Ted Audio Collective
Hello everyone you're listening to after hours. I'm Felix and I'm here. Happy Diwali me here. Oh, yes
Thank you Felix. I know it's been a couple of days, but I hope you celebrated. Oh, it was fantastic
Diwali is a wonderful celebration in Hinduism and for many people around the world
We happened to celebrate it with my sister who does a wonderful job of putting together a little puja
And it's really quite a lovely holiday in some sense. It's a new year celebration
But the theme of light is a wonderful one as you may recall
You'll see houses lit up with Dia's small little lights
Yeah, but it is everything that light represents light over darkness good over evil
And so there's just a wonderful set of themes that run through it. Yeah, it's sort of interesting to think about across
religions light plays a big role
Think about the Jewish holidays think about
Christmas light and religion and festivities. It just goes together really nicely and it's magic
Yeah, it's absolutely magical
Yeah, sit that a fire and stare into the flames for a little while
It's just like endlessly interesting exactly right. Yeah, so what do we have before we get all to
Romantic you think
Exactly. So I wanted to talk about AI and copyright as one of the topics today and all of a sudden
It's everywhere. There's a lot of legal action and I think there's a whole set of really interesting questions around it
Yeah, and there's that copycat after hours podcast too. We have to worry about that's AI generated
Exactly what did you bring? Well, it's a couple of years into this corporate purpose movement
Which has really been transformational in many ways and I thought we could just take the temperature of where that movement is and what we make of its
Accomplishments and where we think it's lacking as a way to think about going forward how it should evolve. Let's do it
All right, Felix so AI and copyright tell us what's been on your mind
I think there are three big things to think about the first is
If you create some work some image with the help of AI
Can you get the protection of copyright? So that's one question, right?
Suppose I create one of these images and it's very similar to something that someone else has created
Could I get sued because I infringed on someone else's copyright and then maybe the most complicated of all because all of these AI
Models are based on huge amounts of text or images. Is there something about the collection of these images that enjoy copyright then as a result
You can't just build an AI model on top of it without asking the owners of the copyrighted images or the copyrighted text for permission
Right, I think of this as like an output problem and an input problem
So there's the output of AI and what does that mean for copyright and then there's just the inputs of AI. Yes
That's a great way of thinking about it
I think the easiest is probably can you get copyright protection for something that you have created with the help of AI
Right and the answer seems to be if it's purely the machine that creates the image you cannot get copyright
Right copyright is really just for human creators
I think the classic example is if you have a monkey and you give the monkey a camera and he presses the button that image
Even though it's created by a camera just as if a human person had pressed a button that could not be copyrighted
So that seems relatively clear there sort of these edge cases
I remember a famous case of a comic book author who wrote a really interesting comic book and then all the images were
generated with the help of AI and in that case the copyright office decided that it's the combination of the images and the text that deserved copyright protection
But the images themselves if say if you were to take it out and then just post an image that image itself because it's literally just created by AI
Cannot actually enjoy copyright protection and Felix before you go to the input side which I agree is more complex
Let's just make sure on the output side there is an issue associated with the use of this technology and so I think the alternative view is by prompting
Artificial intelligence in certain ways and through that iterative process of prompting
Am I exerting enough human influence to get a copyright?
Yeah, I think that's exactly right the court so far have denied these claims so the idea is if you prompt say jatchy pt and you go back and force and it gets better and better at expressing the ideas that you want
You supply an idea but not a work an idea cannot be copyrighted but works can right and so in that traditional distinction
Because you're really telling the AI your idea and you're getting better and better at it than it's back and forth
But ultimately you have supplied the idea the AI created the work and because AI created the work you cannot be copyrighted
And then to finish on the output side
One really big question is if you happen to work with dolly and create an image and the image happens to be
Substantially similar to something that already exists and is copyrighted do you infringe on copyright?
