Joe Woodard and Ron Baker discuss the groundbreaking book, "The Future of the Professions," by Richard and Daniel Susskind, which covers the way AI is impacting all professions, as well as make projections about the changes AI will force on the professions. The changes center around the way AI will disseminate and interpret knowledge through “cognitive assistants,” replacing the knowledge curation role that is currently the foundation of all professionals. After discussing the changes, Ron and Joe discuss how accountants can monitor the changes and respond proactively to protect the vital role they play with their clients.
Full Transcript of the Episode Follows:
Thank you for tuning in to this episode of the Scaling New Heights Podcast.
During this episode, we will talk with Ron Baker. Ron started his CPA career in 1984 with KMPG in San Francisco. Today, he is the founder of VeraSage Institute and a radio talk-show host on the VoiceAmerica.com show: “The Soul of Enterprise: Business in the Knowledge Economy.” He's the author of seven bestselling books including The Firm of the Future, Pricing on Purpose, Measure What Matters to Customers, Mind Over Matter, Implementing Value Pricing, and The Soul of Enterprise.
Ron is one of the nation's leading authorities on value pricing. Though it would be great to have a conversation with Ron in a future Podcast about value pricing, that is not what Ron and I are going to talk about today. During today's Podcast, Ron and I are going to talk about a technology disruption that is approaching the accounting profession, and the whole of the professions, and we want you to be aware of it. We want you to be prepared, to adjust what you need to adjust as a professional, in light of the new world we are about to embrace. So, with that I'm going to welcome Ron to the podcast.
Joe: Welcome, Ron!
Ron: Thanks, Joe. Glad to be here.
Joe: Alright, so you and I were sitting together in Vegas a few months ago and you said, “Joe, have you read this new book called The Future of the Professions by Daniel Susskind?” It was actually a father-son who authors it. And I said no and you said, “You’ve got to read this book!” I went off and read the book. Then, I came back again and thanked you for pointing me to this book.
The thesis of the book and some of the projections of the book are staggering. I want you to lead out and tell us what this book is about.
Ron: It's really about the systems and people that will replace the professions. I mean these guys are really saying that technology is going to drive massive change and that we - and I think this is an incredibly provocative statement - we are advancing into a post-professional society. Like you said Joe, it's not just accountants that they're talking about. They're talking about eight professions in this book – doctors, lawyers, accountants, and of course auditors, architects, journalists, teachers, and even members of the clergy. It's not just us; this is applying across the board and that’s what I found so powerful about this book.
Joe: It applies to all of the professions, and the thesis is there's a coming change. It lays out a couple of scenarios about this change. What are they?
Ron: There are two futures that they're saying are kind of working in parallel right now. The first one is technology is basically streamlining what they call the print-based industrial society. So, technology, the cloud, whatever we want to talk about is helping us just do things more efficiently, but we're kind of still doing the same things. The second scenario is the technology-based internet society with increasingly capable machines and things like artificial intelligence, deep learning, and other types of platforms will actually displace the work of current professionals. And they say gradually the second scenario will dismantle the first one. In other words, it’s not just about getting more efficient at what we're currently doing, it’s about actually displacing the professionals in the role of what we're doing. That’s an incredibly provocative future.
Interesting enough, they do not provide a timeline on this. They don't say this is going to happen in 5, 10, 15, 20 years. We actually interviewed Daniel Susskind, who's the son, and Richard Suskind, who's the father, that wrote this book. Daniel is an economist at Oxford and I think that's why this book resonated so much with me. He said, “No, I'm not willing, we're not willing, to lay down the timeline on when this will happen, but the forces are in place. The technology is improving.” They say we're definitely probably going to see this, but they just they're not sure when.
Joe: Well, they’re very smart not to lay out a timetable, because there are so many variables and it's so unpredictable. But the fact that they aren't willing to define a timetable should not put our minds at rest about, what I would say, the relative imminence of this, meaning that we're not talking that because they can't determine a time table, it is 30 years from now. They're just saying they don't know if it's 2 years or 30 years from now, and that's because of the variables involved in the evolution of artificial intelligence and how ubiquitous that artificial intelligence becomes.
