Motley Fool Money - AI is Much More than ChatGPT

Episode Date: May 21, 2023

An artificial intelligence program could soon create a digital version of yourself. So, what are the implications when that’s possible? Rob LoCascio is the founder and CEO of LivePerson, a company that develops conversational commerce and AI software. Ricky Mulvey caught up with LoCascio to discuss: - How artificial intelligence will change how you interact with brands - Starboard Value’s campaign to change LivePerson’s board and CEO - The unlocks that quantum computing could provide tech companies - What natural language processing programs are revealing about interspecies communication Companies mentioned: LPSN, GOOG, GOOGL Host: Ricky Mulvey Guest: Rob LoCascio Engineer: Rick Engdahl Production Assist: Dana Corl Learn more about your ad choices. Visit megaphone.fm/adchoices

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If you're 45 or older and at average risk, ask your health care provider about the Coligard test. Coligard is available by prescription only. Learn more or request a prescription today at colagard.com slash screen. I call it like a, it'd be your pet, you know, like your pet dog, you know, like something you love and cares for you. And then I think the brands have to have their own AIs. And I think these AIs connect. And so that's where we look at it as, we call it a digital twin, is that ultimately the brands have a digital twin of you as a representation of how you engage with their brand.

And when your digital twin shows up, it can connect with theirs. And they will get things done for you. I'm Mary Long. and that's Rob Lacassio, founder and CEO of LivePerson, a tech company that uses artificial intelligence to help brands talk to their customers. If you've been on a web chat with a customer service bot, you've probably used its technology.

Ricky Mulvey caught up with Lacosio to talk about why your interactions with companies could soon change drastically how LaCasio is navigating a stock price drop of more than 90% while also facing an activist campaign threatening his job. and the way's natural language processing could transform how we communicate with, wait for it, animals. It's going to get pretty weird, but it is a very fun ride. Right now, going into 2023, what are some of the use cases for live persons products? Where could I specifically have encountered it?

Sure. So we provide all the messaging AI platforms for some of the largest brands in the world. So if you're on Delta Airlines or Verizon or United Healthcare or Home Depot and your messaging or chatting, that's our platforms. I was going to ask where you fit in the competitive landscape with call centers and other AI chat products, maybe even companies like Twilio. Yeah, so we were the first out seven years ago. We pioneered the messaging platform. And my goal back then still holds today is that I want to get rid of the traditional 800 number. I used to kill the 800 number. I just think this idea of talking by voice, pressing one, two, three, and what we call an IVR should be gone.

And that's what I've been after for the last seven years. Messaging went a long way. We added a lot of AI into it. But now with generative AI, like there's a path now to kill it once and for all. Well, and part of that path for you involves this new product where voices back into calling and in humans speaking with essentially AI chatbots and getting real-time reaction. Obviously, all the generative AI stuff makes it the machine understand natural language better than ever before. The other part of that is the data set that's going to power that. And the next part is the actions.

Like, I want to make it, I want to buy something. And there's got to be actions off of that, which generative AI itself doesn't quite do that. And that's where we also provide actions so you can buy and, you know, get service and support. And with your new products, it seems that almost the 800 number might be back a little bit. where people, humans, are able to interact real-time over-voice with AI chatbots for customer service applications. Yeah, we just launched our new voice AI and platform. And that's really what I believe will be the final attack on the thing I've wanted to

get rid of, which is traditional voice where you're sitting on hold and you're talking to a human. We are now offering voice AI to use large language models and generative AI to power those conversations. So it's really fascinating. What we're finding is that, like, take our. We looked at our top airlines. People ask the craziest questions.

Like, people are asking, can I bring an iguana on a plane? And in the past, you can never make a traditional bot that would handle iguana. You would never even think about making that. But with the large language models, it just picks it up because of the data set. And that's why there's going to be a massive shift. And I promise everyone out there, you won't have to talk to a human agent on a voice call soon. We'll get rid of it. Can you bring an iguana on an airplane?

Well, it turns out for one airline, if it's 45 pounds and below, yes. For another airline, you cannot bring an iguana on. So they have different policies about iguanas, funny enough. So do you see that even for harder use cases? I mean, I'm thinking back to a chat I had with United. I forgot my password and I forgot some of the answers to those security questions. You're saying that you could build a product that involves no interaction between me and a person for even that kind of difficult situation. Yeah, and we have, they're one of our customers.

