Governance Bites #154: Collaborating for lasting value from tech investments, with Josh Gould

In this episode, Mark Banicevich interviews thebigword CEO Josh Gould on how organisations can turn technology investments into lasting value through strong collaboration. They explore what true alignment between boards, investors, and leadership looks like, and the costly consequences when it’s missing. Josh shares practical insights on balancing short-term pressures with long-term transformation, maintaining capital discipline, and ensuring the right talent is in place. From governance red flags to managing risk in large-scale tech programmes, this conversation is essential for directors looking to maximise returns and deliver meaningful, sustainable outcomes from digital investment.
Joshua Gould is the Group CEO and Director of thebigword, offering over 20 years of C-level leadership across the technology, defence, and healthcare industries. His governance experience includes serving in an advisory capacity as a Board Advisor for AI Research and Development and as an Export Champion for the UK Government’s Department for International Trade. As the former CEO and co-founder of TBW Global, he directed critical language services for NATO, the U.S. Department of Defense, and the UK Ministry of Defence. Joshua specialises in corporate strategy, M&A preparation, and the oversight of AI-driven business models. Recognised as European CEO of the Year, he manages global operations across 80 countries with a workforce of 15,000.
#Governance, #CorporateGovernance, #BoardLeadership, #BoardOfDirectors, #Directors, #TechnologyStrategy, #DigitalTransformation, #TechInvestment, #Innovation, #BusinessStrategy, #Leadership, #RiskManagement, #CapitalAllocation, #InvestorRelations, #OrganisationalAlignment, #BusinessGrowth, #FutureOfWork, #ExecutiveLeadership, #TechLeadership, #SustainableValue, #Podcast, #YouTubeBusiness, #ThoughtLeadership

Transcript

0:00

So hello, my name is Josh Gould, and we're going to be talking today about turning tech investments into lasting collaboration between all stakeholders, whether that be the board, the employees, the clients, and the supply chain. Hi, welcome to Governance Bites. My name is Mark Banicevich, and today I have the pleasure again of spending more time with Josh Gold. Josh, thank you so much for your time. You are, I think, possibly the CEO [Chief Executive Officer] of the largest business that I've interviewed so far with thebigword, because you're quite a large company that's involved in the US [United States], in Europe, in the UK [United Kingdom]. I know you've got a lot in the Netherlands. You've got a fairly large staff in India as well, haven't you? And you're also on a couple of boards. I think one of them, is it something to do with justice in the UK? Yes. So first of all, as they say, Mark, it's never big enough. So we are still working on that, but yeah, everything you said is correct. I also sit on a number of governance boards. So I work with the Ministry of Justice in the United Kingdom and I sit on their language board, and that's all to do with language access in the justice system. I also sit on a board of a consumer packaged goods [CPG] business called Falafel Love. And I advise, you know, other CEOs, other board members, other people that actually are invested in by the same people that I'm invested in. So our topic today, turning tech investments into lasting value through collaboration, and this was particularly around the collaboration between board investors and leadership. So my first question for you is, what does alignment between board investors and leadership look like in practice? So you have to understand how a board thinks, and, you know, the obvious is a board wants a business to do well, but actually boards are made up of investors. So even a public company, and you have all these board members that are on there, they are assigned by their largest investors. So you can have a company that's a hundred billion dollars. There will be hedge funds that own 1%, 2%, 3%, sometimes 4% or 5%, and they will put on, either the fund managers on the board, or they'll put on, you know, a number two on that board. And I don't think people realise that. That board members are actually not these hired guns that just are good at governance. They are investors and they represent investors. So they want to make money and they want to make a great return on investment, and they get paid that way. So how do board members typically get paid? Well, they'll get a small amount of money for their time, but it will typically be very, very small compared to an average salary of someone who's an executive board member, meaning they work in the company, but they're also on the board. You know, it'll be less than 5% of what the CEO gets paid. Sometimes it's 1%–2%. $20,000 to $30,000 is not abnormal for a$100 million company to pay a board member, but they also typically get paid a bonus in stock [equity/shares]. So they're getting stock and their goals are now aligned with the overall success of the business. So I think that's the first really important bit, Mark, is to understand what drives a board. What are they actually trying to do? They're not there to kind of make sure that the management team don't go off the rails, or, you know, we check the right boxes for the banks. That's part of what they do, but they're ultimately there to make money. And then you've got other people on the board from time to time, and these will be assigned directors. And their job is to bring experience. So they'll still be paid in the same way, and they'll still be assigned by the investor, but their job is to bring experience. So you'll see this all the time, like the CEO of IBM [International Business Machines] may be on the board of some semiconductor [business], because it's an adjacent business to their own that they know