Unlocking AI’s Potential with Ruth Porat

On this episode of The Forum, hosted by CNBC's Becky Quick, Ruth Porat, President & Chief Investment Officer of Alphabet and Google, joins Arvind Krishna, Chairman, President and Chief Executive Officer of IBM and Vice Chair of The Economic Club of New York, for a conversation on artificial intelligence, innovation, and the future of work.

Porat shares why she believes AI has the potential to unlock new opportunities across industries, emphasizing that the technology will reshape tasks rather than eliminate careers. The discussion explores AI infrastructure, workforce transformation, global competitiveness, the importance of public and private sector collaboration, and the leadership needed to realize AI's full potential.

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Host: Becky Quick

Guests: Ruth Porat (Speaker), Arvind Krishna (Moderator)

Produced by: AMZG Media

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Transcript

SPEAKER_01 0:02

I'm Becky Quick of CNBC, and your host of the forum. I'll be guiding you through exclusive conversations among some of the world's global leaders. Conversations previously held behind club doors, but today we invite you in. The Economic Club of New York serves as the premier forum for nonpartisan discussion dedicated to connecting the world's brightest minds with preeminent public and private sector leaders. A nonprofit, 501c3, the club is a 115-year-old platform for the conversations that help shape the future of our world. The Economic Club of New York, brightest minds, critical conversations, catalyst for innovation.

SPEAKER_02 0:40

So the upside from AI, when we look at it, I think at a high level, there are four really profound areas that should lead to optimism. Number one is the economic upside. In the US alone, it's estimated that the upside is about 4 trillion to GDP over the next several years. And we're already seeing with small businesses, for those small businesses that are applying AI to whether it's how they reach out to customers, how they engage with customers, how they manage supply chain, et cetera, they're seeing 80% of them are seeing their saying they're seeing an uplift in revenue and profitability. The second that I think is really exciting is advancing science, a place you and I spend a host of time. And probably one of the best examples of that is a colleague, a colleagues of mine who won the Nobel Prize for something hopefully many have already heard about, Alpha Fold, which is about uh protein folding. And it has been described as one of the greatest contributions to drug discovery in our lifetime. What they did is they said they wanted to take on a 50-year grand challenge on protein folding, which is sort of the insight to life. And when they started on that journey, somebody challenged the head of our AI lab, Demis Asabas, and said, How can you take on this challenge? It takes four years for a PhD student just to diagram one protein, just one, and there are 200 million out there, how is it possible? And his answer was why not? And they went on that journey, and within four years, not only had they cracked the code but won the Nobel Prize on this. And if there's one thing I think I would want to leave anybody with that I quote a lot at Google, it's with AI, that question, why not, is something we should each be asking ourselves about anything that to date has been intractable because it lets you break through it. The other is obviously around cybersecurity, where we both spent a lot of time. And the final area is really better delivery of healthcare, education, addressing food security. We were talking about a whole host of really important social issues that we can now address as a result of AI. That aggregate portfolio, to me, is the reason we should be optimistic about what AI responsibly executed can deliver for society.

SPEAKER_00 2:52

I do think that people should note what Ruth began with. 4.5 trillion, even if out there in a few years, let's call it GDP here, is 40. A 10-point increase, which you can reinvest back in the country and in an individual company or into the citizens, it's massive. If you go look at developmental economics, that 10 points is all the difference between breakaway and kind of not breakaway. So while there is a lot of optimism, there's also people out there that are worried about some of the downsides of AI. One of the big ones that gets talked about all the time is hey, is this causing my energy bills to go up or all the data centers, the fundamental cause of this? Could you help demystify that a little bit, Ruth? Because I know you guys do a lot of work on this topic and you have made a lot of investments.

