AI and Agile: Future Business Landscapes with Richard Arnold

Navigating the Intersection of Technology and Humanity with Richard Arnold

In this episode of The Human Code, host Don Finley is joined by tech expert Richard Arnold to explore the dynamic intersection between technology and humanity. The discussion delves into the ways technology is transforming decision-making, emphasizing customer-centric approaches, and the impact of agile methodologies on organizations. They also discuss the evolving role of AI in various industries, the implications for future career choices, and the importance of authentic human interaction in the digital age. Richard emphasizes the need for innovative thinking in the face of rapid change and the critical aspects of aligning business goals with environmental and societal well-being.

00:00 Introduction to The Human Code 
00:52 Meet Richard Arnold: A Tech Visionary 
01:09 The Intersection of Humanity and Technology 
02:36 The Role of AI in Decision Making 
03:42 Transitioning to Agile Methodologies 
10:27 The Future of AI in Business 
19:47 Human Creativity in the Age of AI 
26:26 Career Advice for the Next Generation 
30:44 Redefining Economic Value 
33:48 Conclusion and Final Thoughts

Transcript

Don Finley: 0:00

Welcome to The Human Code, the podcast where technology meets humanity, and the future is shaped by the leaders and innovators of today. I'm your host, Don Finley, inviting you on a journey through the fascinating world of tech, leadership, and personal growth. Here, we delve into the stories of visionary minds, Who are not only driving technological advancement, but also embodying the personal journeys and insights that inspire us all. Each episode, we explore the intersections where human ingenuity meets the cutting edge of technology, unpacking the experiences, challenges, and triumphs that define our era. So, whether you are a tech enthusiast, an inspiring entrepreneur, or simply curious about the human narratives behind the digital revolution, you're in the right place. Welcome to The Human Code. Welcome back. I'm here with Rich Arnold. I would try to do an introduction of Rich, but at the same time, I feel that the man has such a wide berth of experience that would not do justice at this point. And so we're going to jump right in to this conversation. And Rich, I just want to ask you, what is the interest with you as far as the intersection between humanity and technology?

Richard Arnold: 1:15

For me, it's about helping people to achieve their dreams. in, in the tech world, you run into such amazing individuals who are both hugely technically competent and often have incredible domain expertise, and they apply the knowledge of a marketplace or a market to the need of the consumer. And I've worked for a long time with Charles Schwab and one of the beautiful things about Chuck is that the customer was always at the forefront of the conversation. And so when I engage with tech leaders, ones that really excite me are the ones who put the customer first in everything they think about and making life better for the consumer or the end user. Making the user experience better, making the buying experience better, making the quality of life and the quality of decisions they make better. That's what technology is doing for us and It's helping us to answer the question that not enough books have been written about, which is to make a decision. And technology helps us to make good decisions.

Don Finley: 2:30

I don't know if I would go that far. I think it.

Richard Arnold: 2:34

I think particularly with artificial intelligence,

Don Finley: 2:38

Okay.

Richard Arnold: 2:39

there is so much data that is available. so much information. If you think about the data sitting behind OpenAI, or sitting behind Google, or sitting behind Palantir, or sitting behind the U. S. Army, or sitting behind the people trying to run a railroad, there's so much information. Integrating all that information into the best decision you can make in real time requires massive computational power on NVIDIA chips. And we're doing it. And it's going to make things better, right? So that the train will be there on time and it won't run out of fuel and it won't crash and it'll ride smoother. And all those

Don Finley: 3:23

Okay.

Richard Arnold: 3:24

of better decisions.

Don Finley: 3:25

And I think you're right. It does enable better decisions, And then on the caveat, it also enables faster decisions. And hopefully a quicker rectification of a decision that wasn't quite proper, as well.

Richard Arnold: 3:39

Yes. And that's actually a segue into the other topic that I love to talk about, which is transition from top down hierarchical command and control organizations to agile structures and methodologies and the freedom to err and Pivot or persevere quickly, right? to make mistakes and fail and the higher value alternative built instead. And that's what's really exciting about commerce today is how a larger proportion of enterprise is using agile methodologies. To move faster, to higher value flow.