about, that they understand. And a lot of, you know, the CEO of IBM, they think, "Okay, when IBM doesn't need me anymore, I'll sit on five of these"boards, so I'll do one or two right now." And they like it. And when they do that they're looking at the business and investments in a very different way, in a very practical way, because their job is to bring real-world application into the boardroom. So when we're looking at making a big tech investment, it's a risk, and it works very much the same way as a startup. You'll get - in my business it'll typically be the CIO [Chief Information Officer], CTO [Chief Technology Officer], COO[Chief Operating Officer] - they'll come up with a significant piece of technology that they want to build. And either they'll pitch it as it's going to save money or it's going to make more revenue. And then each one of these board members will look at it. The CEO's job is to make sure it fits into the whole picture, and be able to explain that very clearly to all board members. This is what the programme is. This is how it fits into our overall strategy and the investment thesis that everyone else has signed up to, whether it's a public company or whether it's a private company. And then the CFO [Chief Financial Officer] will talk through all the numbers — that's the, you know, the spreadsheets — and it's certainly not boring, you know. Board members love spreadsheets. You know, they're not necessarily people like me who are ADHD [Attention Deficit Hyperactivity Disorder] and just, you know, will go a lot on gut and a whim. These are your very sensible spreadsheet discussions. This is what it's going to cost. And then you'll have your CIO, CTO or CEO — so that's Chief Executive Officer or your Chief Technology Officer — in the room to answer any of those questions, as well. What will then transpire typically in a boardroom environment is they'll say,"Conceptually I like it, I'd like now to move forward with a more detailed"business case and more data in and around it, more real-world testing or more proof of concept."So go ahead." You know, in some cases, "Build that minimum lovable product or minimum viable product,"come back with more data and show me." And that's the governance structure then that the board start playing with and putting in place. And it's not, "Yeah, here's a load of money, go and"buy it, let's hope you're right or you're fired." You know, it doesn't, - Yeah. - I'm sure there are boards like that, but for the most part a professional board doesn't operate in that way. They will then install governance in, and they'll want to see usage figures. They'll want to see people being upsold, cross-sold. How much of our existing client base, for example, is adopting the new investment technology, versus how many new clients is it bringing in? And they're looking at it in the same way as Google is going to look at this podcast's algorithms. You know, how many people are tuning in? But that doesn't tell you the whole picture. How long are they listening to it? How many are subscribing to it? And investment boards look at everything in the same way. Now, what happens in really high-functioning boards, and thebigword's board does do this, they will then create working groups or sub-board committees, and they will review these big investments more regularly than once a quarter, which is typical for a board to meet. So it may be monthly, and they'll keep an eye on it. So there is this sub-structure within a board, typically. There's a lot that's come out of that answer for me so far, and part of it is actually the difference between your experience running a, really, a US-domiciled business. Or is it US-domiciled? It's still UK-domiciled, isn't it, thebigword? thebigword is both. It's a British-American company. Yeah. It has ownership in both. Right. Right. The governance structure in the US is quite different to what we experience in New Zealand. For example, directors don't normally get bonuses in boards in our part of the world, or options. They'll get a salary, and it's not large. You know, I had a great conversation with a guy named Dr John Peebles a little while ago in an earlier episode[episode #135], and he has had a career in recruitment, and then does a lot — he's got a PhD [Doctor of Philosophy] in governance now and does a lot of governance stuff — and he was talking about trying to recruit a heavy-hitting CEO from the US to come to New Zealand for a major New Zealand company, paying, you know, $4 million for salary, and talking to a US recruit saying, "Well, no, that doesn't really cut it.""Just quietly, what did you earn last year?""Oh, $100 million." So the scale is quite different. But so there are quite significant differences in the structure of your boards, as well. We tend to have a few more independent board members that are deemed to be really important in boards in this part of the world, that don't come with any tie to the company and are there to guide and make decisions. As well as, you know, private firms, as you say, it's quite common for large investors to appoint people to the board, but they'll often be balanced with people that don't have an otherwise relationship with the company. So those differences are quite interesting. Yeah, I wonder how many are truly independent, though. Absolutely. Because I can guarantee you if we had my investors on, they would be saying, "Yeah, we have independent — all of ours are independent." But who hires them? Who makes the decision to pay them and how much to pay them? And I think when you follow the money, you'll find that those independent board members are not that independent. And whilst they will say they are, and they've got to say that, I think, you know, one of the things I love to do in podcasts is kind of rip away, you know, all of this BS [bullshit]. And, you know, that's my style in my own podcast — I tell everyone the strategies