Seeing past the hype around cognitive computing – Jeanne Ross

Jeanne Ross, Director & Principal Research Scientist at the MIT Sloan School's CISR

Jeanne Ross, Director & Principal Research Scientist at the MIT Sloan School’s CISR

From Information Management

Given the hype around artificial intelligence, you might be worried that you’re missing the boat if you haven’t yet invested in cognitive computing applications in your business. Don’t panic! Consumer products, vehicles, and equipment with embedded intelligence are generating lots of excitement. However, business applications of AI are still in the early stages.

Research at MIT Sloan’s Center for Information Systems Research (CISR) suggests that small experiments in cognitive computing may help you tap the significant opportunities AI offers. But it’s easy to invest huge amounts of cash and time in failed experiments so you will want to carefully target your investments.

The biggest impact from cognitive computing applications is expected to come from automation of many existing jobs. We expect computers to do—faster and cheaper—many tasks now performed by humans. Progress thus far, however, suggests that we have significant obstacles to overcome in our efforts to replace human intelligence with computer intelligence. Despite some notable exceptions, we expect the displacement of human labor to proceed incrementally.

The business challenge is to determine which applications your company is ready to cash in on while resisting the lure of tackling processes that you can’t cost-effectively teach machines to do well. We have studied the opportunities and risks of business applications of cognitive computing and identified several lessons. These lessons offer suggestions for positioning your firm to capitalize on the potential benefits of cognitive computing and avoid the pitfalls.

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Jack Ma is retiring. Is China’s economy losing steam? – Yasheng Huang

MIT Sloan Professor Yasheng Huang

MIT Sloan Professor Yasheng Huang

From New York Times 

GUANGZHOU, China — Earlier this month, Jack Ma announced that he was stepping down as executive chairman of Alibaba Group Holding Ltd, the world’s largest e-commerce company. His decision caught many by surprise. At an economic forum in Russia, President Vladimir V. Putin reportedly asked him, “You are still so young. Why are you retiring?”

Maybe Mr. Ma, 54, knows something that Mr. Putin does not. Two of the three forces, globalization and marketization, that have propelled Alibaba to its current $500 billion valuation are dissipating. The third force, technology, is mired in the trade war between China and the United States, and its prospects in China are now uncertain.

Alibaba didn’t just transform e-commerce in China; it transformed the entire economy by helping build up the private sector. Mr. Ma’s departure from the company now — though he claims to have been planning it for a while — adds to a gathering sense that China’s private sector, the engine of the economy, is losing steam — and faith.

Alibaba is China’s globalization story par excellenceFounded in 1999, the company created a website that allowed people outside China to buy directly from Chinese exporters. At that time, China was opening up but foreign buyers were hampered by their lack of knowledge of Chinese suppliers. Alibaba set up a program called TrustPass, allowing third parties to verify the quality and trustworthiness of Chinese suppliers. This system enabled foreign buyers to bypass the slow and often bureaucratic state-owned intermediaries that typically performed verification, and it eased Chinese companies’ access to the global marketplace.

Alibaba also tapped international capital markets. The company’s founders hailed from modest backgrounds and had little capital, but they benefited from liberal policies that China had put in place as it was negotiating to join the World Trade Organization (which it did join, in 2001). During the company’s early years, its leaders turned to foreign suppliers of capital, such as Goldman Sachs, SoftBank and Fidelity Investments. Later on, Yahoo also provided funding.

In the early 2000s, Alibaba structured its investment arrangements via what are known as “variable interest entities.” V.I.E.s are intermediary structures in which foreign firms can invest to acquire contractual rights over revenues generated by Alibaba. They were an innovative solution to help foreigners navigate China’s murky legal system while bringing critical financing to Chinese high-tech entrepreneurs.

But today globalization is under assault. The Chinese government is enforcing more strictly regulations over V.I.E.s that it had long ignored, creating uncertainty for foreign investors. And the trade war between the United States and China is disrupting Chinese exports, threatening the supply chains of which Alibaba is an integral component.

Alibaba has elevated China’s private entrepreneurs in another way: by providing direct financing to them. China has a massive banking system, but it is almost entirely organized to support the less efficient state-owned enterprises, leaving China’s dynamic private sector chronically short of capital and credit. Alibaba, through its financing operations, has stepped in to provide much-needed capital, especially to China’s very small businesses.

Read the full post at New York Times.

Yasheng Huang is the International Program Professor in Chinese Economy and Business and a Professor of Global Economics and Management at the MIT Sloan School of Management. 

Why companies should rethink their approach to freelancers – Kristine Dery

Kristine Dery, Research Scientist, Center for Information Systems Research

From Workforce

Companies today need a new approach to managing digital talent.

Gone are the days when they can easily recruit and retain full-time employees to staff every project. When you look at the employment landscape, a lot has changed from even five years ago — and it’s only going to change more over time.

For starters, there is a shortage of talent with the necessary digital and social skills required by a lot of companies, especially in the tech sector. Companies need flexibility to scale their workforce up and down, depending on project requirements. Having expensive talent sitting on the bench is not a sustainable option.

We’re also seeing more interest among workers in freelance work. According to Forbes, up to 35 percent of people are choosing freelance work in the U.S. However, constantly onboarding new freelance talent for every project isn’t efficient.

Companies facing these changes need to become “future ready.” This means focusing on creating an employee experience that will attract the sort of talent you need when you need it. The most successful companies will take a flexible approach to work and workers. Rather than only assigning full-time employees to projects, companies with a hybrid workforce can curate talent depending on their project needs. They can engage people — both employees and freelancers — to both broaden and reinvigorate their talent pools.

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What Great Leaders Can Learn from Great Photographers–Hal Gregersen

Hal Gregersen, Executive Director of the MIT Leadership Center

Executive Director of the MIT Leadership Center, Hal Gregersen

From Harvard Business Review 

Almost everyone on this planet is a worker in some way, but only a minority deserve to be called craftspeople. This is especially true of leaders. We don’t often think of leaders as artisans, but like good craftspeople, good leaders go about their work thoughtfully and purposefully.

These good leaders want every piece they produce to be the best it can be, and to bear their stamp. Some even go a step further. They reflect on their craft and articulate what they do that is special or distinctive. Doing this delivers the great benefit of making it, to at least some extent, teachable. They like to develop the skill in others.

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Will a fragile banking system survive future runs? – Lawrence Schmidt

Lawrence Schmidt, Assistant Professor, Finance

From Barron’s. 

Events surrounding the failure of Lehman Brothers 10 years ago nearly brought down the world’s financial system. While much of the dust has settled, economists and policy makers still seek to better understand the forces that led a set of seemingly small losses on mortgage-backed securities tied to the U.S. housing market to trigger the worst global financial crisis since the Great Depression.

A strong candidate is the series of “runs”—large-scale, rapid withdrawals of short-term funding—that took place throughout 2007-08. The most dramatic run occurred on money market funds (MMFs) immediately following Lehman’s collapse. In a week, investors withdrew more than $300 billion from this market. This figure likely would have been larger had the Treasury not taken the unprecedented step of offering temporary guarantees to MMFs.

What causes runs? One economic theory posits that runs are the result of, and exacerbated by, investors’ self-fulfilling beliefs about other investors’ actions. The nature of banking is fragile. The bank keeps cash on hand to meet depositors’ daily needs, but it will lose money and may fail if it runs out of cash and is faced with the difficult task of selling its loans on short notice. Suppose, though, a depositor is worried a “run” might take place. If she believes that others are asking for their money back she is incentivized to do the same. First out wins; last out loses. If, however, others are not in a panic, that depositor will wait it out and the bank survives.

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