Computers Commiditize Knowledge

30 years ago, the highest paid person in the room typically made most of the operational decisions. A CMO or Creative Director would determine the final language in an ad. A VP Sales would determine the exact language sales development reps (SDRs) would use when calling prospects. HR directors would set employee policies without much employee input.

Today, things couldn’t be more different. CMOs and Creative Directors may set high-level themes for a marketing campaign, but copywriters and junior marketers generate many unique sets of copy and split-test those messages on a small scale first. The best received messages will then be reproduced on a larger scale. Similarly, a VP Sales no longer needs to claim to know any best-practices about cold calling. She can split-test every variable using a tool like SalesLoft.

30 years ago, a VP Sales would never claim to offer a useful opinion regarding visual direction and ad-copy. And a CMO would never claim to guide SDRs through cold-call scripts. The processes outlined 2 paragraphs above couldn’t be more different. But the process outlined in the paragraph immediately preceding this one are identical. In both cases outlined above, the VP doesn’t need to claim expertise in much of anything beyond managing the experiment. The VP can and should defer to what the data says.

CEOs used to rely on expert VPs to make these kinds of decisions. The VPs had decades of experience. The VPs would synthesize all of their learnings and experiences and offer an answer. This process was not unlike the split-testing process outlined above. The only difference was that humans were responsible for processing the results of the experiments rather than computers. Computers are by definition orders of magnitude better at understanding, normalizing, and comparing data than humans.

Now that we have the tools to split-test and measure almost every action we take through computers, VPs no longer need to do this. In fact, they explicitly shouldn’t because they are inferior to computers.

I’m not suggesting that the experience that many VPs bring to the table is worthless. There will always be questions that computers cannot answer: will this person jump ship if they receive an offer for $5K more elsewhere? how can we structure our pricing proposal and presentation to maximize revenue on this $500K deal?

Rather, VPs are moving up to higher levels of thinking and operation. Without the need to worry about as many tiny operational details, VPs can focus on higher level issues to accelerate firm performance.

Each functional area still requires plenty of nuance that is not easily computable. But a lot of the basic questions can be answered by computers. Thus, VPs should be increasingly valued not on their willingness to dictate what should be done, but how they structure and manage experiments to make the best decisions from data. This isn’t to say that data commoditizes all knowledge, but that many facets of what were once knowledge have indeed by commoditized by data. I suspect that in 20 years, the most efficient management teams will operate in ways that we can’t fathom today. As computers offload more of the busy work that today is in the realm of, management, managers will focus on ever higher-order issues and accelerate firm performance even more.

The real question is: when will computers move further up the chain and commoditize wisdom? Is this possible before we achieve general-purpose artificial intelligence?