exactly how they are. And I think because in the UK it's the same as New Zealand. Yes, it is. You'll typically have a chairperson who doesn't have much skin in the game. They're often like a professional chairperson, and you'll have, you know, one or two non-exec directors that often are accountants or something else. But, you know, look closely at who pays them, who hired them, whose final decision was it, and you will find that they're not so independent. They may not get paid what people in America get paid, because the economy is smaller, the market is smaller, and everything is relative. But yeah, I probably am not supposed to say this, and, you know, if I get off a podcast and don't get in trouble with my investors, it's a rarity. But I question how independent — and CEOs from my perspective really understand this. We understand the politics between everyone, and we understand who is looking at it from a really strong governance perspective and who is looking at it from a really strong investment perspective, and who is looking at building long-term value versus, you know, they need to turn a short-term dollar. Yeah. And we have to then be able to package this into one story that works for everyone, because I can't go and tell — to go back to the topic and the subject — I can't tell five different stories for the same investment. I can kind of sharpen my thesis one way or another for them, but I can't make up a whole different story. So it's a real challenge for CEOs to create a strategy that all your board members really like, they can all get behind. And at the end of the day, if you're paid even$30,000–$40,000 a year, and let's not forget they're often only doing six to ten days a year, these board members, so it's still a good amount of money, and they enjoy doing it. And their job is to find the holes. So one of the ways that I like to do — and I try and give when I'm on these podcasts tips to people so that they can actually take it away and try it out — I try and pre-empt those holes and who's going to pick them. And then well before the board meeting, I will say, "Let's have a discussion about"it. What do you think?" Even before they know this investment request is fully formed. And then the other thing I'll do, and I think this is somewhat of a high-risk strategy, I will encourage my non-exec directors, my independent board members, to actually have skip meetings — so without me, but with other senior people within the business, and even sometimes middle management. And they love it because it's so unusual, and they're getting this access, and it's not a polished presentation, and this person has no idea how to speak to a board member, but they love it. And I do say to them, "Listen, it's not a polished answer. They're going to say things without"thinking about the effects of them. It's going to be raw, and they don't always mean what they say,"because they're used to playing politics. They're not at the top of the organisation." So there's a lot, you know. So they'll sometimes say things that are negative about other areas in the organisation to help them get up, which, you know, is not a culture that humanity should be proud of, but it is part of the human condition.

So these are my tips: 15:16

you know, really give some of these board members access well before the board meeting, make them part of that investment process well before you're presenting your thesis. Yeah, that's a really good tip. Thank you. Coming back to our — well, you've brought it back to the topic about that alignment between the board, the investors, and leadership — where do you see malalignment, and if there is malalignment between those parties, what are the consequences for the business? It's a very good question. Typically a CEO won't often bring something to a board meeting without socialising it first. So the malalignment really happens kind of well before the board meetings. So I'll have a vision and a strategy and a goal of how to get there. I see it as my job to get my board on side, to bring them along on the journey with me. It's not their job to buy into what I'm doing, it's the other way around. I have to get them, the onus is on me, should I say. So the malalignment in my world typically comes well before a board meeting. It comes when you're discussing it and you're getting feedback. Now, sometimes I will believe that I understand the business better than my other board members. I've been there a long time. And then I have to sit down and say, and I have words with myself:"Josh, you're not always the smartest person in the room. In fact, frequently you're not."And these people have all this different experience"than you, outside your industry, which applies directly to what you're doing."So absorb it, listen to them, react to it." And I think that that's a very healthy way to review it. And then you present it to them. And I presented a piece of software which I wanted to build. It was going to cost about $7 million to build it. And the board told me, "No." And it was actually AI [Artificial Intelligence] translation. This was years ago. And they said,"I don't disagree with you that it's going to be built. It's just not going to be built by you."You have access to market; let someone else build it and then you install it into your software." I was absolutely fuming, Mark, at the end of that meeting. This is like the greatest thing. It's a multi-billion dollar idea. We're going to make it happen. Everyone's on side. We're going to transition our business from a tech-enabled into a true tech platform. The vision had been sold internally and externally. And I went to the board and I hadn't done what I said. I hadn't, I was a new CEO at the time, and I hadn't gone and got buy-in. And all they heard is $7 million, and we're going to do something that Google hasn't been able to do, Microsoft hasn't been able to do, but yeah, Josh Gould, from