm constructing illness fashions from large-scale automated experiments with the aim of creating new therapies. Parsing enormous volumes of scientific and genetic information, these fashions can decide “how a illness works” and assist establish new subtypes of illness — and in the end assess which sufferers are more than likely to reply to a given remedy. That is solely potential due to machine studying because of the very massive variety of confounding elements at play.

Right here’s one other instance that can assist crystallize my level. Ask your self: why are (EV-native) vehicles like Tesla and Rivian so totally different from different conventional (gas-first) automobile producers coming into the EV race? The top sport stands out as the identical, however the merchandise don’t evaluate.

Within the final decade, we’ve seen AI-washing take over. In lots of instances, AI has develop into a buzzword to imply something with some type of algorithmic “intelligence”—from boring issues like insurance coverage and monetary administration to inserting the suitable adverts in entrance of individuals. 

Seeking to spend money on AI-native? Be sure you’re asking the suitable questions.

Not sure as to the way to inform between an AI-native from a non-AI-native one throughout a pitch? Lead with these questions and also you’ll get the reply fairly shortly:

• Query: Why is that this actual AI? 
  • If, for instance, the reply is one thing to the impact “our platform boasts an automation engine to streamlining workflows,” probe additional. 
  • If you happen to get some wishy-washy reply like, “it has some information and a few logic,” one thing is fishy. 
  • Or in the event you get a jargon dump to the impact of, “it’s a database plus a best-in-class refined question engine,” run. 
• Query: What was constructed first, the mannequin or the corporate / answer? 
  • If the reply is one thing to the impact of, “effectively, we centered on the consumer expertise after which utilized algorithms to streamline the workflows engine,” it’s not AI-native. 
  • If there’s language about “layer in” AI after the very fact, or that we’ve “constructed a classy AI engine on high,” you recognize it’s possible not actual AI.
• Query: Is AI a boardroom dialog on the firm? You understand AI will not be core to the corporate when….
  • The phrase AI seems on a slide and everyone seems to be shocked and befuddled. 
  • When the founder says, “the board slides had been generated by AI.”
  • If the board assembly begins with a TikTok.

To sum up my argument: I applaud any moral use of AI. However calling any firm that makes some use of AI an ‘AI firm’ undermines corporations doing deep AI work or AI-native merchandise; it’s additionally deceptive and doubtlessly dangerous from an funding perspective. 

So, subsequent time you get the inkling to make use of the phrase AI to explain an organization, take into consideration these factors, maybe even ask your self the questions above. If in the long run, you notice you’re not AI-Native, that’s completely okay—simply be extra considerate about the usage of the phrase ‘AI’ for the sake of readability within the business. I believe we are able to all agree that we want it.

Luis Ceze is a Partner at Madrona Ventures and CEO of OctoML