SPEAKER_02 3:45

Well, I like how you started with the upside, because if the upside's not worth fighting for, I think we all just go back into our corner. And I think the upside is worth fighting for and we can responsibly protect against the downside. And to your question, we can't have the upside of AI without the energy to power it. I think there are a couple of pretty critical issues. When I was in New York as a banker, one of the core things we all learned is if you really want to address a risk issue, you have to go at the root cause of the risk issue. And with respect to energy, it's that our country is underinvested in energy infrastructure for far too long and it's caught up with us. That being said, data centers are in the spotlight inappropriately because of the growth and the expected growth. But today, just to put some numbers around it, data centers used about 4% of the grid. Expect it to go to ballpark 12%. But just to scale it. Now, what's I find really important also for context, and I'll get to how do we mitigate against it, Lawrence Berkeley National Labs did a study a number of years ago, and they said for states that have data centers, electricity prices actually go up more slowly than for states without data centers. Why? Because data centers and the large workloads help amortize the fixed costs over a larger base. So data centers through 2024 have actually helped keep electricity prices growing at a slower rate. What we have done because of this very important question, and wanting to make it clear that when we show up, it's a net benefit to the community, is a couple of things. One, we're committed to adding capacity, energy capacity, wherever we invest. So you've probably hopefully seen a lot of announcements we're investing in nuclear batteries, solar, wind, et cetera, so that we're bringing additional capacity online. Second, with technology, we've done something where on really hot or cold days, we can move our workloads out of the way. It's called demand response. Across the country, we've created the equivalent of one gigawatt of incremental capacity by saying we'll get out of the way when the community needs it. We then say, not only are we paying for the energy we use, but we'll pay for any infrastructure investment needed to support that growth, whether or not we use it. And on top of that, we build an energy affordability fund in the communities we go into, which works with local organizations and they go into homes and help weatherize homes. So all of that leakage that would otherwise show up as an energy cost on your bill drops immediately. And then we were just talking about this. To build this energy infrastructure is actually a job creator. There are hundreds of thousands of jobs that are unfilled and will continue to be unfilled if we're not trained. So a year and a half ago, about we started an electrician training program. And whenever I show up in a town and we're gonna start a data center, one of the really important elements is we have the IBW or the Electrician Training Alliance with us. We have somebody who's talking about the jobs that are created. And I was in Missouri a couple of weeks ago, and one of the many beautiful stories, talking to a woman who's going through the training program, I'll never forget her, her name is Danielle, and her husband had recently passed away, and she has two children, and she said, you know, being a bartender, which is what she had been doing, can't cover the cost for her kids and it doesn't provide the security. This is a secure job, it's a career, and it's enabling people to stay in their communities and have careers that they're really proud of. As you were saying, when we show up and do any kind of build or you do, the multiplier effect in the community is profound. For every job we create, third parties have said there are nine additional jobs created in the community.

SPEAKER_01 7:41

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SPEAKER_00 7:56

Somebody who was, I think he still is at Google, Jeff Hinton. No longer, right?

SPEAKER_02 8:01

No longer, but I'll still I still know like where you're going. Yes.

SPEAKER_00 8:05

He made a claim that in another 10 years, this was back in the 2015 era, we're not going to need radiologists. You know, to some extent, every time a new tech is coming, people make this claim that all these jobs are going to go away and we are not going to need anything. How do you react to that, Ruth? Because I think there's more radiologists today.

SPEAKER_02 8:26

There are more. So he made that prediction 10 years ago. There are more radiologists today, and there's actually a shortage, and compensation is up given the acute need. He's a fantastic computer scientist, Nobel Prize winner, fantastic computer scientist. I think what we're seeing too much of are forecasts about what might happen to the future of work that actually are not anchored in history and labor economics. And I want to go beyond what Jeff had said. In the instance of radiology, what you're seeing are a host of other factors that need to be considered in answering the question: what happens to work with AI? Demographics are such that with an aging population, there's a need for more scans. Then there's obviously demand elasticity when you can have availability of it, more people may end up using services. So when we look at the future of work, we'll go back to what have you seen throughout history with profound technology changes. The nature of work has changed, augmentation. There are new industries that are created that typically people don't see when they're in this kind of moment, and jobs are displaced. And I think one of the most exciting areas is actually augmentation. So what we're seeing with radiologists is you have radiologists who are also working with AI. And I think one of the very important things, going back to your first question, not everyone across the country is privileged, like the people in this room, to have extraordinary doctors in New York. And in many areas, you know, you don't have radiologists who are able to actually have the cutting-edge equipment or the or are at the level that we're seeing. And so what I think is really incomprehensible and something that's on all of us to address is the disparity in outcomes in healthcare should not differ based on your zip code. Not in America. Again, not anywhere. And if you can use technology to augment and actually supplement the radiologists, we can start addressing across America outcomes. I've had cancer a couple of times, I'm fine, but my read I always go back to my oncologist, and he said the only way to democratize the quality of healthcare in America is with AI. So that, you know, augmentation is important. Actually, thinking about this lunch, I was thinking so many, I look around, I see so many old friends from finance. When I started in finance in 1987, I showed up and it was amazing to have an IBM PC. That was like the magic of the day. And young people won't remember what that is because you've done a great job continuing to transform IBM. But it was an island. It was a little island, and you had to add your floppy disk and you had to manually input data. And if you fast forward to 2000, and we could download whatever you needed to download, and then you could make, you know, you could analyze it. My job went from what I thought was magic, but was still a lot of processing, to a lot more thinking. And that's what augmentation with technology does. So there's a whole area there. Then there's jobs that are created that we don't even see today. I've talked about some, you do see them building the infrastructure required to deliver this. Areas like computational oncology or data analytics, we don't even see today what will come. But jobs will be destroyed. And I think what's absolutely critical is to make that J curve as shallow and tight as possible with job skilling efforts, and we're doing some. I know a number I see a lot of people around the room who are engaged in it. We need to get people the skills they need to get on the curve so that they actually are benefiting from what those jobs are of the future.