Leeds in the United Kingdom, is going to do this in a little shed in Lower Wortley. And they weren't buying it, and they weren't buying into it, and I was fuming. I was mad. As of today, we built these phenomenal orchestration tools around enabling all these different AI translators, and we've got great ways to tune it. But we never had to spend a single penny on building it. So whilst I would never admit it to them, and hopefully they're not listening to this, they were 100% right. And that's what healthy governance within a board looks like. And it's that healthy malalignment. Malalignment is not negative. It's not negative at all. You need people to question your thesis and what you're doing. You need that experience. That's awesome. What a great example. Thank you. Sometimes you may have investors on, particularly those that sit on your board as you said before, or even those outside the board that are pure investors that are demanding the quarterly gains, right. They want to say each quarter, where's the profit, how's it going? But you know, you're talking tech transformations there, where, although that example didn't go ahead, you've had other examples that have, and they might take 24 months or longer to show any benefit. How do you manage that tension between investors saying, "Show me the money now," and wanting to deliver long-term benefits? Well, you have to understand when you're leading a business that your goal isn't always going to be the same goal as your investors, but you have to find a place where both are going to win. So my goal, every day when I wake up, I want to eradicate the final barrier of communication, which is language. That's my entire goal, it's what I get up for every single day. I like to earn the money that comes along with doing something that audacious, but at the end of the day the audacious goal is what really drives me. Wakes me up early. I was up and in the office for 5:00 a.m. this morning. I'm speaking to you

and it's 5: 20:42

44 p.m. right now. So I'm excited about it and I enjoy it. My investor's goal is somewhat aligned to that. They like the mission, but it's not why they invested. They invested because they believed that they would make money from the company and that they could do something that aligns with the goals of their own funds. And, you know, they have ESG [Environmental, Social, and Governance] goals, which is like the social responsibility side and governance side of it. They like the governance-heavy businesses, like thebigword, but they ultimately believed they could make money in it. And I guarantee you if they loved the business, but felt that they would make more money in one of my competitors, they would have gone to my competitor and bought them instead. So my goal is first and foremost mission-driven. Their goal is first and foremost financially driven. But there is a world where we can both get what we want. I still want to make a lot of money and they still want to do something that's good for society. So really it's about this kind of understanding where each person sits, what's driving them to make an investment, to want to build a piece of software, to want to buy a machine, to open up into a new country. And at the end of the day — and I think people don't realise this — board members, whether you're sitting on a board of Tesla or whether you're sitting on the board of Falafel Love, which is a very small CPG company, which is a consumer packaged goods business, they're still humans. And humans are driven by their own belief system. So I can't tell you how many times I've worked with people who want to pay more for a business because it's a local company to them. And they'll justify,"Well, I can go and sit with them, I can speak to them, I can drop into their offices." And they'll literally spend one to two turns of EBITDA [Earnings Before Interest, Taxes, Depreciation, and Amortisation] more, you know. And if you're making $10 million of EBITDA, that's tens of millions of dollars, potentially they'll spend, because it's local and they like the local boy or the local girl. I've seen people invest in a business simply because of the sex of the CEO. "We need more women in tech," which I agree with, but I wouldn't spend more on buying a company simply for that reason. So you've got to understand that humans do have belief systems, whether they're atheist or not — atheism is a belief, as they say. And boards are made up of humans. So you get people who say — one of our big investors is one of the richest men in America, and we do all this really cool stuff in the courts and the police stations and we enable all this justice. When I speak to him, he just says, "Tell me about what you're doing in the hospitals." And he really cares about the medical side of our business. And I'll tell him one of our recent war stories about how someone was giving birth and one of our interpreters was in the hospital and there was a cord wrapped around the neck, and the person was pushing like crazy. And actually, apparently, when that happens you have to pant, and the interpreter said,"No, you've got to pant," in the language that the person giving birth — and the doctor told the interpreter that they saved the baby's life on that day. And that made this investor, who is, like I say, one of the richest people in America, very well known — it made their day. They loved it."I invest in a company that saved someone's life. I played a small role in that." And it's heartwarming, and people like that. So you really got to understand that people are still people. It doesn't matter who they are, and they all have things that are going to drive them in their subconscious. Ultimately, money is going to make the investment worthwhile, but there's lots of ways to make money. Yes. Yep. And let's focus on the ones that help people, right. That's awesome. What are the red flags that a board is either too