Don Finley: 4:19

I could totally see that because I can tell you from my personal experience, as well as, talking with other industry experts in this, that the amount of data that an executive needs to process on a daily basis is just too much for them to be making, decisions. And even 10 years ago as a CTO, the amount of technology change that was happening in our organizations. was too fast for top level decision making. And we really needed to push down, either some of that research or the architecture of our platforms needed to be modularized so that independent teams could, develop what was necessary to fulfill that customer value that they were trying to capitalize on.

Richard Arnold: 5:01

that's one of the wonderful things about well implemented agile methodologies done at scale in large enterprise, where you've got thousands of teams

Don Finley: 5:11

Yeah,

Richard Arnold: 5:11

that the inner product. if they're properly in touch with their user base or their customer base and understand what the needs and potentials are, put candidate epics or initiatives onto a board and teams self direct about selecting which of them they build and how they build it. and then you get cross functional collaborative teams doing that real time design work. And development work and testing work. And then,

Don Finley: 5:44

it's super fascinating to see like how, we can go from top down to also to bottom up and how that collaboration goes in your transitioning of companies from that top down to that agile directive. What are some of The immediate pain points that companies run into when making that transformation.

Richard Arnold: 6:03

well, the first one is that there's a small subset of people who can't make it. and so there is typically some turnover in that initial phase where people are just natively more waterfall, program management kind of structures. But people really benefit from it. I have to say. In every case where I've been involved in that fundamental transition, there's a cultural transition that you have to manage. And that means taking people off site and sitting them down and talking about how to have open, honest communication and not get finger pointing and blame and admitting error and weakness and recognizing failure quickly. And being honest about it and authentic about it. And I literally in every single case have had at least one and often four or five people come to me afterwards and say, Richard, you saved my marriage, or you saved my life, Because they find a new way to be that is more authentic And happier, and it's a beautiful thing to watch, and when the branches are no longer pointing fingers at headquarters and yelling at them and the product guys aren't bitching about the salespeople and vice versa, you get that hold of team collaboration. It's just so beautiful. and once you've done it, turnover goes down massively, People used to change jobs every three or four years. Once you get in a really well oiled, agile organization, voluntary turnover drops below 10 percent,

Don Finley: 7:48

Yeah, it is one of those amazing things because I think you're hitting on the point of people can be more authentic with who they are. So we're not wearing the mask of work as heavy as it once was, Like you're not hiding yourself from the experience. we've empowered people to make decisions. And giving them the autonomy to, impact an organization. And So you feel like your value is either greater appreciated, but also you can have a larger impact on the organization is what I'm hearing as well.

Richard Arnold: 8:20

So you've mentioned two of the key words, empowerment, And, I would include alignment as critical, Once you get an organization aligned, once you've got clarity of what the strategic objectives are, clarity of what the KPIs that you're driving to achieve through those strategies, clarity of how initiatives are tied to those strategies and those KPIs and then aligned across an organization. So that there is respect for each of the initiatives going on in each of the parts of the organization. So you get improved alignment, you get improved engagement. People are leaning forward. it's amazing how often you see, the stock boy in the parts department becoming the scrum master, because he's the guy that knows everything and stands up and is willing to lead and make a mistake. And it's just

Don Finley: 9:18

It's amazing to see, I think I first got involved in agile software development 20 years ago now.

Richard Arnold: 9:24

yeah, me too.

Don Finley: 9:25

And it was profound for me. with my focus in artificial intelligence in college, we were taught waterfowl software development life cycle. Which for artificial intelligence is probably the worst because you literally are creating experiments to see what actually works. And it's not so much, changing deterministic code, but learning how the system adapts to itself. And so learning that waterfall method. for those types of projects was very challenging. And then it was like a breath of fresh air to see that people were thinking about this, the frustration of Waterfall and that we were solving customer needs, but we may be solving customer needs that were defined six, nine, 12 months ago. And not actually validating them until a year after that. And so the amount of rework that needed to be done was just always massive towards the end of projects. Where do you see the state of AI today impacting how we do business in teams and individuals and like what that looks like for an enterprise or for a startup in adopting, what they're doing today to create more value for the customer?