I did a lot of study on IBM's Watson after reading this book, because they refer to Watson often, but they did it just enough to tease you. IBM, when they were describing Watson, said a couple of very telling quotes. One of them was “Watson will scale the greatest minds to every mind.” Now that's a loaded statement that I know you get, because you’ve got the book fresh in mind. What they're saying, for the podcast listeners here is, it will scale, in terms of broad reach, the greatest minds of any profession to every single mind on the planet. If they left any room for interpretation, they followed up with this statement, “Every member of a profession,” and they actually use those words, “Every member of a profession can be as effective as the greatest member of that profession with the help of a cognitive assistant.” Now there’s a brand new term - a cognitive assistant. That's what Susskind is saying - artificial intelligence will become cognitive assistants.
And, we need to take a step back, Ron, and talk about what a professional is. Because there's what it was and what it's become - and those are a little bit different - curators of intellectual capital versus, what I would say, hoarders of intellectual capital that extort you (“give me a little money and I'll give you a little intellectual capital”). I'm being a little hard on the professions, but I want you to talk a little bit about that migration and how Watson and technologies like Watson can disrupt that.
Ron: You know all professions are solutions to the same problem, that none of us have sufficient knowledge, sufficient specialist knowledge, to set our own broken legs or fix our own legal matters or whatever. So we seek out these professionals, and the states give them certain monopolies like only auditors can audit and only lawyers can practice law and only doctors can practice medicine and prescribe drugs and things like that. The question is - those professions are human constructs; we constructed that - is there another way to get the same jobs done rather than just relying on monopolies?
One of the things, Joe, that bleeds through the book is that Daniel Susskind, the son, being an economist, doesn't like monopolies. Economists don't like monopolies because they don't innovate, they charge high prices, they can hoard their production and all of that. He says, maybe there's a better way to do this with advancing technology, like Watson, like deep learning, like even just platforms like PatientsLikeMe, where you go online and meet with thousands of other patients that have your exact diagnosis and you can talk about the drugs you're on, the side effects, what procedures are working, surgeries, all of that. And you don't even need a doctor if you think about that.
And those are the types of things that they're saying. We could supplant the professionals because the specialist knowledge that they have can be imbedded in these other platforms like Watson, like PatientsLikeMe, and a whole bunch of other types of platforms. Pretty soon we'll probably have Watson on our phone.
Joe: Yep. And that actually is one of the things I was researching on Watson at the time that Watson beat the leading Jeopardy champion on Jeopardy. If you think, “Well, I can ask Siri a question and she'll answer it; that's no big deal,” most of the time when you ask Siri a question, she gives you some suggested websites. There's very little that she can just answer straight out. She's not artificial intelligence; she's an if-then conditional statement engine. But Watson was able to play Jeopardy alongside human minds with human thinking, find the answers without human assistance, and even rephrase it into Alex Trebek’s required answer with a question, which has always aggravated me about Jeopardy. It’s kind of a weird premise. But the point is Watson was able to do all of that, and at the time it did that, it fit into a space about the size of a domestic bedroom. Today, Watson fits into the size of about four pizza boxes. And IBM is projecting that, within the next three years, Watson will fit into the case of a cell phone.
So, yes we cannot make projections on timetable, because again we have factors of cost to market, affordability, commercial availability and applicability to the way we actually interact with our lives and then you've got data compression. That's just about 5 variables out of probably 500, but the availability, the existence of the technology is not in question. It's just how long it's going to take for that technology to get into the hands of the consumer.
