Artificial Intelligence September 27 th 2017 Artificial Intelligence

Artificial Intelligence September 27 th, 2017 Artificial Intelligence Operating Systems With Emphasis on Prevention Mark Montgomery Founder & CEO http: //www. kyield. com markm@kyield. com

Background of speaker 1980 s 1990 s 2000 s 2010 s WA State Arizona AZ/SV/NM NM . . . Student Worker Entrepreneur Consultant Executive Consultant Publisher Lean Incubator SW programmer Hands-on KS lab ‘Yield management of knowledge’ AZ VC SV VC NM scientist Inventor Patent application Incumbent negotiations AI sys patent awarded Pivot to customers Kyield OS C-Suite EDU on AI Hum. Cat Next gen R&D Go to market… (All within USA)

Areas covered in this talk 1. Different types of operating systems – Computer vs. organizational 2. Risks and Benefits of an AI OS – A few examples of each 3. Pathways for achieving an AI OS – Build vs. buy vs. hybrid 4. New models for prevention – Technology and financing 5. Governance – Rules, security, and certification © Copyright Kyield 2017

Different types of operating systems Computer Organizational – Primarily CS and engineering – Limited psychology and behavioral (mostly in apps). – Traditional management & consulting – Departmental: human resources, accounting, etc. Combined Digital Convergence & Network Economy “We needed a new operating system” – Doug Mc. Million, CEO of Wal-Mart * * See article: “Why Every Company Needs a New Type of Operating System Enhanced by Artificial Intelligence” © Copyright Kyield 2017

Why an organizational OS? “The existing structures and processes that together form an organization’s operating system need an additional element to address the challenges produced by mounting complexity and rapid change. The solution is a second operating system, devoted to the design and implementation of strategy, that uses an agile, networklike structure and a very different set of processes. The new operating system continually assesses the business, the industry, and the org, and reacts with greater agility, speed, and creativity than the existing one. ” —”Accelerate!”, by John Kotter, HBR November 2012

Why now? “These ecosystems are nested complex adaptive systems: multilevel, interconnected, dynamic systems hosting local interactions that can give rise to unpredictable global effects and vice versa. Acknowledging the unpredictability, nonlinearity, and circularity of cause-and-effect relationships within these systems is a notable departure from the simpler, linear models that underpin traditional mechanistic management thinking. ” — “The Five Steps All Leaders Must Take in the Age of Uncertainty”, MIT SMR, 7. 11. 2017 © Copyright Kyield 2017

Why now? “I like your idea of an Operating System. I’m so convinced that the world is too complex and getting more complex every second that human beings cannot manage it in the right way anyway… Now, it is time, otherwise we are on the hook of dark side of cybernetics— cybercrime or cyber war and nobody can defend us. ” — Recent note from G 100 CIO © Copyright Kyield 2017

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Risks and Benefits of an AI OS Risks Benefits • Business – May be necessary to survive – AI gap is expanding rapidly • Financial – Open checkbook to AI hell – Big cap failures are common • Operational – Necessary for crisis prevention – Augmentation hard to beat • Technical – Legacy and internal battles – Data quality, prep and conversion – Talent wars, Bo. D competency • • Far more precise governance Strong competitive advantage – When executed well…. • • Highest level of organizational optimization known Examples: augmented functions in our standard Kyield OS – – – – © Copyright Kyield 2017 Discover Prevent Collaborate Create Produce Learn Adapt

Common paths for achieving an AI OS Large cap custom Unified system • Strategic imperative – – • Few exist to date Autonomous vehicles Military When money is no object Basic R&D – Similar to autonomous vehicles even if focused on augmentation – Enormous amount of trade craft – Need well-aligned incentives – Must have exec / Bo. D leadership Combination • Most common to date – Easiest to fund – Usually departmental level – Problematic unless unified leads © Copyright Kyield 2017

New models for prevention • Hum. Cat – Prevention of human-caused catastrophes – Cyber prevention • Requires unified system – Deeper and more relevant intelligence – Continuous process – Behavioral • Several options – Cost + performance bonus for captured preventions* – Bundle with financing and/or cat bonds *See article: “A Million in Prevention can be Worth Billions of Cure with Distributed AI Systems”

Governance Rules-based systems Security • They do work with AI! • Integrate pre-existing ++ • Cyber – GIGO still rules • Algorithmics run on data… • Control data quality & feed – Algorithmic • Relational • Behavioral Certification • Required for Hum. Cat – CKO admins & system – Pre-agreed meta data monitored for bonding

Governance Inspired by nature. Managed by humans. Assisted by AI. Discover Secure Prevent Group Collaborate Create Produce Knowledge Worker Regulator Customer © Copyright Kyield 2017 Learn Adapt Organization Partner

Summary 1. Org and network AI OS are becoming necessary – Small minority to date but gap is accelerating 2. Significant risk whether one does or doesn’t – Increasing number of big wins and career ending mistakes 3. Three common pathways emerging – There is an awful lot to know about AI systems… 4. New financing models are now available – – Requires sponsorship, but institutions have confirmed interest Costs depends on individual risk profile 5. Beware AI hysteria – Rules-based governance works: GIGA still rules in AI systems.

Contact Mark Montgomery Founder & CEO http: //www. kyield. com markm@kyield. com