Richard Arnold: 10:45

That's a very short question with a hugely long answer and I'll try not to be too verbose about it. So the first thing is that it's very market specific. that you have situations where what AI is doing is just extraordinarily complex. If you think about what Palantir does for the CIA or the U. S. Air Force or the U. S. Army or the Israeli Army whatever, where you've got battlefield information in real time, and you're trying to make very high value decisions very quickly about target selection and whether to drop the bomb or not, but a huge part of life where humans have been forced to make decisions themselves with limited information and limited understanding. And AI takes us from an information system that makes the information more available. Like we now know what the stock prices are, We used not to know that we now know what the trading volumes are. We now know the financial results of the companies that were right. now know what new contracts they've signed, but that doesn't allow you to necessarily synthesize all that information or understand. All the information about what the competitors of that company are doing, and regulators in that industry are thinking about doing, and there's so much more information. what an AI system can do is synthesize and make probabilistic based that the human brain is not well facilitated to do. Humans are not natively probabilistic in their thinking. They're natively deterministic. And the beauty of AI systems is that well designed massively probabilistic and what they need is not just good algorithms, but good data and more of it. And if you take 15 different competing AI platforms and compare how they perform over time, there's actually not a huge amount of difference. determined by the algorithms. There's a huge amount of difference determined by how much data they've got and how good and clean that data is. And we as humans needing to make those decisions won't necessarily get displaced by these systems. much as we will be aided by them. And so if you think about a financial planner or a wealth advisor, they think now I know stocks, I know how to pick stocks. I know how to do investment plans, whatever. And they're really bad at it. Honestly, their cost to the customer is higher than the value they create. But you give the right set of technology and let that human have a digital assistant that can keep that human on the right track with better quality decisions. That's better for his customer.

Don Finley: 13:59

Yes.

Richard Arnold: 14:00

And that's where life's going all of us having really good digital assistants to do our life and our jobs better.

Don Finley: 14:09

So thinking about like how these digital assistants can help us, do you see them as a combination of like general assistants? Like we're talking, the series of the world, the Google, can't remember what Google's AI assistant is called. but then also we'll likely see context dependent AI is helping us out in assistance, like in our cars or, relationships with businesses as well.

Richard Arnold: 14:36

Yeah, there are a lot of places where taking the human out of the loop is better than leaving the human in the loop. So there will be both human in the loop computing and no human in the loop. I will give you a perfect example. I worked with the first company that purported itself as a decision systems company. decision support, but decision systems. And they, I have to give a little background here so you understand how it came about. My sister is Literally the leading woman in the field of high energy physics in the world. and she introduced me to this guy, Subhash Gupta, as the smartest guy I ever met in physics. And he had left physics and was working on, basically optimization mathematics of various kinds. he did things like, United Van Lines, whose goods do I put on which truck? Which truck do I send where? when do I refuel, like all that kind of stuff. And then he did airline planning systems for U. S. Air and Canadian Air and so on. then he productized in the hospitality industry. So in every hotel, you've got the question of, how much do we say a room is next Thursday, or is a suite available over the weekend? And so hotels have revenue managers whose job is to increase aggregate revenue for the customer the hotel. And it's not just about average price per room or average occupancy rate. It's about what's called REVPAR, Revenue Per Available Room. So how do I maximize REVPAR the whole year? He built systems to do that. for example, the human used to know the Pope is visiting Chicago in the third week of June, so we'll raise the rates, But the system can make a much better decision in real time. of what price do I quote this lead or this opportunity and do I or don't I sell the room and literally took the humans out of the job of revenue management. Now, how does the system know the pope is coming? It doesn't. What it does know is that 211 days prior to the event, it saw a change in demand. And so it's able to mathematically compute what that implies about what the aggregate demand is going to be and change that computation with every new day Or with every new minute of input. And so nowadays, every hotel in the world has these very sophisticated revenue management systems and don't have human revenue management,

