Governance Bites #112: technology, artificial intelligence and governance, with Jon Davies

In this episode, Mark Banicevich talks with Jon Davies about technology, artificial intelligence (AI) and governance. He asks how boards should be thinking about AI, and what directors need to ask (even if they are not technical). They discuss the human size of innovation, and potential impacts, and where lived experience can add the most value. They also discuss what traits future directors will need in this rapidly changing environment.
Sport NZ, Nine Steps to Effective Governance, https://sportnz.org.nz/media/kwdjeum0/nine-steps-fourth-edition-final-version.pdf
Institute of Directors, The Four Pillars of Effective Governance, https://www.iod.org.nz/resources-and-insights/4-pillars-landing-page# 
Jon Davies is the CEO of InsuredHQ, an award-winning insurtech headquartered in New Zealand, helping modernize insurance companies across global markets. Jon trained in marine biology and zoology, worked as an professional outdoor guide and paramedic in the USA, and move into technology in the Bay Area and Silicon Valley. He built a career working with and inside startups, scaleups, and giants like Microsoft, NASA, and Yammer. He later served as Tech Sector Lead for New Zealand Trade and Enterprise and sits on advisory boards including the Nasdaq Entrepreneurial Center. He’s also the author of the Top 10 in Tech newsletter and a passionate advocate for using technology to make industries more human, efficient, and future-ready.
#governance, #leadership, #corporategovernance, #boardcraft, #decisionmaking, #makingadifference, #governancebites, #boardroom , #cgi, #charteredgovernanceinstitute, #director, #startup, #technology

Transcript

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My name is Jon Davies. I am the CEO at InsuredHQ. Next topic is technology, AI and governance futures. Hi, I'm Mark Banicevich, welcome to Governance Bites. As you just heard, today I have the pleasure of spending more time with Jon Davies. Jon, thank you very much for your time. Thank you for having me. We are going to talk about technology, artificial intelligence [AI], and the future of governance. Yeah. You have a tremendous amount of valuable experience in this area, having worked in Silicon Valley in the tech space. You've worked for New Zealand Trade and Enterprise, associated with that relationship, too, wasn't it. As well as being an outdoor guide in the [United] States, which, you know, just goes to show that you're crazy. So, and a paramedic in the States, too. I mean, that's got to be nuts. So, yes, we'll learn some great things from you, but maybe not emulate your history. We're going to talk about technology, artificial intelligence, technology more broadly, and innovation, and how it will affect governance. How should boards be thinking about artificial intelligence beyond where it is in the hype cycle? Yeah, yeah. So, I think boards have a big role to play because there's a massive governance factor with AI. And so, one thing to think about is, (a} is how it's being used; (b) is where that data is going to live, how leaky that may be, and making sure it's being used in appropriate ways. There's a whole learning curve I think that's going to come with this because AI is no different than any other technology or any other product or any other person. I mean, eventually we're going to have to have some kind of AI HR [human resources] practice, I'm sure. But its use case and what it's capable of in terms of outcomes sometimes is surprising all kinds of people. And there's all kinds of things that we don't know are going to happen when we apply AI to our business. And so thinking about the role that a board may have on the governance of AI is a crazy concept that's only two years old, you know. Yeah, right. So I think there has to be a level of curiosity from the board in terms of trying to figure out what good governance looks like in AI. Right. And what that means, right. Because the directive on that side is going to be governance. The directive on my side is how can we leverage it to create value for our business and for the people that use our products or software. So the role of the directors is ensuring that there are good policies and processes around artificial intelligence in the business to ensure that it is used but not abused. I think it's even one layer up from that, is how do we figure out what good policies and procedures look like? Because there's - You ask ChatGPT. - Yeah, there's no 200 years of books on good governance for this specific thing, right. No. It's, we're writing it. Yeah, right. But if we don't do something in terms of, you know, my perspective is, if you're not using AI in your operations, if you're not using AI in development, if you're not using AI to automate a bunch of your workflows, if you're not using AI in your product, if you're a software company, you are already at a competitive disadvantage. Yes. Right. So, the assumption is we have to use, we will be using AI in some capacity within our business. What does that mean for governance? How do we figure that out? And that level of curiosity is the thing that I think is required in governance. So one of the things that I would be wanting to insist as a director is that all of the staff in my business have some sort of training, whether it be prompt engineering or how deeply they get into, when we were talking before about agentic AI. Yeah. Any of these sorts of areas, just so that they've got an idea of what the possibilities are, encourage that curiosity, but give them some guard rails so that they can do so