Watson Food for Thought

I am a big fan of Watson and the business model vision that IBM has for allowing other businesses and start-ups to leverage the power of Watson for their own solutions.  While Google, Facebook, and other massive data stores seem intent on leveraging their own data for their own use, IBM appears to be taking a more open approach, leveraging its massive base of computing knowledge to accelerate other companies’ strategies and collect recurring tolls along the way.

As investors this creates what is likely to be a huge next wave in start-up innovation driven by artificial intelligence, and as early stage tech investors, our team here at Osage Venture Partners will do our best to invest to seize this opportunity.  Corporations see the huge economic benefit of replacing people with technology solutions, especially as we shift from replacing bank tellers, toll collectors, customer service reps, and gas station attendants to replacing much more expensive knowledge workers.   The social implications of this potential disruption deserve much debate and discussion but that is for another time and another post.

Perceptions on the viability of AI to displace white collar jobs are changing fast.  Industries that never saw automation replacing key roles are shifting their views of the future.  Take law as an example.  I found this following data in an interesting blog: https://www.linkedin.com/pulse/legal-ibm-watson-business-model-reasoning-modes-ron-friedmann

There is a lot to remark on in this data.  First, look at how perceptions have changed in four years.  A 50% increase in percent of people who think first year associates can be replaced in 5 to 10 years by a Watson equivalent– up to 35% of those surveyed.  Almost half believe paralegals will be able to be eliminated in this time frame.  As this was a survey completed by firm leadership, of course the percent who believe partners will be replaced is lower – but is this reality or some form of polling bias, as Daniel Kahneman would point out?

Of course, this is a poll trying to predict the future, so it could be wrong in both magnitude and timing.  Yet recently with technology penetration, the timelines have been shorter and the impact has been higher than earlier estimates had predicted.  Remember how everyone laughed when Jeff Bezos discussed drone delivery in December of 2013?  Remember how recently we laughed about autonomous vehicles?  Four years ago, 46% of law firm leaders polled said computers would never replace human practitioners.  In 2015, it was down to 20.3%.  Time will tell.

Similar trends are emerging in other knowledge worker functions.  In Japan,   Fukoku Mutual Life Insurance is reportedly replacing 34 human insurance claim workers with “IBM Watson Explorer,” starting this month  http://qz.com/875491/japanese-white-collar-workers-are-already-being-replaced-by-artificial-intelligence/.  Today actuaries – tomorrow lawyers?

The good news is that we should be seeing legal fees coming down steeply in the future, although the computer which replaces me may not need to hire its own lawyer.