I want to get back to the professions thing for a second. There was something that the Susskinds wrote in this book that I've given much thought to, as a matter fact, it stuck in my brain in a good way and it is kind of reshaping the way I'm looking at the accounting profession. They pointed out that in the 1800’s lawyers, accountants and other professionals were paid fees so that they could be the curators of intellectual capital in the service of humankind, much like we might describe a clergyman today. They're not paid to dispense intellectual capital, they are paid to curate intellectual capital and the pay is just so that they can provide for their families and pay their rents and have room and shelter in need and maybe some comforts of course and then that frees them up to serve humankind with the curation of their intellectual capital. And, where for religious reasons the clergy held on to that better, the non-religious professions lost their way a bit and started becoming the secret possessors of intellectual capital that they trickle out - in exchange, usually, across the medium of an hour, a billable hour - that they trickle out, and really don't even dispense to their clients, that they retain and they are now using it as they deploy services on behalf of their client. Like a lawyer - a lawyer is not going to teach a company how to be a good lawyer. They’re just going to charge an hourly rate as they, I guess hoard is too strong of a word, but as they collect that intellectual capital in their brain and deploy it on behalf of a client.
If I think about that Ron, I like that first model a lot better.
Ron: Yes, I agree, because knowledge - what's interesting about this is - knowledge is what economists call a non-rival asset. If I have a bottle of water, and I drink it, you can’t. It can only be at one place at one time. The more I drink, the less for you. That's a rival asset, but knowledge, if I give you knowledge, now not only do you have it but I still have it - I haven't lost it. It's not just information that can be replicated on these new digital type platforms like Watson and other things, it’s actually knowledge that can be shared. As knowledge is shared, it actually grows, it accretes, and that's the source of all wealth is knowledge. The way we grow is we learn new things. That learning and that growth and that knowledge sharing can take place across different platforms. We no longer have to seek out the Oracle from the Profession. We can ask Watson or other deep learning type platforms or machines to help us solve problems.
Now, we still might want to consult with a live lawyer or doctor. They’re not saying that surgeons are going to go completely away. But there's no doubt that their role is going to change and they're going to be aided and assisted by these new types of platforms. I think it's really exciting. I think it's going to democratize some of the specialist knowledge that professions, like you say, have hoarded. And that's probably an appropriate word; we do tend to hoard it and guard it and protect it and that's why we're not willing to change, its why we're not willing to innovate, or test new business models. Well, if we're competing with Google or Apple or IBM that has Watson, we're going to be forced to compete and share our knowledge like these other platforms. I think that's a good thing for society as a whole.
Joe: I agree, but there might be some listeners to the podcast who say, “What you're really describing is commoditization through technology and doesn't that then negate our entire role? Should we just pick a different profession?”
Is there something left for the accounting professional? I'm going to ask that question in the context of the two Susskinds. Let's say that their projected new reality exists today; I have Watson in my phone and I can say to Watson, “Watson, given the amount of tax I paid last year and the capital gain that I'm going to receive from the sale of my home at my current tax bracket based on current year earnings, how much of that capital gain should I reinvest into my next home?” and Watson gives me an answer. Let’s say that kind of a world exists today. What role is left - and that was kind of a financial planning scenario, but let's just say we can do the same thing with tax planning, we can do the same thing with any functions of the accounting role - what's left for the accountant?
Ron: It's a great question. You know probably things like they're going to have to become craftspeople. You're probably going to see a bigger role for paraprofessionals, not full-fledged professionals, but para-professionals to take on certain tasks. You're going to see probably more knowledge engineers and process analysts and designers - I think design is going to become a big thing on some of these platforms - and system providers, data scientists, system engineers, things like that. I think the role is going to change. It's not going to be Dad's profession anymore. If you're going into architecture, engineering, or accounting, or being a lawyer, or even a doctor, you're not going to be doing the same things day to day that your dad or granddad did. You're going to be aided and assisted and, in some things, displaced by this technology, because it can do it better, can do it more consistently, and it can do it at a much cheaper cost.
Joe: Well, there you go. And I would call that a return to curation, because now we're curating the intellectual capital and interpreting it. I don't think Watson will displace the accountants any more than the calculator displaced a mathematician. It still takes someone to push the right buttons, to ask the right questions, to collate the answers. And I think, Ron, this is the real key differentiator, and I just borrowed it straight from Susskind, I think it comes down to the application of that in a human-to-human exchange. That no matter how smart artificial intelligence becomes, to put a fine point on it, no matter how intelligent artificial intelligence becomes, that artificial intelligence will always be intrigued by, confused by, and envious of that dynamic of human-to-human it can never achieve.