We have some research that says 2 to 5% of the output of AI systems ends up looking super super similar
Right and if it was similar enough to be essentially declared substantially similar by a court you'd be liable for infringement
Yeah, I think in a way of all these questions that one feels relatively speaking the easiest in the sense that
It is the same question we've been asking about copyright for a while
Which is if you produce a piece of art that's substantially similar to
Michael Angelo's we've worried about that problem before in a way the means of production are different
But that question it not that it's an easy question
But it seems like one that we've struggled a little bit with before as opposed to those other AI questions which feel novel and weird
So maybe let's go to the input side and there I think it's wide open what it means
So one important facet here that will matter quite a bit is
As you build one of these large language models or as you build on a database with photos
It's almost always the case that the AI company will actually download
The text will download the image right so that's the sense in which you can ask
Well, you downloaded an image and you copied it and you didn't ask the owner of the image whether you were allowed to do this
This is classic infringement and not just that Felix then you
Download it and then you train your model on it. That's right. Yeah, and so the excuse and I think the whole
Conversation is around does the excuse apply the excuse is one that we typically call fair use right and there's a whole host of criteria around fair use
Right, I mean you characterize it as an excuse and by the way this is becoming very relevant because the FTC is solicited comments on this
Technology firms like entries and horror wits have suggested that if you make AI firms pay
For all that content could cripple the AI industry
Yeah, and I don't know Felix you put that in such a dismissive way, but fair use is an important doctrine here which is
We can use copyrighted images in limited ways
If it is under certain parameters
particularly the way we use it the way we cite it the way we
Characterize it how much we transform it
There is this kind of safe harbor. I guess is the way to think of it of fair use and I take it your skeptical about that
Maybe I can point at two conditions that apply to fair use that I think are particularly
Relevant here. There's a whole list of criteria, but two that strike me as really important are
One is what's the effect on the value of the original work right? So is it the case that now that there's something that AI can do
Does it have a dramatic impact on the value and I think the most recent example is
When someone used AI to produce a new song by Drake in the weekend
But it was recognizable as one of their songs and it was hugely popular
But that feels like a very close substitute to a Drake or a weekend song and as a result
Probably fair use doesn't really apply here
The counter example is when Google downloaded basically all the books that ever existed
Right to improve the search engine
But also to just create a database of books and you can look at snippets of these books and maybe hard
It's a very powerful search engine. It's very powerful. Yeah, there
I think the courts decided in Google's favor and one of the arguments was look these snippets in the discoverability of books
It's not actually a substitute if the books in in some sense you might argue
It makes the book more valuable because now you can discover it in ways that you couldn't have discovered it before
Exactly. But so that's an important thing for us to think about what happens to the market value of these works as AI creates
Related images related texts right and by the way just to be clear that
Question is fairly speculative. Yeah, it's not like how common are these things your 5% rule for example with images or something like that
This is a what is happening to the value of property because someone is doing something
So one could for example argue that Drake's reputation is enhanced by the production of this additional song
So it's actually a very speculative question, but a super interesting one, but it really is speculative one
The other one that is really interesting is
Fair use applies if the work is really transformative. Yeah, remember copyright was created to give greater incentives to
Creators to do new things and we didn't want to discourage the creation of really new things
But the emphasis here is on really which I guess is called transformative in legal speak
For instance, it's a big issue with Andy Warhol paintings now
Where it's not clear are they distant enough are they transformative enough in order to not have
Inferringed on the copyright of the person who created the original work
These issues within fair use strike me as clear examples of how and why AI might get tripped up
So for example if they don't transform enough
Some piece of content or if for example they devalue some other work
But let me ask you though even more simple question. What do you make of
Just the fact that AI is being trained on lots of lots of material
That is somehow an input to their process
And even before we get to these issues where it seems a little more
Not easy Felix, but for example if they come out with a book and it's not called better simpler strategy
It's called way better
Clear strategy
That might devalue your work and it might not be sufficiently transformational of your work because it's been trained to basically just
Talk like Felix. Yeah
But in the background put those cases aside
We know that they've read your book
That seems like a threshold question even before you get to your questions. Do you know where I'm going Felix?