hands-off or too involved in the business? Sorry, I coughed over you there, Mark. No, not at all. What was that question? What are the red flags that a board is either too hands-off or too involved in the business? Yeah. So you can sometimes see that. You know, you can go to these, we do these monthly operating calls, and you know, you do the quarterly board meetings. I can always tell who's engaged by, are they turning up to all the monthly calls? And have they read all the materials and got really genuine questions? Or have they scanned it into ChatGPT [Chat Generative Pre-trained Transformer] and said,"Give me ten questions to ask?" Because when you scan it into ChatGPT and you get ten questions, they're usually general questions across the board. But when someone really is interested and really wants to know more and get more involved, they will continuously ask questions about the same thing, they'll ask the follow-on questions, and they'll do it over a long period of time. It's my job as a CEO — and I think it's all CEOs' jobs — to try and get everyone that focused, that involved. Part of that is you've got to keep doing well, because people get very excited when you're doing well, and everyone wants to show up to your meeting. When you're not doing well, they want to get involved, as well. So it can work — you know, there's two sides to that story. But the other thing is, really understand what drives people, what is making them invest in you, and it all comes back to what we've just been talking about. They're individuals. And, you know, if they are disengaged, they're not going to write another cheque for you, and they're actually at some point going to want to put the company up for sale pretty quickly. And for a CEO, sometimes that's really good. We get paid when companies sell. That's how we make most of our money. But when they sell for less than they're worth, you've left money on the table. Yeah. And, you know, for me, I'm always playing the long game. So I'm always looking to hang on to my investors for as long as possible. I'd rather sell my business two or three times in my lifetime and stay with the same company — and I'm on my second time already — than go every four or five years to a completely new business and exit it. I think I can actually make more money by staying and accumulating real knowledge, real capability over time. And to do that, I've got to keep my investors very interested. And I've also got to pick the right investor, which we probably should talk about a little bit. Please do. You know, you've got to look at the business you want to become, and find that investor, rather than the one you are today. The main and lead investor of thebigword is an organisation called Susquehanna Growth Equity. And they mainly invest in tech companies with subscription models. We're not. We're a tech-enabled business that's really a service model. So I wanted to work with them for a couple of reasons. One, I believe that they are the right partner to get us to the subscription-based model. And number two, they don't have outside investors, so that they can stay in an investment for a long period of time. That can be a bad thing. If you just want to do a five-year stint, you don't want investors that never need to sell your business, that are looking to build multi-generational wealth. You want the fund that is already two or three years into it, and they're just deploying their last bit of capital, and at most they're going to sit on your business for five years, but probably it'll be more like three or four years, and then they'll be ready to churn the investment. So you really have to align your investors to your own desires, but also to what you want to do. That's a really strong pickup, and really closely tightly tied to the topic. You know, we're talking about the alignment of investors, and the board, and choosing your investors for where the company is going is a really powerful way to achieve that, right. If you find the right investor, and as that example that you just gave where you want to transform the business into something that that investor specialises in, is a really great example of getting that alignment. I grade my investors. I — again, I'm going to get in big trouble for saying this — but I grade all my investors based on importance. My most important investors are typically my senior leaders within the business. They're not investing their own money; they're investing their time. Now, they do earn bonuses related to how well the business is performing. So, to that, you know, they are investing some money, because sometimes they'll say — and this may surprise people —"I know I'm not going to earn a bonus this year because we're investing for the long term, and"we'll decide to make less profit in order to build cooler stuff." So they do invest in that sense, but they're really investing time, which is a more precious asset. Without those people, I won't have clients. So they're my second on the grading system, and each client has its own grade because different clients have different profitability levels, have different importance to generating what we do. But I've got some clients who are fairly small, but they're like,"Let's do it, let's build it, let's bring it into our call centre." And those are really important investors. You know, they may only spend a million dollars versus my bigger ones that spend five plus million dollars, but they're allowing me — they're funding me — to build things that actually I'm going to provide to my entire client book of business. And then I have my actual banks, and those are the debt investors. Now, without debt, I couldn't — everything would take three or four times as long. I can borrow money, deploy that capital, and get a return very, very quickly, and then churn the debt. So they're really important. But they're not as important as your equity investors. These