SPEAKER_00 11:58

We'll come back to the jobs, but your point on the PC and the nature of your job changed in that 10 to 15 year period. I think that's been the nature of our call the word tools. If instead of using the word technology, you use the word tools, and as the tools do more of the rote work and the mundane work, it actually frees you up to do higher autocognitive work, which then creates a lot more value for society and for wherever you happen to work. I think we've seen this movie play out again and again.

SPEAKER_02 12:27

Can I jump out there? Yeah, I I absolutely agree. And two points from that, all of the analysis of what is changing, tasks are changing, but not careers. Tasks are changing, and then very much, Arvin, to your point, we're being able to uplevel and think more rather than process, which I think is one of the exciting areas. I called our chief medical officer when I saw the breakthrough that was announced a couple of weeks ago, super exciting breakthrough in pancreatic cancer. And I said, why are we not hearing more about AI on things that are landing today? And his comment was people appropriately should talk about the impact to humanity, not the tool that got you there. And so these this AI is a tool, very much to your comment, that enables us to be the best we can be. It helps us crunch more data, see things more rapidly. But I still firmly believe that it is the human and bringing people together. Humanity is a critical part of then, and so what do you want to do about it?

SPEAKER_00 13:28

And to the point of democratizing healthcare. Here is one example in the country which you talked about. But if I go out to the developing world, the country where I was born, India, there's 900 million people still in rural India. They're in villages. It is possible maybe to have a machine that costs $10,000 out there, but there's zero chance of having a doctor or a hospital. Their only hope for getting any kind of health care would be through AI. Otherwise, they got to think about moving someplace for a month to go get it. So I think this question of these tools can democratize and bring much better care than what is possible. If I think about Africa, if I think about the Middle East, these are going to be essential tools. Otherwise, you're still going to get back to spiky delivery and people have got to travel across continents.

SPEAKER_02 14:19

And the stories are moving. There is an organization in Kenya that's focused on maternal health. And when you look at mortality in childbirth, and just a very basically simple intervention can save lives, you say, How can we not be doing that? Or I was with the prime minister in Southeast Asia who said, Can you help me with the lowest economic strata, which are farmers? And the answer is yes, with AI, you can actually on a simple Android phone, which is inexpensive around the globe, global south, pervasive, you can provide pre-crop information and post-crop information. We did a pilot actually in India with Ajay Bang and the World Bank, and it was a we already with the pilot, it was 13,000 farmers, so small relative to the opportunity there, but we saw a double-digit uplift in earnings. So this it is making a difference today in the global south. I think the opportunity there is profound, which is also back to your optimism question, why the optimism levels in the global south are so high.

SPEAKER_00 15:20

So we can't talk about AI and technology without talking about all of the capital that's getting deployed.

SPEAKER_02 15:26

There's a tad bit.

SPEAKER_00 15:29

And you've certainly been extremely innovative in how, and a knowing you, um, which is the person, but also the discipline that actually Google has had over capital. I'm sure there's an ROI in there somewhere. So would you talk a little bit about both the sheer amount of capital getting deployed and what you see as the potential returns?

SPEAKER_02 15:53

Absolutely. So there kind of I think there are sort of two parts to that question, which is why lean in as heavily as we and others are. And you know, we strongly feel that what the history of technology has shown is you can't miss platform shifts. And actually, when I was still at Morgan Stanley, we had taken Google Public, and so I still was reading all of the founders' letters. There was a founder's letter back in 2013, and Larry Page at the time wrote that incrementalism leads to irrelevance because change in technology is revolutionary, it's not evolutionary. And I think it's really important for each of us. There's actually a lesson I learned earlier at Morgan Silly. If you don't invest for the long run, you are sowing the seeds of your own destruction. And when you see a technology that can be this transformative for each of our businesses, I'll go back to my why not question. If we're each asking why not, and doing something bold and profound in building for long-term growth, it makes a difference. We view it that way for our own business. So investing for long-term growth has been key. And one of the earliest sort of jokes within Google was that URL actually stood for User's First Revenue Leader. And what we what we found was if you focus on the consumer, you focus on creating a better experience, good things will follow. And they have. So we start with this mindset of long-term investing. It's um and and then when you go to okay, so what does that mean in the moment? How do you do capital allocation? And what about that model where you have to try and solve for an ROI? You know, I think there are two parts on that one. When we were starting to build for theoretical real increases in CapEx, the phrase we used was to what end? So you may be today trying to determine what is the big bold idea. And what you can tell, what we can all model is if we're going to be investing at this level, a number of years out, what must one assume you're gonna be able to drive in terms of revenue and profitability? And dare to be great and think about what actually you should be doing. I think the biggest risk for everyone is when the question is asked, which it often is, how do you get to an ROI? That's gonna force our teams to do something short-term and tactical. You can always do a cost cut to get something to drop to the bottom line, and that is not a way to build a great company. So I think the risk is don't be so in the moment maniacally focused on what is it, but have a right mix of an engine that's continuing to drive the business, which also explains why you need to start building early for growth so that it you can grow into it. But then look at that to what end. And the to what end conversations were fantastic internally with my amazing business partners on how big can it be, and therefore how does one think about the possible the art of the possible. And then we go back to technology platform shifts. This is true for every industry, every single industry, as you and I have talked about. If you're not applying technology, you will be lagging behind.