Don Finley: 17:29

Oh, that's amazing. because you're absolutely right? You don't really need to know that the Pope is arriving, but you're going to see a change in behavior that 200 days out while people are like actively making sure that they can get a spot where if there isn't an event. You don't see that blip and that's not a normal behavior to be grabbing a room.

Richard Arnold: 17:50

There are many other. event driven behaviors. for example, the AI conference books MGM Grand in Vegas and locks up 680 rooms for four days in February. The moment that booking hits system knows Okay, 13 percent of those people will arrive four days early, 8 percent will arrive three days early, and it starts adjusting and so on, and some will have their wife come and stay over and it just changes the aggregate demand on either side of the block book

Don Finley: 18:30

And like you were talking about the utilization of decision systems and AI kind of allows for greater amounts of data to be used in these systems to be making these decisions.

Richard Arnold: 18:43

and to localize that information. So this is really important. There are systems now, for example, that decide when do we start discounting the yellow dresses, because lime green is starting to replace yellow in the demand in the fashion house. But it may be different in Bakersfield than in Portland, And so you might be discounting earlier in Bakersfield and later in Portland. And you might be discounting earlier in the large sizes and later in the small sizes. And all that stuff is now data driven, systematic decisions rather than humans making judgment

Don Finley: 19:28

I absolutely love this. Like you can see that I'm just smiling along as you're describing these things. Cause we build some of these solutions and like we have a very shared, I would say value system as to how we go about looking at what we're going to execute and implement. One of the questions that I have for you then is, where do you see that human spark of creativity that comes into this? I've noticed in my past, and even early on, is that there was always a hesitation of the frontline person to think that the system could do the job better than they could. they thought that there was some sort of thing that they brought in that gave that localized institutional knowledge that you couldn't replicate in a system, but I can show you the numbers, Like you can, and it's very easy to prove, but now we're talking about AI that is much more capable and shows a higher level of intelligence and decision making capability that we could offer in the next couple of years. where do you think the human in the loop is going to be?

Richard Arnold: 20:34

my first answer is ever changing, there will come a day a woman will rely on a system to tell her which shoes to wear to the party, Today, there is no way you would let a computer make that decision.

Don Finley: 20:49

I'd make it for myself, but either way, yeah,

Richard Arnold: 20:52

But if the system knows every pair of shoes that has been sold and every dress that's been sold and which one somebody took off the rack 13 seconds ago, because the camera in the closet knew it. And so now we know that, half the people are coming in summer dresses and half are coming with boots. And I'm being ridiculous, but deliberately so that. There are many decisions that today we take for granted as truly human, that today we can assist a bit, tomorrow we can drive the car fully autonomously, and eventually human brains will be used for things other than making many of the decisions they make today. So what will it be used for? ultimately. More recreation, more creativity, the arts and whatever. I know AI can do wonderful art and write poems and things like that. But, if we gradually reduce the amount of human labor. And increasing the amount of computational value creation through computer labor, then it inevitably frees the human for more recreation and more creativity. we won't have to work as many hours or as hard. Or we will work on new and exciting things. don't think AI is going to reduce total demand. It will increase total labor demand because we'll just be doing a lot more.

Don Finley: 22:37

we as a society definitely fall victim to the disaster that could be created. But then at the same time, every revolution that we've had, industry information, the internet, like they've ended up being net positives. on the economic like creation. And I think we're finally starting to see maybe where productivity.

Richard Arnold: 22:58

need to worry about future work for the buggy whip maker or the horseshoe when they

Don Finley: 23:04

No, it's true.

Richard Arnold: 23:05

places stuff, right? Because

Don Finley: 23:06

Yeah.