are the people who are buying your stock. Because the bank folks, they're not a pure commodity, but they really don't get that involved in your business from an investment point of view. They do. And you might be surprised that you do typically have to go to your bank managers and get them to agree to open up an office somewhere or to make a big investment. And sometimes you're going to use more capital than you want, so you're going to go and ask for more. But more important than them in the grading system is your equity investors. And those folks are the ones that keep you in the job. They're the ones that sign my paycheque, as we say in America. But I do grade them in that way, and each one has to be bought into what you're trying to do and the technology investment you're trying to make. And each one is looking at it from their own perspective — going back to kind of what makes people tick. But one of the things that I think is a bit of a travesty is people don't really think of their clients as investors. And I have a friend who said, "I could never do"what you're doing. I don't know why you do it. You know, I run a business"that's one-fifth of what you do, but I own 100% of it, and I have no boss,"and no one can ever fire me." And I understand that, I genuinely do. But I think I couldn't achieve what I need to achieve with this huge audacious goal of eradicating the final barrier of communication without all these different people. But what I did say to this particular person, I said, "Of course you've got investors. How do you"pay your bills? With what?" He's like, "Well, we sell revenue items.""Exactly. Your clients are your investors. And if they lose confidence in your business, they"can't sell your company, but they can move from your company." Yes. So we must look at clients as investors, and a lot of our big tech investments get backed before the clients well before the board ever know that we're thinking about them. And that's one way I actually sell it to the board. I've already got these three major government bodies signed up to the minimum lovable product and they're going to test it in their court system or their hospital system. It's then very hard for an equity investor to say,"Guys, I don't like it." You know, because then I've got to go back to my client and tell them, "Board didn't sign it off. Sorry about that." Nice approach. What does good capital discipline look like in fast-moving digital environments? Good capital what sorry? Good capital discipline. You know, the fiscal discipline, the control of the money. So what does good capital discipline look like in... In your tech fast-moving digital environment? You're into this tech business that, you know, you've got to move fairly quickly. You do, and it's so easy now and really dangerous. I'm waiting for a big company to collapse because they accidentally spent hundreds of millions of dollars. If you're not familiar with how AI works at an enterprise level — like, I bet you've got a lot of people on here who spend $20 a month for ChatGPT or Gemini and say they've got enterprise AI. But what I'm really talking about is this tokenised system. Yes. So it's the next layer above that. And this is where you plug in, and as part of your product or services you have a third party like ChatGPT or like Gemini, or like Claude, which is an Anthropic product, and you then make that service available to your end users. And how you pay for it is a token. But the tokenisation is really complicated.

So in my world, in AI interpretation — which is: 36:07

interpretation is the spoken word, translation is the written word; everyone outside the industry calls it AI translation regardless — but in my world you pay a token for every word, but it's every word times two because you've got the source and the target languages. And then you can also pay different numbers of tokens to get rid of the delay. So if you want simultaneous interpreting versus consecutive — and simultaneous is like what you see in the UN [United Nations], you know, where they speak as the other person's speaking, - Right. - that's very intensive on the chips and electricity and data centres. So the amount of tokens you need for that goes up, and you don't really have a huge control of it. And what will happen is Gemini and OpenAI, that owns ChatGPT, won't say, "This is how much it is for a token for the next three years or five years." But I have to sign a contract with my government clients for five years. Sometimes I sign seven-year contracts, and I don't know how much that AI is going to be worth — or sorry, cost me — in that period of time. And I actually don't know; they could even change how they calculate the tokens."We're now going to charge you two tokens for that, three tokens for that." And it's really, really difficult to predict how much things cost, which is why you need to wrap this with phenomenal governance. So we actually have a governance meeting every two weeks exactly around this. And it happened when one of my test engineers decided to spring up a new server to test and do quality QA [Quality Assurance] testing, and it cost $30,000 a week. Now, you're asking me probably,"How the hell is a test engineer allowed to spin up a server?" Poor governance. That's where the governance comes in. There was no process. So he could click a button on Microsoft Azure, a test server spun up, and all of a sudden we're spending thirty grand a week, and it's like months go by before we figure out that this guy has spun up a [server], and he had no idea what it was costing, - No. - nor did he care. Until we told him. And he cared. But this happens all the time. It happens in the SEO [Search Engine Optimisation] world. You know, my same friend as I was just telling you about, who runs his own company, he does pay-per-click, and he says sometimes Google will charge me $60,000 for a weekend of pay-per-click. It's