Yeah, you're thinking about the black box process that ultimately can lead to something novel
My intuition here is say
You go to an art gallery or you go to a museum and you're an artist and you're incredibly inspired by what you see
If the resulting work is
sufficiently different as transformative I see I think you should be okay because what we wanted really was copyright is we wanted to give you
Fabulous incentives and wanted to protect the creators
But at the same time not shutting down
Innovation for everyone else at one at the same time and so it's always this balancing act between giving protection to
Works that exist but at the same time enabling future creations and fair use
I think was a pretty smart way of doing this in that we recognized if there's enough distance between what you did
And what the original work was your home free you're okay
If you're very close then I think all these other criteria kick in right you see it as different from being a stroll through the museum
I do I guess because of the scale and the speed with which it happens and the nature of what can be produced
I take your point which is there's a distinction between
Some general sense in which I might be influenced or an AI model might be influenced by your work
For example in strategy, and we don't really want to
Penalize them for some general sense of influence that you have had on the world. Yep, and they are just absorbing that and they're drinking it up
Yeah, and so then where we're left is I think where you're taking us which is we have to judge
The outcomes and the output and then we judge the output
And we see how far it is. Yeah, I guess the problem with that is it's not rewarding
Creators for that general way in which they might influence the world
Yeah, and you might say yeah, well we never really wanted to
But it does feel a little wrong if a company is monetizing that in a way
That was not really true for your lovely story of an artist who just happens to be strolling through a gallery
The scale and scope of that monetization is different right as I'm speaking
I'm not sure this argument has merit honestly Felix
I think it is worth pausing on because I think where you're going is we're just left with the traditional way
Which is we have to measure intellectual distance X post right that's where you're heading
I think yes, and I think it's interesting how
For instance when you use dolly 3 yeah, and you ask it to create an image in the style of some artist
It will now decline to do so and the reason is the output is going to be so close to what because I would have done
Future AI products will be careful to maintain that distance to the original works
And one of the reasons why I actually really love this is that it makes it so much more likely that AI will be used by humans in really creative ways
The strategic decisions of AI companies can push in that direction that we really get to see
New things that no human would ever have started
So then oh my god AI has just gotten so much more interesting so much more creative
Yeah, and that story the world is one where it has absorbed lots of knowledge and lots of images from history
And somehow is just able to recombine it in more wondrous ways
And faster than anyone could imagine and that is truly wonderful
And then the guardrails are effectively the ones you've articulated which is exposed in intellectual distance as well as
Exanti we just won't let you
Prompt us for things that are too close
All right, well then Felix. I guess you'll be delighted to hear that I've used AI to generate a new strategy book
Oh my god is so interesting because I just wrote a finance book. I mean
Corote sort of
Yellow like the famous hell finance works, but you know other than that all right
Well good, so we'll see each other in court then
Ha ha ha excellent very good
So many years social purpose what's on your mind?
It's been a couple of years since the corporate purpose movement has really taken hold now in some sense
It's been a long time coming
Mm-hmm the initial ideas that ran up against so-called shareholder primacy and articulated the idea that stakeholders more broadly are important to corporations
Has been around for quite a while
But in the last five seven years it has really accelerated to the degree that
And we talked about this a while ago the business roundtable has embraced it and
Now indeed it is kind of the bread and butter within
corporations to have an explicit corporate purpose. Yep, and
I'm curious what you make of that movement now that it is so well established
To give you a sense of what this is
Most corporations today have some notion of a purpose statement
So for example black rock says to help more and more people experience financial well-being
Campbell soup real food that matters for life's moments
AT&T inspire human progress through the power of communication and entertainment
So these statements are out there and they are really front and center in many ways in the life of a corporation
And I guess I'm curious as to what you think this movement has accomplished so far and what it will accomplish in the future
One really significant
accomplishment is that we sort of opened up this conversation around
What is the purpose of businesses? I think shareholder capitalism the arguments are at least to me