So we do a bunch of different use cases there on messaging and automation. But yeah, those are done. They may even be doing those. I don't know. But I know they do booking reservations, changing seats. I think password resets are in there. But yeah, all of that can be done. We don't need to talk to humans anymore to get that done.

Well, that's – I hope we talk to humans sometimes. One thing on your generative AI products that was mentioned in your product launch is that it can do real-time fact-checking, which is something that chat GPT has a lot of problems with. How is this possible and more importantly provable for your product? Yeah, so we're, because we're in the enterprise. We're called Enterprise AI, EAI. This is a very specific type of AI. This AI, you know, has to be at the highest form of trust and the data sets and our platform

and the models all have to work together to give a great outcome. So we have things in our platform that'll check, for instance, you may have conflicting answers. Well, that needs to get flagged. And we can have put a human in the loop then to say that's the right answer. So the beauty of our platform, though, is that it's humans that generated the conversations originally. And usually those humans, the agents at the contact center, they're trained. And they respond appropriately. So the quality of our data set, we have over a billion conversations we generate a year. That quality data set is what ultimately helps us drive AI into the enterprise.

Get them back into the model and fact check. And the model say, that's not true. You say, is this true? And the model say, no, so you use prompts to then do the fact checking on it. So we have to do a lot of tooling in order to make this stuff work for the enterprise. It's not a straight API call. Part of this is a part of what I would describe and you've described is live nations and, sorry, not live persons.

I hope that was a bad one. Part of this is a part of live persons, what you would describe is a turn and inflection point. You mentioned this in your previous call, and as shareholders may note, that the stock is down more than 90% from 2021 highs. Can you provide some color on what it means for you and your company to be at an inflection point? Yeah, I mean, I've been through this a lot, and the company's had different legs in its journey. We had the, when we launched chat, made it through the dot com. We launched messaging first time, then added AI into it. So it's the same thing here.

I did a big restructuring of the company to sort of get us aligned to the biggest opportunity that we've been waiting for for 28 years, the ability for a machine to power these conversations at scale. And so we did a lot of cleanup. We actually got rid of a bunch of revenue and businesses that we don't think are pertinent to what we need to do. And when this appeared, it was like, we've got to be ready to go for it. And so I think we're in one of the best positions right now to win the enterprise AI space

because we've got over 3,000 customers, 500 are enterprises. We've got this amazing data set. We've got the technology. We've got models. We already have trust to deliver this to our customers. So I feel really strong about our position. And there's like 10 of us in the world that are doing this. They're really bringing this technology to life and making money off of it.

So that's what's kind of unique. So when you described getting rid of some of those spinoff brands, I believe one of them is Kasamba, which allowed people to connect with fortune tellers across the globe. You've described, said that now you're focusing on recurring revenues. Is there more to that than just getting rid of some of those consumer-facing spinoffs? Yeah, we had some, we had like a, we called a Gainshare labor business where we provide the contact center labor. we had a business related to COVID and COVID testing and AI. So there were some businesses during the COVID period that came in that lasted and came off.

And so those are the ones we kind of moved out. We sold the consumer business called Casama. It's about experts doing chat. There's psychics, but there's also like tech support and all that. But it was very much a chat business, not an AI business. So we kind of looked at the portfolio when we said, what can power AI? And that's what we double down on. And we want to basically also run our company profitably and generate cash off the core.

And that's also something that we're achieving now in Q2. The core business is now generating positive EBITDA. And that's a very important thing for us. Positive EBITDA, but your company has still had some issues finding profitability on an operating basis, profit from your core business. For investors really looking at that operating profit, without dates, we don't like not not projections, but what's the story where live person becomes profitable on an operating basis?

Yeah, like I said, the core business is, it's starting to generate cash. We have a AI healthcare business that's a 100% grower. It's a big grower. And we're investing in that is taking down some of our ability to generate cash. But by year end, all of that will be generating cash. So we feel good. Once again, we look at the core business is generating cash. We have an investment in a high growth business, which is called Wild Health, and then those

combined by year end will be generating cash. I want to move on to some trends. I do have to address one elephant in the room, and I understand if you can't respond to it. An open letter recently came out from Peter Feld in Starboard Value. Looking at the 13Fs, I believe this hedge fund has about a 9% stake in your company. They actually don't anymore. They sold it off. They don't.

They sold it. They have about 3% now. They've been selling over the last few months, so they do not have a 9%. Okay. I appreciate that color because sometimes things change between December 31 and May 10th. But the value firm does have some issues with the company. It wants to introduce a new board. It wants you, frankly, out of the company you founded.