safely for the business. Yeah. I think there's also a role for the directors to ensure that they have some sort of understanding. In fact, I'll ask you the question here, what should directors be asking around technology, particularly if they're not technical people? Yeah. Because if you're on a board every company uses technology in some way. So let's broaden this out beyond AI alone. Yeah. What should directors be asking about technology? Yeah. So, you can do whatever you want within technology, but what you have to do, and this is especially important for an insurance B2B SaaS[business-to-business software as a service] company, is what are the guardrails in place to protect everything that you offer as a service to your customers? So your customer feels secure, they feel like the governance is in place and the security is in place for them to make an investment decision in your business, especially if it's a, you know, early stage startup. Yes. And, you know, all of those processes, the controls, the audits, the evidence that you have to provide, those are best understood at the governance level, because, you know, often times at the governance level you are dictating, but in certain cases, especially with AI, you have to be on the side figuring this out with everyone else because it's terra incognita [unknown land]. And so given that you don't know what that's doing, you know, how do you put rails on the sides? So when you need to communicate what it is that you're doing to other people, it's well understood. Yes. Right. And that friction actually gets in the way of our sales process if we don't do it right, because the first thing that an insurance company will ask for is all of our documentation. And if we're not ready with that, if we've not had a pen test [penetration test] recently, if we don't have any third party delivering kind of reports, right, that will create a whole bunch of friction in our sales cycle, which then impacts our ability to generate revenue. And so, it's all related. Right. I think one of the key things that a director should have a broad understanding of the general issues of technology, how technology fits together, what sort of systems and processes and governance should be in place to control the use of technology and the risks associated with it. Yeah. So everyone has to have this basic understanding so that they can ask intelligent questions in this space. Yeah. And it gets even harder for us because we are remote by strategy. We're 100% remote business. We operate in eight countries, we have staff in six, multiple languages. We actually do - Different time zones. Different time zones, but we do supply them with our computer, but they're accessing our infrastructure from a keyboard, from an internet connection that we do not manage. Yes. And so we have even more responsibility with that strategic decision of good governance around security and controls. Right. And managing those people. How do you find, you mentioned before that there were five languages involved in those eight countries and the communication difficulties associated with that. Yeah. How do you find those communication challenges, and getting the right behaviours from those staff? Yeah, well, it's all a learning experience, right. Because I moved from San Francisco to New Zealand in December 2019, and then, you know, got here, I was like, I'm going to be, have an office, I'm going to be going to Australia all the time, I'm going to be doing this, doing that. COVID immediately happened, which strategically no one's ever ready for, is a big global pandemic, and also at the same time as managing multiple people in different time zones with different languages. So, you know, my big learning curve was how to lead from Slack[slack.com], you know, and, you know, I was at home working in a computer, dealing with people in different time zones. So learning how to be an effective communicator asynchronously and emoting on a keyboard are the two biggest things that I have to learn. Yeah, right. But I'm still not great at. But emojis are universal, right. Where language can be misinterpreted. Don't underestimate the power of, well, yeah. Don't underestimate the power of emoji. Yeah, for sure. Yeah, very much. And what's cool is, I'm in probably, I'm in a lot of different Slack groups. But I'm in kind of four in an official capacity. And in each Slack group they all use different emojis to convey things. Wow that's interesting. So there's different emoji language that I have to adopt when I flick between Slacks. For different groups. Well, that also has very interesting implications for the board of directors, too, because if you're dealing, and we even find that within local businesses, you know, we're a very multicultural society. Yeah. So you have a whole lot of different cultures that are involved in your business. Yeah. And, you know, we know that success with business happens when you don't engage a whole bunch of people that are the same. Yeah. You want to have diversity within your business. That's right. That often involves diversity of culture, diversity of background, diversity of language, and having the expertise within the business to communicate across those cultures is very important. Yeah, yeah. And we also do cool things like, every country gets 13 public holidays, and I don't get to decide what those public holidays do, they do. And so every year we go through the same process of what are your public holidays, and we lock them all in, and then we recognise and celebrate each one. But everyone takes different days. Different holidays, right. So, you know, and there's