So convincing so powerful that for a very long time we didn't really have the conversation
It was really before shareholder capitalism got established that there was a broader notion of the purpose of companies
And then I think for at least a couple of decades that conversation ended and we all seem to believe that
Be as profitable as you possibly can basically sums it all up
So I think that to me is already huge. It's a very interesting and important conversation to have
And in the course of that conversation, I think it's roughly two thirds of companies that have now some sort of a purpose statement
if you then
Scratch the surface a little bit and you ask for
How many of these companies is it actually true
That there's real impact that there's rules or that there's prescriptions that there's do's and don'ts as a result of having that purpose
You get to a much smaller number. It's probably around 25% of all companies or so that's a first thing I would say
Working progress, I think is maybe one way to describe it because if it's just the nice couple of words on
Someone's web page
It will not really bring any of the benefits
So one question to ask is like why is it so difficult to translate these purpose statements into things that have impact
Right, and then I think the second big issue is
There's sort of purpose at the level of the mission of the entire organization and then there's purpose as experienced in the everyday of employees in the organization
We now know from research that these two things are actually very different from one another for instance
At the level of the overall purpose the mission of the organization
That appeal is very gendered
It's very important to women. It doesn't matter so much to men
While purpose or meaning in your everyday activities is not gendered at all
That's equally important to men or women
There's a really nice paper out of Columbia Business School
It's one of the reasons why fewer women go into finance
Because the overall sense of purpose or mission is not really something that the industry is famous for
And as a result the finance industry struggles to attract really smart women
Right
Those are two I think really important questions
I think the first is in some sense why are so many of the statements so anodine and ineffective in some sense
Yeah, they're really in some sense unconstructive
I think my take on that first question is in some sense
Purpose has become about pleasing people and so it is less about saying what you will and won't do as opposed to it
Just is about saying yes
Good thinking is about trade-offs and it feels like when purpose fails
It ignores trade-offs. It just says yes to the world and we know
Saying yes to the world is not strategic thinking in some sense. It's the antithesis of the thinking
Yeah, yeah, it is wonderful for the reasons you said which is it's forced us to rethink what corporations do
It's forced us to think about the role of corporations in our lives
It's forced us to rethink what work is for human beings which has to be purpose-driven
I do wonder if it's come at a cost of a little bit of a looser
Appreciation for business fundamentals, which is concerning because those business fundamentals are really important at least to my eye are really important
Yeah, and on top of that, I think there's a second concern
Around what will happen longer term with the purpose movement? So maybe I give you an example
So take a company that says we help small businesses be more successful, right? And say it's built
For a bank that has amazing risk management tools that are really geared towards understanding how risky is a small business
And they're better just making credit decisions. That's the source of their competitive advantage
I do think the framing matters
If you say we want to be the most profitable bank in this particular sector
Or if you say we want to be amazingly good at helping small businesses
Get access to loans and as a result make them more successful
The second description is just more engaging
I can see how you might be attracted to that particular kind of business
And so there's two things here to think about the part that I love about this is
I think strategy for a long time has taken people for granted
Yeah, we were very good thinking about customers and thinking about the trade-offs that come from serving particular customer groups
We were not nearly as sophisticated in thinking about how do we create value for people in the organizations?
And so in that sense this might be very welcome
My fear is of course that if it turns out that
Many of these purpose statements are
Just a reframing of what the company would have done in the first place because we now discover that it creates a little more enthusiasm
Sure, if in the end maybe it's true that some of these companies are good at making loan decisions and maybe other companies just
Go small businesses into taking on more debt than they should in the first place
We will very quickly and over time get something that is going to look like greenwashing. Yeah, we're now every
Environmental statement that you see exactly. You think oh my god. Is it true? Is it not true? Should I be skeptical?
Am I falling for a cheap marketing ploy because it's attached to some claim?