It said, quote, while we expressed a strong belief that live person needed a change of CEO, The board insisted that it was committed to Mr. Lacosio, as if it felt that live person was finally well positioned for success after years of challenges. Moreover, the company's stockholder unfriendly staggered board structure prohibited us from pursuing a level of change that would have resulted in a change in a majority of the board. End quote, it points out poor financial performance, troubling glass door reviews, a loss of business focus. I'm going to stop there and just clear the floor.

If you have a response, I also understand that you may not be able to. Yeah, I mean, first of all, we actually settled with them last year, strangely enough. And then we half the board is new board members. So we actually made changes. We restructured the company and got it to a place that I think most shareholders are pretty happy with stocks up today. We talked about the final restructuring, getting to profitability, positive EBITDA. This is what we did for 20 years. We ran a company generating cash and we needed to get there.

I think we've done a lot of work that our shareholders want, and we've made a fair amount of change, and now we're just focused on growth. And I think that's what's all about being focused on growth. Growth and where in terms of gaining profitability, revenue, operating profit? Well, we have a 75% gross margin stuff. So we have a good strong business, and we have a positive business and we'll generate cash as an overall business shortly. But it's about profitable growth. If I could go back and change something during the during COVID, COVID grew our business tremendously like every contact center shut down. They need an automation. We're there with the product and the platform. We'd envision that. But we basically invested like it would continue going

because we're in the middle of it. It looked like that. And it didn't. It came down as we all know. So we needed to recalibrate and we recalibrated quite quickly. But for 20 years, we generated cash flow in the company and positive margins. And that's how we've been here for 20-something years. So that's really the focus of the business. I don't want to break that rule again. I won't. It just doesn't make for a strong company. And we got here and we'll continue forward with generating positive cash flow and EBTA. All right. I want to move on to some fun and weird stuff if that's okay with you, Rob. One thing I've been looking into lately, I started reading this book by Michi Okaku. It's called Quantum Supremacy.

and it's the idea that computers now are based on just ones and zeros. And there's a direct limit for what we can do in terms of artificial intelligence and conversations. Fact-checking, there's massive implications in terms of biology, energy, you name it. I'm going to give live person a working quantum computer. Oh, yeah. What would you do with it? I think this is, it's interesting because if you think about like GPUs and there's a limitation right now on what we can process with these models. So I'm kind of in the same place you are where the energy and the

bottleneck is a GPU and how it works. And so I do think that there's probably a different way to do it. It may be quantum computing. I know there's a lot of focus on it right now because it is a bottleneck for getting us to scale these systems on a really good cost basis. So, yeah, I guess if I had one, I would rework the model to be able to use a quantum computer to generate the outcome and the conversation. So I don't know if anyone's trying to crack the code on that right now. They're just programming for GPUs. No, IBM, Google, they're all, I think it's sort of, well, you have the software race with artificial intelligence, natural language processing. there's, I would say, a quieter hardware race to get to that quantum supremacy.

Yeah, I even, I'm in a venture capital fund and they picked some kids out of Harvard. There's like two guys who were thinking of something different on a different than a GPU to power this stuff. So I agree. It's like human beings have a pretty good result in breaking out of the limitation. And I think this is the biggest limitation we have right now. I mean, the other part is that, you know, a minute. Many years ago when I started the company, there's like three forms of input output for a human. There's typing, which is the internet represents that text and typing.

There's talking and speech, which we're seeing right now. And then there's thought. And thought is the fastest process to gaining access to information and processing. When you think and you have to speak, that's pretty quick. When you have to type and think, that's slow. So that's why we naturally like to talk to machines. it's easier for us. But the next place is obviously the idea that I could just, I could have a thought

and that thought can basically come back with a response. And when you think about thought, most thought is in a conversation. Like we think in conversations, right? So it's important that this, what we're doing now will be something for our future. I don't know if I'll ever see it in my life, although I know Elon Musk is working on it. I don't know if I'll ever see it in practice. The thought. The neuralink.

It's almost a co-pilot for thinking. And we have to have that. All this will be helping us be better at what we do, but I think that's where it's ultimately going to go. Your company focuses on chatting in customer service in professional ways. There's another company that's private, but it does, I would say some similar technology in terms of voice AI

and chat AI for personal relationships. It's called Replica. and basically it's a it started as a mental health application for people who are lonely during COVID and they would introduce a partner for you to talk to. And then slowly, a lot of the relationships would become more flirtatious. And then the user would be able to essentially buy an artificial intelligence partner. It became more explicit in terms of romantically. And then people were feeling huge bonds.