Diwali is massive for our team in India, whereas in the Philippines they follow more of a Christian calendar, and then with the Muslim calendar it is very dependent on lunar cycles. Yes. And so a lot of the holidays there are uncertain come January 1st, and they get clearer as time advances for all of their festivals. And then the Americans just celebrate because they're getting way more holidays than their peers. Way more! Did you know there's legally no public, requirement for public holidays or personal leave in the US [United States]? As federal law? Zero. And state law, zero. Wow, that is... So, everything that they get, two weeks, and then the public holidays that they do get paid for are decided by the business, not by any... So you have to check your contract. And you chose to work there for how long? 20 years. I'm just going back to the craziness that's sitting beside me. Yeah, yeah. People from America don't understand that, you know, you just get four weeks leave here by law. Yeah. It's very hard for a lot of US people to comprehend that. Yeah, I wouldn't want to live there. Moving back to the concept of innovation, and the human side of innovation in particular. Yeah. How can governance help to protect the human in this process, particularly as we're getting increasingly automated systems, and should governance protect the human? Yeah, I think so, because, there's a lot of things to unpack there, but basically, you know, people like to do business with people, right. There's, we've gone through all these different waves of innovation, we've gone through all these waves of disruption, you know, starting with the industrial revolution or even before that, right, with a bunch of technologies. Every time, you know, there's a lot of people loudly outspoken about how it's going to kill the economy or people's jobs or whatever, and the world figures it out and evolves. Yes. Not at the individual level, you know, there'll be some people that will get disrupted in a negative way. But the trend generally over time is that this disruption - New jobs are created. - yeah, unlocks new opportunities, new ways of doing things, and that this AI revolution is no different. Perhaps the cadence at which it's running is the only thing that's significantly different. Yes. You know, we are building this AI plane while we're flying it, and no one has the controls. Yes. That's a scary way to put it, but remarkably accurate. Yeah, yeah, yeah. And, you know, that kind of flexibility, I think, and adaptability is going to be a necessary key element for people. And very much a trait for good governance in the future, I think. And the analogy here is writing versus typing. So a developer does two

things: 13:22

they create code and get the mental model figured out in their brain, and then they type all that out. And AI can help eliminate a lot of that typing. Before that, there were lots of online resources where they would copy and paste it. It's not actually that different. It's just now AI, so it's labels and such. It's faster. Yeah, it's a lot faster and it's more bespoke and it's very personalised. And so these things are happening at the typing level, which unlock a whole bunch of writing. And my working hypothesis is the writing typing analogy will be true for a lot of roles outside of just software development. Absolutely. Yeah, it's almost like the invention of a calculator, right. It elevates people from simple mental arithmetic. Yeah. To be able to concentrate on the larger problems. Yeah. Well, remember when we were young, god forbid if we brought a calculator into an exam, that was unheard of. But now. Until you got to fifth form, when you were allowed the [Casio] FX-82, right? Yeah, yeah, that's right. But now, you know, it's like, - It's standard. - yeah, it's standard, because it's not what you know, it's the process that you understand of how to get there, that's the important thing. Yes, yeah. Where do diversity of experience and lived perspective add the most value? This is a great analogy for AI is, you know, AI will never disrupt everyone's jobs because they don't have that lived experience. They are predictably smart enough because they run in a probabilistic way, but they will never have the lived experience that people have. The analogy is also the same for governance. You know, I have an accounting director from PwC, I have an industry insurance lawyer, I have someone that has 30 years of insurance experience in my governance domain. These are things that are not replicable. Yes. Or teachable by me. So I'm constantly leaning heavily on their deep domain expertise, which is their lived experience, in order to get good insight of how to solve a specific problem that I have no experience with. Yeah, as you was talking about in an earlier conversation about the battle scars, having got the t-shirt, destroyed the t-shirt, built a new t-shirt. Built a better t-shirt. Hopefully a better t-shirt. Yeah, absolutely. Yeah. Right. What board traits or capabilities do you think will matter most over the next decade? So it's going to be the flexibility and adaptability because we're flying this ship and no one knows who has the controls while we're building it. And figuring that out on the fly is going to be a key trait of, I don't know if if rapid governance is going to be a thing, but something along that line, right. Where it's governance is identified, action taken, because there was no governance required before,- Yes. - but it's a newly identified bit of governance that needs to be implemented rapidly. And then curiosity. Like, where is this all going? Where are we headed? What