Richard Arnold: 23:07

them in Carfax.

Don Finley: 23:09

And it is, it's, we're at an interesting time where, this is the first time that we've basically created a tool that can think for itself. It can make decisions, Or at least we feel capable giving it the opportunity to create a decision, or make recommendations, allowing. information to be turned into like knowledge and hopefully soon wisdom as well. and that embodied knowing of what it is. But as we get into these different areas, like we're going to find different careers are created. Like you're saying there's going to be, an opportunity for more play. which always reminds me of an Alan Watts quote around make your work look like play and you'll never work a day in your life. and so maybe hopefully that is an embodied reality that we could all be living soon and that our, children and grandchildren could get to. congrats?

Richard Arnold: 24:05

of this though. If you take a shorter time frame I had to think about. My sister graduated high school last weekend. In Santa Cruz, California, and my granddaughter and she is now headed off to college. what do we study in college? year and maybe the year before her, but her year is the first year I think, where all those girls and their literally sat around and talked about which career paths are no longer viable because of what AI will do to them. And that's really interesting.

Don Finley: 24:45

That is amazing

Richard Arnold: 24:47

do you

Don Finley: 24:47

for,

Richard Arnold: 24:48

a lawyer if we only need a third of the number of lawyers? Because is done by AI now and we don't need so many.

Don Finley: 24:57

yeah. And that's a, it's a really amazing conversation for high schoolers to have

Richard Arnold: 25:02

Yeah,

Don Finley: 25:03

as well. And because it requires a, you've got to be forward thinking. And at the same time, you're not really banking on a lot of. baggage, but like you and I have, careers that we've gone through. We have, predetermined type of activities where we're very much like habit creatures and might have shrunk. I'm so curious as to what they saw as being, either the most viable majors for them. Or how they aligned themselves to pick where they wanted to be. Was it a logical decision? Intuitive decision? A combination of both.

Richard Arnold: 25:39

I think it's all, it's very regional and cultural. she's Santa Cruz, California, right? So she, interest is in helping to address and solve homelessness problems. so was fairly easy for her to direct herself towards, public health and sociology and like that, but she pretty quickly ruled out things like lawyering, and even health care itself. but I think that conversation would be very different in Compton, California or Detroit, Michigan, or, even New York City, because of cultural differences between, what teenagers are talking about and worrying about in those locations right now.

Don Finley: 26:23

Absolutely. I gotta say, I've really appreciated having you on and it's been a really good conversation, but what would you recommend to younger people who are looking at their career? what are the points that they should look at to evaluate?

Richard Arnold: 26:38

my first thing that I have said to all of those people is do not ignore aged care. We have a phenomenon going on right now that is a macro phenomenon of a massive increase in the total number of post work individuals. And in the degree to which those people need care, Alzheimer's, dementia, and other high levels of care. there is not a culture of building people to work in geriatrics. The world is going to need a lot of people working in geriatrics because computers can't whack my bum, right? but I think also be prepared for a very accelerated rate of change. Of everything about your life, including the number of different careers you have over your lifetime, because the world five years from now will be very different from today and 10 years from now, be very different from five years from now, you have no idea what the world will be like in 10 or 15 years.

Don Finley: 27:52

Yeah.

Richard Arnold: 27:53

honestly, I have built an entire career based on being the one guy in the room that drew a graph with 30 years on the bottom line and today in the middle and said, where has this come from and where's it going? And I'll use one example that I really like to use because it shows how dramatic this is. I met Charles Schwab and stock brokerage was becoming deregulated, the average commission that people were paying to Merrill Lynch to do a brokerage trade was 150. and Chuck put an ad in the Wall Street Journal that said, I'll do that trade for 75. And the Inbound 1 800 number, which we were the first to use, started ringing. so a discount brokerage industry was built. And Chuck and I had this conversation where he had this sort of, here's 150 and here we are now at 75. And I said, Chuck, I see a different graph. I see a data point here and a data point here. And that looks like a curve that is asymptoting to zero. We've got to build the business that can live on zero dollar commission. the one that lives on 75 commission. And that's why we became so aggressive about it an applied technology business and applying technology to every single issue in the business.