the same thing. So it becomes very, very dangerous. But at least he's in control of his pay-per-click. When I resell an aspect of AI which has been tokenised to a government provider, and I'm under something called FAR [Federal Acquisition Regulation] regulations, which is federal administration[acquisition] regulations, I've got to deliver it, and it's potentially criminal not to. That becomes really difficult, and, you know, man, you've got to wrap a lot of oversight into this. I mean, this is governance on steroids, because it can cost you millions, and, like I said, I'm waiting. There will be a company that will run out of money or go bankrupt — and probably already has — over poor governance in and around this. Yeah, that is amazing, because it's not like you can go to your clients and say, "Well, here's our pricing arrangement, we charge you X cents per token," because they're going to look at it and say, "Well, that's meaningless to me, give me a"number that I can work with." So you're the party that has to translate that tokenisation into a price that the client can understand, and you're taking that risk of the cost inside. And as you say, over a long period of time — over seven years. Imagine I went to Homeland Security and I'm like,"Guys, we're going to charge"you tokens. This is our new way, because we're getting charged tokens." They're going to look at me as if I've got three heads. They're saying, "I just need to know if this"person should be in the country or not." Yes. You know, "I don't care if it's a person, I don't"care if it's AI. I know my procurement manager does, but I don't, and I can't use that." So, you know, this is a real — the governance in and around this capital, and cost of capital, and cost of capital, as well, is not easy to control. So if you go to the bank now and you want to buy a new warehouse or a new factory, and it's the building itself, you're going to be paying 6½% plus here in the US or UK. That was 3% five years ago. Yeah. And so it's changing. But if you go and say, "I want to build a piece of technology." And you go and say, "I need working capital from a lender, " you're going to probably be paying 15% now, which would have been around 8% five years ago. So the cost of capital is rising in a way that most CEOs haven't had to deal with in their CEO-ship. You know, they probably were working in business — you know, I remember when a good mortgage last time around, sadly, was 6%. My first ever mortgage was 6% here in the US, and everyone saying what a great deal I got. So now if I told people I'm paying 6%, they're like, "Oh my god, I'm paying like 2 or 3%. We remortgaged during '21 or '22." Yeah. So there's so many variables, and it makes that capital structure and the way you have to think about capital and managing capital and governance of capital, it's becoming very, very complex. So when people tell me that they can start an AI business in their bedroom and take over what we do, I have to chuckle to myself, because, it's just the business is becoming very, very complicated. It is. Yeah. Sure. Actually, on that point around the capability of people, how should boards assess whether the organisation's got the talent to deliver on these tech ambitions? Well, I think the way most boards will assess is they'll pattern-match from the past. So, you know, most people aren't looking for the new Michael Jackson. You know, they're looking for someone — I liken it to the music industry, because my wife's a songwriter. So, you know, to be successful in the music industry now, you have to have a million people before you sign, following you on Instagram, two million people on YouTube, significant engagement. They're looking at, you know, is 2% of the people that signed up interacting with the videos, and all these different things. And I think boards work now exactly the same way. They're looking for people who have made it, which makes it really hard to come through the ranks. Yes. However, what you are now seeing for the first time is people coming through the ranks quicker than ever before, and I'll tell you exactly why. There's a lot of CEOs who are looking at AI and saying to their boards, "Calm down, everyone. It's"no different to what we had ten, fifteen, twenty years ago." I was selling on Wall Street SOAP [Simple Object Access Protocol]-compliant APIs [Application Programming Interfaces], where we could integrate into the back end of a content management system in 2006. All right, today we have REST [Representational State Transfer] APIs, as well, and I know they're like religions, but ultimately, we've had all this AI for a very long time. We haven't had the generative chatbot AI that's very sexy. But what actually saves and makes companies a lot of money is automation, not, you know, a ChatGPT little chatbot. Yeah. So, you know, we've had all of these for so long, and CEOs are saying, "This is not a revolution,"it's an evolution." And you get investors who are saying,"Anyone put their hands up that think they can do this in the next two or three years and increase profitability"by 80% and grow the business by 200%?" And people are putting their hands up, you know, because, why not? I would if I were them. I might as well give it a whirl. I'll either fail and make quite a bit of money until I get kicked out, and then I've got it on my résumé as I've been a CEO of this tech company, or I'm going to succeed and I'll be the next Jack Dorsey [Twitter co-founder] or Elon Musk or Mark Zuckerberg. So you are now seeing a massive cull of CEOs. And I read something the other day that 80% of all CEOs are now first-time CEOs. Wow, that's amazing. I don't know who did that research, but it was on LinkedIn. 