So this is an exciting moment for me, because doctors, lawyers - oh my gosh, the lawyers; that’s a very exciting thought! - the accountants, we're going to become human-to-human agents again like the clergy is today. We're going to be caretakers of the professional soul. We're going to be hand holders. We're going to be nurturers again, not of information but of the application of the information to the very human needs of business owners.
Ron: I think that's a good point, Joe, and I would say to that that we need to change our focus on beating computers on what they do - we're not going to be able to do that, right? And we're not going to necessarily even be able to predict what a computer is going to be able to do in twenty years. I mean they're going to be driving cars! And the thing about it is the Google driverless car is going to become a better driver over time. The joke about Watson is it's the only computer that rises in value as it gets older.
So, I think the more compelling question is, a better strategy is, to ask ourselves what are the activities that we humans, driven by our deepest nature, will simply insist be performed by other humans regardless of what computers can do. And when you're talking about that, then I think that gets to your point about being empathizers,being coaches, mentors, helping people. It's not just about processing the information or the data or the knowledge. It's about being a coach, a trusted advisor, I hate to use that term, or mentor or something like that. But we need to stop trying to figure out what computers can do good and what we can do good and ask ourselves what roles will we simply insist that humans continue to fill. I think that's a better strategy going forward with all this technology disruption.
Joe: I’m tracking with you 100% on that one.
I’ve got one more question for you, and we might have just touched on it a little bit, but I'm going to drill down on this human-to-human component in the way that artificial intelligence interacts with humans and I’m going to say, Is there a moral implication or an ethical implication to this coming change?
Ron: Yes. I believe there always is a moral and ethical issue. I mean there's some things that we're not going to be comfortable with Watson doing. I probably wouldn't want to hear a fatal cancer diagnosis delivered to me or a loved one by Watson. I wouldn't want Watson to make a decision about turning off life support or even putting down a household pet. Would we be comfortable with Watson deciding custody in the divorce action? Probably not. Or relaying verdicts in a criminal trial? Probably not. What about sentencing and parole decisions? Would we want Watson to make military decisions about drone strikes or other types of combat issues? Probably not.
These are the things that we want humans to do and agonize over and take responsibility for. I think those are the types of things that we’ll never relegate to this technology; we’re always going to want a role for humans. I think that's the question professionals need to ask themselves. What are things that we're going to insist humans do no matter how good the computers are?
Joe: You know there was a common denominator - and it's hard to have a conversation with Ron Baker and not have at least a mention or two of value pricing - there is a common denominator to everything you just mentioned; and everything you just mentioned was not just human-to-human, it wasn't just an ethical and moral implication of the technology, it was steeped in the delivery of value with a measurement of effectiveness.
That’s another exciting thing about this disruption. If accountants are still holding on, for whatever reason they're holding on, to this billable hour, this disruption will pry it out of the profession's hands. And if you won't let it get pried out of your hands, it will just drag you out of the profession, because people aren't buying hours today, they're buying results. We just mask the results in hours, if we're lucky. Now, there is no mask. It’s results or nothing, because I can go to the computers and I can get all the things that you used to spend an hour doing.
Ron: Yeah, exactly. I mean an hour is a rival asset. That's why it's such a limiting business model right? I can only do one thing at a time in an hour, but Watson can do all sorts of things. So, if you're competing with Watson on the hour, I've got news for you - you're going to lose!
Joe: Pretty bad, right?
Ron: Watson can read 8,000 medical reports in less than a second; there’s just no way to compete with this technology based on the hour. That's why I think the billable hour is going to be driven out of existence by technology, and it's going to be accelerated with changes like artificial intelligence and deep learning and even some of these other platforms, like PatientsLikeMe, WebMD, and those types of things where people can access knowledge and it's not about the time it takes, it's about the results it creates.
Joe: OK. So let me just wrap up our conversation with sort of landing the balloon, because we know an accountant audience wants to know, “You’ve given me information, now give me action and preferably in the form of a checklist.”