Don Finley: 29:20

Ah.

Richard Arnold: 29:21

Schwab's commissions are virtually zero and it's a very healthy company. The point being that those transitions. happen without you realizing that you're in a fundamental transition. The real estate brokerage industry is about to experience it, where they've had fixed commissions. just gone through what would have been a Supreme Court decision and ended up being a settlement of class action suits. And nobody in that industry understands that the value they can contribute to us, when you think about how much of the information is available to us on the web, Like it's really low. And so the aggregate commission revenue in that industry is going to asymptote to zero. And that means that a lot of people are going to change the way they buy and sell properties, but a lot of people are going to lose their in real estate.

Don Finley: 30:19

It's an amazing time for us to like experience all of this as well. there's, you're describing, and I feel like we just touched on three different industries, but they're all going through a similar sort of challenge where they're going to see something fundamentally change in their market. And it is going to drive something to the price of zero. And like the thing that we thought that we might've been able to compete on value, compete on, whatever is still going to be worth really nothing. there's a book called sacred economics. And I absolutely love it because it taught it. It gives a counter to the capitalistic pursuit that I've always been in. And it goes, an economy is the study of scarcity. And I found that to be rather interesting because if you look at like childcare in America, we have a GDP component. in which child care is part of because I can go to a daycare center. I pay money for it. But if I go to Southeast Asia, children run the street free and they know that no matter whose house they show up at, they're going to be cared for. They're going to be fed. they'll have their fun, but there is no GDP impact for childcare in those countries. And we're getting to the point where like value creation can become So solidified in a, that product that we're offering at that price point, but you've just described two different areas where that could be easily driven to that price of zero. And so you really have to look at what your relationship is with that customer and coming back to what you were saying earlier around the customer needs to be your primary focus. At least I feel like I'm synthesizing what we've been sharing today.

Richard Arnold: 32:04

I would add one little thing there, by the

Don Finley: 32:06

Please.

Richard Arnold: 32:07

thanks to this amazing New Zealand woman there. Suzanne Waring, who, who wrote a book, Counting from Nothing, where she got interested in how GDP is calculated. And she pointed out eventually after many that, if the Exxon Valdez sailed successfully to its destination, it would have a GDP contribution of but by crashing in the shores of Alaska and causing One of the largest environmental cleanups in history. It had a GDP contribution of a hundred X and that can't be the right way to measure things. So when the shopping center is being built and the pavement is being paved, where do you value the birds or the bees or the bugs or the other wildlife that are impacted? And so she started doing a kind of economics. That is fundamentally different than any economics we've ever done before. And I do think that one of the ways society will change is we will figure out to properly value environmental protection or quality of life enhancement or other elements. it matters what my air is like. So how do we make an economy? That makes for me to have good air, stuff is going to be really central to the next 50 or 100 years. Because if we don't do it, life's going to be crap.

Don Finley: 33:46

Rich, it's been an absolute blast. I want to make sure that we end on that note because it is one of those important things that we have to be looking at all stakeholders. in our economic pursuits, it's not just the shareholders. It's not just the employees, but it's the environment that comes along with it, the community, and even the future impacts and the second order impacts that come from it as well.

Richard Arnold: 34:09

And the words, right?

Don Finley: 34:12

Yeah, exactly. every conscious being like we all get a chance to enjoy this. So once again, from the bottom of my heart, thank you again for taking the time to talk to us today.

Richard Arnold: 34:22

Great conversation, it's been fun.

Don Finley: 34:25

Absolutely. Thank you for tuning into The Human Code, sponsored by FINdustries, where we harness AI to elevate your business. By improving operational efficiency and accelerating growth, we turn opportunities into reality. Let FINdustries be your guide to AI mastery, making success inevitable. Explore how at FINdustries. co.