Yeah, and I think it's done
Tremendous damage to companies that are trying to do the right thing with respect to the environment
Then I fear the same might happen if we're not
Careful and strict in their enough purpose as well. Yeah, I think that's right on both dimensions
Felix so the first is I think the primary domain where this has really been influential and powerful is
Inside organizations and with respect to employees in some sense. I've been looking for the effects in
How you allocate capital or how you think about which markets to serve or how you think about those kinds of decisions
I don't think it's been that necessarily influential. I think what has really mattered is
In the contract between employees and employers and the understanding of what it is that we are providing each other
And that is not to be dismissed
That's like really important to your point and so I think that is exactly right. That's where this has really proven
powerful
And I guess there's two questions to my mind which is why has it exerted its maximum influence there
Why are people looking for meaning and why are companies now providing that meaning and then
To your second point is there's some way that this
unravels where people end up finding that these companies may not be able to provide the meaning that they
Have portrayed themselves as providing to employees. I don't want to be negative about it
I and I think you take tremendous value from being attached to an institution that we really believe in and being involved in something that really matters
And that mission really matters to us
At the same time it feels like it's a little hard to imagine and hope that every
Organization in the world can generate that same level of meaning. I don't know if that sounds horribly snobby
But is that feel right
I'm not super sure so to your first question wise and more powerful for employees than for consumers
I think part of it might be that many consumer decisions are so fleeting. Yeah, so I go by my coffee
I know it's better not to use a straw if the straw is a plastic straw
Mm-hmm. It's the right thing to do
But it's also not something that I will think about for the rest of the day
Work is just really central to people's lives and so having a sense that you're doing something meaningful absolutely matters
And to your second question, maybe it's the very fact that
Many moments at work are just not all that inspiring
So if you do your time she sure you feel out your travel expense report exactly jobs and parts of jobs can just be incredibly dull
Knowing that even though what I'm doing right now is not all that interesting
But it's attached to something that is more meaningful and more interesting
Maybe that's exactly why it can be extra powerful
I imagine if you work in a hospital and you save someone's life
No one has to tell you
My purpose and why you're doing what you're doing
But when I do my travel expense report. It's a little less obvious
Maybe those are the moments when it's particularly
helpful and when companies fail to link it to these more mundane parts of our work lives
You miss out on almost everything that is actually helpful and useful. Yeah, I think all that makes a ton of sense Felix
I think what I'm stumbling with is and this is gonna sound a little harsh
If at the end of the day
This is fundamentally an HR strategy
Then that is not really how it's being sold to the world. It's being sold as
A transformational rewriting of capitalism
By the way HR strategies are like really really important creating more engagement at work and like getting people to feel
The way they work and how they work has more meaning is hugely valuable. I'm not trying to diminish it
But it's not really a rewriting of the rules of capitalism. So that seems like the gap. Yeah, that feels a little bit like a big gap
Now maybe that's okay. Maybe things get sold in ways that don't end up working out and that's just like for
Can I have disagree with you? Yeah, so
Imagine
You're doing all the work you have amazing purpose and then you link it to individual activities and it makes jobs better
Right that is value creation that will eventually show up on p&l's in ways that you can understand because we know for every job that we look at
There is an incredible dispersion in
The wages that you earn much bigger actually than most people realize and some of that has to do with
Is it inspiring? Is it a great place to be and so on?
So there are these
traditional linkages back to what we've always understood the purpose of companies are if they create a ton of value
In all likelihood they will capture some of it in the part that they capture we will see on p&l
So that's sort of the narrow answer. Yeah, where I agree with you is
Where is that line where you do things?
Because it's consistent with your purpose that will actually undermine your profitability
So I have always found companies that have these purpose statements and then as a result
There's a set of things that they don't do even though they know it would be profitable or say in my little example
We cater to small businesses and small businesses is actually not the most profitable segment of the market
But I really believe that that's a good thing to do and as a result
I create the most value I can and I think
Corporate leaders have been missing out I think largely by not making clear
When is purpose a useful thing to do but we only do it to the extent that it furthers profitability
And remember that's still a good thing to do because you're creating better jobs
You're creating more engagement people will feel better going to work
That is value creation that we shouldn't discount because it's not value creation for customers
That's the same kind of value creation that we always loved about business
But corporately there's have not been good telling us are we doing even more than that?
Yeah, are we saying no to profitable business opportunities?
Are we staying away from the kinds of things that would increase our paychecks but it's inconsistent with purpose?