SPEAKER_00 18:56

Also, to make the point, it's not a new thing for Alphabet and Google. If I go back to even 15 and 20 years ago when the first boom was happening on search and automation and video, I know people outside were questioning why does Google need 5 million servers? And why do they need all these tens of millions of square feet of data space? It is an order of magnitude because in those days the spend was already in the tens of billions, maybe, but it wasn't definitely not in the hundreds. But with this technology shift and the ability to capture market share, I think to your point, this is a moment, and if you miss it, you miss it. That if you fall about three years behind, would be my statement. You're never going to catch up. You can be a user, but you're not going to participate as a direct beneficiary.

SPEAKER_02 19:46

I totally agree. And you went back to 2015. I joined Google in 2015. And at the time, the narrative was okay, well, Google did pretty well on desktop, but can they make the transition to mobile? And by the way, what is YouTube really anyway? That was sort of like, and I was excited when I got there and got to look under the hood. And I think we showed pretty clearly that you've got to embrace and shift to the new platform, did pretty well with mobile. In 2016, Sundar said, we are now shifting to AI first, and it will be a full stack approach. And at the time, I don't think most people understood why that was so differentiated. But full stack means we're going to invest meaningfully in research, in models, in chips. We have our proprietary TPUs. Most people know about GPUs. We also have TPUs, we also use GPUs. And what you and I have talked about, the application solutions that we can then distribute to billions of people around the globe who today many don't even know are benefiting from AI, whether it's in Google Translate or in Search or Maps, but it's making the products better. And so that pivot was 2016. And when people look at what we're doing today, we acquired Google DeepMind, which is our DeepMind at the time is our leading AI lab, and then we merged in with Google Brain to have Google DeepMind. That was 2014. We started our chips program about a decade ago. You really do have to plan for the long run.

SPEAKER_00 21:14

And the Chips Pond, a lot of people were wondering why is Google investing in chips? And now, how many of the other companies do you have who are becoming your customers and who are desperate to get that capacity?

SPEAKER_02 21:25

Exactly. The performance and efficiency of the chips is pretty special.

SPEAKER_00 21:29

So I think the whole goal which you've been making so passionately and eloquently is that we need to channel this correctly and leverage it for all the benefits while working to make sure that you called it the J-curve, there is always some displacement that we manage that. But given the amount of resources we have, is that fair? We can manage it.

SPEAKER_02 21:49

We can, but I think very importantly, this notion of done right, investing responsibly to protect from the downside. Because we need to make sure that everything you said that could go wrong does not go wrong. And I think on job skilling, you know, when we started the electrician training program, the number of times I said no one company can do it alone, it needs to be program upon program building, and that's what we're seeing, and we're really excited about it. Same in other fields, and the work that's being done here in New York is really important on job skilling and beyond. But yes, done right, we can protect on the downside, and we have to be clear-eyed. That's not a that's not a statement, that's an investment, that's all of us working together, and there will be some public policy work that's going to be needed to protect on the downside transition to help move people into jobs, to give them that you know that safety belts when we're going through.

SPEAKER_00 22:40

That's very well said. I mean, the whole point of public policy, I actually think that is where government can be most effective in terms of writing and then helping enforce the policies as opposed to trying to go micromanage what is what is happening out there.

SPEAKER_01 22:58

You've been listening to the forum by the Economic Club of New York, a nonprofit 501c3 dedicated to connecting the world's brightest minds for critical nonpartisan conversations. Be sure to subscribe now to be alerted to future new episodes. Would you like to be a part of the conversation at the Economic Club of New York? Learn more about membership, the New York City and National Fellows programs, and other opportunities for engagement in the club at www.econclubny.org. I'm your host, Becky Quick. Thanks for listening.