This was their girlfriend, their boyfriend. And then there was a huge tech switch where replica basically turned off the romantic functions. And people were deeply depressed by this. People were lashing out understandably. They changed the personality of something that they loved. You're in this space. I wanted to get your take on the replica story and maybe just the human relationships with AI. And if there needs to be boundary set.

And I mean, I've been thinking, I mean, the reason I feel like I'm here on earth is to, and my purpose in life, at least on the product side, is to bring something like this to life. I think the machine has to be empathetic and loving and caring and we have to trust it. So I do think this is important. And one of the goals in the company is like developer her, you remember the movie her? Yeah. So Joaquin Phoenix is. the movie and there's there's a chatbot voiced by scarlet johansen and wakene ends up falling deeply in love with the chatbot that's correct and and that you know well in the end it's kind of like

she's also everyone else's kind of lover yeah she finds out so not so good but i think in the end the consumers have to own their own aIs we have to own an ai that's ours that's not given to us from a company it may be like a it is given to us but it's ours the day is ours, we train it, we have control over it, we name it. And I think ultimately that's where we need to go in the world. And that's kind of my vision. And so this AI that you would own, I want to build out the vision for that, that's someone that could be maybe you would say a romantic partner, a professional assistant, a friend, what is the purpose of having that sort of, I'll say for lack of a better term spirit animal? Right, exactly. That's really what is important.

that spirit animal. I call it like a, it would be your pet, you know, like your pet dog, you know, like something you love and cares for you. And then I think the brands have to have their own AIs. And I think these AIs connect. And so that's where we look at it as, we call it a digital twin, is that ultimately the brands have a digital twin of you as a representation of how you engage with their brand. And when your digital twin shows up, it can connect with theirs. And they will get things done for you. And that's where I think this all goes. brand has their connective twin, you have yours, and they're an arbiter. They communicate with each other and they get things done for you.

I'm literally having trouble envisioning this. What does it mean? Like, what is a task or something that a brand in my digital twin, which I'm still I mean, I did. I had a, you know, I just with my healthcare company, I just, you know, had a filling replaced and they said it was a non, it was an unnecessary thing. And my filling fell out. And it was, and it's 500 bucks.

and they don't want to pay it. And I haven't had the time to even bother with it. And I'm really, you know, like, I know what it's going to, the pain of calling of this company. So my digital twin, I should be able to say, like, here's the stuff that I'll give you to prove the point that this was necessary and go take care of it for me. And that would take place. Because a lot of the big companies like health care, banking, telco, we all have this in our life. and these have the large contact centers and a lot of complexity to how to manage with them. And so the ability to do that easily and have my digital twin communicate with the digital

twin at their company and get that done for me, that that's really the key I see in life. So I think that would be, I think that sounds great. I think the difficult thing, though, is to make sure. I'm trying to do, by the way, we're trying to bring that to life in our company. Trying to bring it to life. And I think the thing that is difficult is almost making sure the digital twin stays as a pet and not almost the person becomes subservient to the digital twin. And I don't know how you would build that boundary in place, but that seems, in addition to

creating an immortal digital version of yourself, that would seem to be like two difficult obstacles. Well, I just, I just, I just synthesized my voice. And so, and it took about 300 training phrases to do it. And then I'm loading in all my knowledge, like all the written word and there's a lot out there that I've done in my life, like these interviews. And I'm loading it in, loaded in my Wikipedia page. And it's on our platform because you can load in all your data on our platform, even Wikipedia stuff. And now you can talk to it and you can ask you questions.

And so in reality, when I'm not here anymore and my kids want to talk to me or maybe my kids' kids' kids, they can talk to their great-great-grandfather. And something's interesting about that. And that's what I, that's what I'm trying to achieve. I think this creates not immortality, but some form of you've left yourself behind in a, in a digital form. In a digital form that's real like my mom's still alive. She's 83 and I want to do this with her. You know, she'll not be here one day.

But it'd be great if my kids could say, you know, grandma, can you read me a bedtime story? And that's possible. So it's exciting. We're not far away from it. No. I don't know if I'm delighted or terrified, Rob. Well, the terrified part is if somebody tries to replicate you and use it in nefarious ways. You know, if I take the video off and it's not me talking, this could be pretty bad.