And this is where things I think get really interesting because I take your point about the narrow version
Which is it can lead to greater profitability because
Employees are more engaged but the other way to frame this which is more transformational which I think is super interesting is
If employee meaning is so valuable then we have to listen to their preferences on the most important decisions we make
If you want me to believe that there's this much meaning in my work then
You have to start doing things that I believe in so it becomes a two-way street now that is radical to me
Yeah, that's really transformational if we see that version of things
That's I think the next leg of this which is if we see
leaders understanding this as a shift in who has decision rights
Then it gets really transformational
That's really interesting to me your point about we have to link decisions in the organization to the things that people want
And think of two ways of doing that one is to really actively listen and then change
Or I think which happens to a great extent with customers and I think I wouldn't be surprised if that's also the dominant response on the employee side
You rely on selection effects
Right, you make it clear right what your product is what your service is and then the right customers come or you make it clear
How you run the company what you do what you don't do and then there are selection effects in this respect also
And employees are very much in the dark when they choose their jobs with respect to many of the little things that won't matter
When you think about purpose. Yeah, that's super interesting because I think you're absolutely right
Yeah, it can lead to a lot of sorting which can be maybe really great that could be amazing
It does run up against one thing that we used to think about workplaces
Which is that they were generally a place where you could interact with lots of different types of people like a neighborhood
And maybe that ceases to be true maybe it doesn't need to be true because sorting in workplaces could be a great thing
It's interesting feel is this conversation has really made me think a lot harder about purpose because I think I've been looking in the wrong place in a way
Like I've been looking
In decisions that maybe the corporate purpose movement is not designed to deliver on but it's really delivering in many ways on these margins
And maybe that is much more powerful than I really thought about
Recommendations Felix, what do you have? I saw a show last week by a comedian her name is atko
Katsuka very nice. She's out of LA and
She is amazing. Oh, I can't really remember
Laughing so hard for so long. It was just an incredible show and many of our listeners will probably know her
She has an HBO special
Call the intruder where you sort of get to see her personality and get to see her comedy and she's on tour now
Up until early
2024 so you might be able to catch her in one of the cities, but to me she's really special for two reasons one is
She starts with these topics that sound quite serious for instance in this latest show
There's this issue around how do you actually make friends as an adult so easy as a kid and then as adults
We know it's until you think okay, so this is like a really serious topic and then these little twists and turns
When she thinks about when does it work well? When is it harder?
Mm-hmm. What is it about the workplace that it somehow seems easier to make friends when we're at work as opposed to others at
And so on and so yeah, so that alone is like really fantastic
And I don't really remember having seen this the way other comedians build their shows
She has these little snippets that reoccur
So for instance in this particular show she talks about tandems and how she likes to write a tandem with her husband
Yeah, and the tandem becomes this little symbol is almost like a secret that she shares with her audience
And then at various points in the show the tandem or a single bike shows up again
And because you experience the earlier part of the show
It's this secret language that you have with her that then makes you laugh and think about things
Other than having the most complicated name on the planet. She's just really fabulous
Wow, and I love the idea of these themes that get woven through
Sometimes these comedic routines because it makes you realize that it's really very subtle the storytelling they're doing
Yeah, it's easy to kind of look at it as a set of jokes or a set
But often it's really very delicate what they're up to yeah
What do you have for us me here?
So given that it's the valley my recommendation is a little bit related
I just think these occasions are
Wonderful occasions to taste other cultures and embrace other cultures
Hmm. So I just want to encourage everybody especially at this time of year since we have so many of them to
use these occasions
to embrace and
explore a different culture and in particular
One can do that obviously by reaching out to people from those traditions
But also by visiting parts of your city that might be dominated by different people and different cultures going there for a meal
These holidays are spectacular and they're wonderful invitations to engage with other cultures
So rather than think of them as times to let other people celebrate
Perhaps try to understand them as opportunities for you to celebrate yourself
We think people who come from different traditions
Love nothing more than to share it. Yeah, and so it is a good opportunity to
engage with different cultures than your own. I love that
And we're out of time already. Thank you everyone for listening. This was after hours from the tip of your collective
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