Other than Step One – reading this book, The Future of the Professions, by Susskind, what should an accounting professional do to begin preparing now for this inevitable disruption.
Ron: It's a fantastic question and I don't know if I have the silver bullet answer, other than to say realize that the way that you practiced in the past is not going to be the way you're practicing in 5 or 10 years; and that's not just talking about your pricing, but the actual type of work you'll be doing, how you'll be getting that work to your customers, and transmitting that work and transmitting knowledge. Obviously, you have to embrace technology; I would say study up on Watson. And if you want to see something very close to home, study up on IBM's Ross, because that's its Watson equivalent for law firms and law firms are already teaming up with Ross. I think one of the law firms, Baker & Hostetler, just hired Ross to run its bankruptcy practice.
Joe: That’s amazing.
Ron: But these things are happening! And I would also say - and this is not in the book and I think it's a gaping hole in the book, Joe - it doesn't talk about the Blockchain. I think the Blockchain is just another piece of this technology puzzle that is incredibly disruptive to the accounting and even the bookkeeping industry, because the Blockchain is a publicly distributed ledger or database. It's kind of a trust protocol and that's going to have significant implications going forward for bookkeepers and accountants as well.
So, I just think you need to make yourself aware of these things and realize, whether you like it or not, your business model is going to change and how you interact with your customers is going to change. You're going to be more of a coach and mentor; you're going to have to be the person that has the better questions not just the answers.
Joe: Well you may not have had a silver bullet, but I’m extracting some steps out of what you just said and I’m going to dissect what you just said into steps.
One - read the book to create the awareness.
Number two, make friends with the technology and leverage it; don’t see it as a threat, see it as an asset that you can leverage to, in the short term, stay ahead of competition, and in the long term, compete effectively. So the competitive advantage becomes competitive effectiveness, and by the way we've seen that trend over and over again in the accounting profession. The first accountants to adopt the microcomputers had a jump on the rest. Be the first out of the gate to leverage the technologies when they become available at the consumer level. And what you can embrace right now is automation technology that exists, that is in market. It isn’t artificial intelligence, but it does have an element of machine learning to it and you can make it more and more automated through human-based rules. So, make friends with the technology and leverage it for competitive advantage now and competitive survival later.
And then you gave us a third one. Begin in your business plan now, maybe your three- to five-year business plan, begin or accelerate your path toward mentorship, business coaching, management consulting, trusted advisor work. There are a thousand names for it, but it all comes down to the way I describe it, Ron, is become an agent of small business transformation. And if you'll do that, then maybe eventually Watson can be an agent of small business transformation, but at least you’ve provided yourself with what I personally believe is at least a decade of cushion before Watson gets there.
Ron: Right, you’ll still remain relevant. I agree.
Joe: And then there's always that human element you talked about, if Watson could even make a really smart decision on where to place a child in a divorce situation, we won't want him doing it. The way Susskind phrased it was, there are those things that artificial intelligence will never do and there are those things that artificial intelligence should never do.
So, let's find the will, and the spine, the should and let’s embrace it. And that's the future of the professions.
Ron: I agree.
Joe: Ron, this has been an extremely exciting podcast episode.
Now, if you're listening to this episode before the third week of July 2016, you have a chance to join us in Chicago where Daniel Susskind will be presenting a keynote address at Sage Summit and where Ron Baker and I will be sitting on a panel with a few other thought leaders within the accounting profession, interpreting Susskind’s keynote for the accounting profession.
So, if you've ever thought about going to Sage Summit, even if you don't consult on Sage Software, because it's much bigger than that, do join me and join Ron in Chicago in July of 2016. You can go to SageSummit.com.
And Ron. I'm looking forward to seeing you there.
Ron: Me too, Joe. And thank you.
Joe: And thanks for being on today's podcast. It has been great having you.
And to everybody else, thank you for tuning in to today’s Podcast and our conversation with Ron Baker. For more information about today's episode, to explore other episodes in this podcast series, or to learn more about our annual conference, visit Woodard.com. As always, we encourage you stay tuned, stay connected, never stop learning and scale new heights.