are the things that we need to understand? How are the problems going to be identified? How are we going to solve them? And again, like the systems innovation analogy earlier is, where are the barriers? Where are the levers? You know, how do we get rid of a barrier? How do we pull a lever - Yes. - to unlock opportunity in the future? Yeah, curiosity is one that has come up in this type of conversation before as being a key trait for a director, and that, with the rapidity with which change is occurring, - Yeah. - it's essential to be curious to try and at least try to keep up with a little bit of this change. It's moving far too quickly to keep up with everything, but you kind of got to know where to look and who to ask and, and those sorts of things. Yeah, yeah. On your point that you raised about adaptability, - Yeah. - one of the things that I wonder then is, will we start to see an increased cadence of board meetings? Because change happens so quickly, right. Yeah. Now, if you're waiting until the next quarter before you meet, maybe there's more ad hoc arrangements, but do you potentially need to increase your cadence to monthly because you have these new things happening so quickly? That's very interesting. I wonder whether, yeah, just food for thought. It's interesting. Yeah. I think you might be right. Yeah. Even the startup that I'm helping advise right now, you know, we are meeting at a weekly cadence. Yeah. Yeah, right. That may not be true for forever, but right now it's very important because, you know, I'm preparing them for a phase that they don't understand yet. Yeah, right. I'm like,"You're going to be here. By the time you get here,"if you're not ready for it, it's too late. So we do it now, do it now." And then, you know, everything will then, hopefully, be much better when you're at that phase. And then less governance meetings will be required. Yeah, yeah. But now you're saying the opposite is true. God, you might be right. It's interesting, eh. Yeah. And then you come back to the challenge of the more frequently you have governance meetings, how do you ensure that you remain at the right level and don't get down into the weeds and start getting operational? Yeah, yeah. So there could be some change to come here. I know. It immediately sounds burdensome. Yes, because as a CEO, you prepare reports for every one of these meetings, right? Great, got to do it again. But maybe that's not the format for these - Maybe. - faster cadence board meetings. Yeah, maybe you've got your quarterly board meeting, where you're doing the formal packs, and then a monthly dive into a particular strategic issue, and that's all you have on the agenda. Yeah. Yeah. Interesting. For a new director then, what advice would you give to somebody who's starting a governance journey? Two things. One is get as much experience as possible. So we've talked about these before. So, my experience is advisory boards, whatever nonprofits you can get a hold of. I was fortunate enough to do IT [information technology] work for nonprofits in the past - Ah, yeah, right. - which got me a lot of governance work. I was also a trainer for the American Red Cross doing CPR [cardiopulmonary resuscitation], first aid, those kind of things, which gave me access to good advisory boards. And then from there, what are you showing in terms of a commitment of your continuing education in terms of this is my focus, I'm showing you I'm focused on it, these are the courses I've done. Yes. Which were the courses you were talking about. Yes. The Insitute of Directors' course, the Chartered Governance Institute course, the Sport New Zealand course. Yeah, that's right. And then of course the reading material like Bob Garratt's "The Fish Rots From The Head","The Four Pillars [of Governance Best Practice]" from the Institute of Directors. Yeah. There's a lot of good governance material out there to read. Yeah. There's a great one from Sport New Zealand, too. I can't remember the title of the book. I'll try and put it in the description. Cool. Yeah. And so those courses. And then the other thing is knowing your superpowers, knowing the value that you can bring to a business, and then knowing what kind of business would execute on that value the best. Yeah. You know, for me, for example, it would be early to mid-stage startups that are in scale up mode and desperately need some governance help. Yeah, right. But they don't know, but they don't know what it is. Yes, yeah. And I think associated with that is also the self-awareness to know when you've stopped adding value and when it's time to say, "I think you need someone new." Yeah, yeah, yeah. And that that's also kind of my working hypothesis right now within InsuredHQ is, "Let me"get you to a scale of the business that I think we can get to. After that is, you know, it's"outside of my capability. We'll have to hand it off to someone else who's more experienced at that phase of the business." Yeah. Right. Yeah. Jon, thank you very much for the time, for your time on this. Okay. That's been a really cool conversation. Second time through. There's a story behind that. The first time we did this, it didn't record. So I'll look forward to catching up again soon. But we did it better the second time. Just as well. And I'll look forward to seeing you next episode. Thank you for watching this episode of Governance Bites. We have more episodes on YouTube and your favourite podcast channel where I interview directors and experts on various topics relating to boards of directors and governance. We'd love to see you back and please like, subscribe and share the videos and podcasts.