80% of all private equity-backed CEOs are first-time CEOs. Wow, that's amazing. But they're still pattern-matching. They're still looking — has that person got a pedigree, have they worked on programmes? You know, you can't get your receptionist to put their hand up. "Yeah, I'll give it a whirl. I'll be the CEO of your $300 million company." Yeah. But that's how it works. So you've got to build a track record. Yeah, of course. Yeah, that makes sense. What are the key risks boards should focus on in large-scale tech programmes? Large-scale what programmes? Technology programmes. Oh, OK. You know, since I've come to America and I've lived here half my life, I can't understand accents anymore, which I used to think,"Oh my god, can you, you know, how can you not understand me?" And I would have to repeat myself five times. Now I have to ask you to repeat yourself three times every time you ask me a question. So apologies about that. Not at all, mate. So my brain is fried. Tech programmes we're talking, right? Yeah, yes. Technology programmes. So what key risks should boards focus on when there's some big tech programme, or some big-scale tech play, that they're looking at? What are the risks that they should think about? I mean, you've already mentioned the tokenisation of AI — that's probably one of the key ones to consider. I think the answer to this question, above and beyond the obvious, which is cost and return on investment, is actually speed. So most — if you're in a world now where money is very, very expensive, we had decades almost where money was free or close to free. Yes. People are deploying cash, but they need to get a quicker return. We used to be able to sit on a company for ten years. You'd see these angel-backed companies, and people would stay in them, and they'll become Series A, B, C, D, public listing, and that would be a twenty-year time span, and there'd be plenty of investors that would be in from, you know, a good ten years of that twenty-year time span. What boards now need to do is they really need to ask: "How quickly am I going to get a return on"investment?" The other thing is, quite often programmes didn't have to be profitable to be worth a lot of money. So it wasn't unusual — you would get a tech company that was growing at 40% a year, 50% a year, never had made a penny, didn't need to make a penny, and it would get thirty times revenue. And clever investors would work out what it will make in cash, and they're still making a multiple of cash or multiple of EBITDA guess. But they were willing to stay in for a long time. That's not really happening at the moment. I am seeing it in the US at around the ten times. So if you get a company that's, you know, let's say already a real company doing $20 million, and every single year they're growing by 50-plus% and their gross margins are holding, it wouldn't be unusual for them to go for ten times. Imagine you were the buyer that paid thirty times two years ago. Yeah. That's a hell of a decline. And we, you know, so investors have lost a lot of money in businesses that actually have knocked it out of the park in terms of the fundamental numbers of the business, but the valuations have come down. But because, you know, people are looking for cash flow. I have a savings account and I'm getting 4% in that savings account. I'm investing in that savings account because I can't find any other safe investment where I can get better than 4%. So then you have this whole crop of investors like me where I'm saying, "Okay, this money is allotted"for higher risk, but I want to get — if I can get 4% in the savings account, I want to get 15 to 20%"for the higher risk. And I need to see cash quickly and I need to ensure that there is a market to sell this product in." So that's how investors are looking at it, and that's the big change. It's the paradigm shift. Yeah. When they look at these, they want to be able to invest in something that's not a five- to ten-year investment. It's usually a three- to five-year investment, and I need to see it making money as we go along. I can't live with the fact that it'll never make money and that will be someone else's problem, but they'll pay me for the growth. That is so interesting to see that change. One final question for you today. What advice would you give to a new director? Well, they will have — if they're a new director, they picked an interesting time to direct. So if it's an executive director, my advice would be this. You've got to have realism, but also optimism. I probably should come up with a word for that. But you need realism, but you need optimism, because if you're not real, and you've got your head buried in the sand, then you're not dealing with the fact that people need a quicker return on investment, they need to generate cash flow, and the valuations have come down. So you're going to be wanting to spend too much or stretch out time horizons. You need to understand all of that. But you also need to understand everything is cyclical. You can go to some of the worst times in our entire global economy, and if you just wait a few years, there'll be a boom. You know, I live in Florida, and I remember when the real estate market went down 40%, and people were saying it's never going to come back. The homes did come back, very, very slowly. In 2018, they were back to where they were from about 2008, 2009. If you bought a house here in Miami on the water, you could get one for about $1.5 million in 2018. Today, that house could be worth $5 or $6 million.

So, you know, my advice to new directors is: 52:19

you have to look long-term. You may have investors that need short-term decisions, and you have to be realistic with the current reality. But you then have to have a long-term plan, and you have to be optimistic. If you're not optimistic, don't do it. No one wants to invest in someone who doesn't think it's going to be wildly successful. Josh, that has been such a cool conversation. I really appreciate your time. Thank you so much. I hope we can do it again. And we'll see 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.