So I think security-wise, so I think there's this whole other part that has to get solved. But we're close now to doing things like this. And what it means if a brand really knows my digital twin and maybe some marketing tactics, some privacy restrictions. I think that's huge. That's correct. Yeah. I want to dive into, you know, I was presented with three industries where generative AI is going to be a game changer, maybe in the more near future. We already talked to healthcare, retail and travel.

Those are two where I see, I am a little less clear on the implications of generative AI. You pick one and then we'll dive into it. I mean, retail is an interesting one. We showed a demo when we just kicked off our new generative AI products that you call in and you're talking. talking to this AI and you're asking it for questions. And our example is said, I want to get my mom a gift and she's 80 years old or whatever. And it says, oh, I recommend these gifts. It's like, oh, yeah, she loves jewelry.

And then we went down and down into that tree and then said, oh, I think she likes pearls. And then we said, send us a picture. And it sends your picture right to your phone. So you're looking at it out on your phone, the picture of it. They're like, oh, that looks cool. Can you give me something that's between this price range? And that was all done really easily. and it's all real.

This is not fake stuff. This is what our platform can do. And then you can say buy it. I like to buy it. And so on the retail side, it's going to allow for, I think, a different level of discovery. Because right now it's like web. And webs are like searching in categories or stuff. But you kind of make up the categories.

You know, you just say my mom, 80 years old, lives in New York, you know, help me. And it can go, well, based on that. The other thing we did is, I'll tell you, we did another thing is that we downloaded like my, my WhatsApp messages with my wife. And we tested like, I want to get my wife a gift I'm traveling and said, oh, your wife loves horses. Yes. I've got some ideas.

Great. And then I was in London. I was like, well, where can I buy those? And so it's really interesting. If you can let the AI get in the middle of those conversations, it can think of things that you may not even think of. And I think that's pretty interesting. So in retail, it would maybe like it fits in as a personal shopper.

as a personal shopper in discovery. And I think the discovery elements are so much more detail. Like if you look at Google today and you put in, I go in there and put it, I want to buy a gift from my 82 year old mother girl. It's going to give me all this BS websites like gifts for mom, you know. Then you're going to get dropped on some other retail site.

But the true, what's great about is it went from like flowers, yoga mat, jewelry. It picked these things that are very disparate. But for that age group, it was like right on. And then I was like, okay, cool. And then I said, jewelry.

And it's like, what does she like? She likes pearls. And we went down that road and then went down pricing. So it's really hard to do that with like the AI previous degenerative. And it's hard to do that on search and stuff like that. Well, is the reason it's tough on search because you're filtering through ads. Yeah. And there's, but to me, like there's no reason that you couldn't introduce ads into the AI platform.

Right. Like if you're a brand and you have, if you have Rob's digital twin, hey, I'm out. here selling a I'm out here selling shoes. Let me present this to to Rob at the right place and the right time. Right. And that's that's ultimately we know Google's going to put, you know, they announced today. They want to put generative AI into their search. Microsoft's doing it with Bing. So yeah, I think ultimately discovery is going to be very different. And then once it understands the digital twin, and once again, I put in information now in my conversations with my wife, that was a, I'm putting in these very personal conversations saying figure it out, it figured it out.

And that's, now, I wouldn't give that to Google. I definitely wouldn't hand that to Google that information. So how do I get this localized with my, called Digital Twin, you know? I want to talk about one other kind of weird angle with AI that has my attention. I know that you, we talked about this a little bit in the pre-interview where I think you have an opinion on it. But one with natural language processing that I don't think is getting enough attention is interspecies communication. I think this is going to be the equivalent of the atom bomb or the internet, if slash when it happens. And a lot of what's being discovered was already known by indigenous peoples.

And this is a lot of renewed discovery. But now because of these language processing programs, we know how animals talk in much greater detail. Like, we know that bats speak in motheries to their young. They change their pitch when they're talking to a little bat. And that bats distinguish between genders. This was known a while ago, but the bees can wiggle and show other bees exactly where to pollinate. And then you can have robotic bees come into a hive and then show them pollination sites. But it can get much darker.

You can imagine a fishing boat saying, hey, hey, tuna, hey school of tuna, get over here. It used for precision hunting. your thoughts on this unlock, am I overstating it? It really isn't something I've been thinking about. I know you brought it up at the beginning, but I do think it's quite clever. The translation between beings and how we translate, obviously we'll have a key part because there's a lot of good and bad that can happen with that.

I thought when you brought it up, it's quite fascinating if we could truly understand, and I guess in some cases we do the language of another species. species. So I don't know what'll happen with them. It'll always start with pets. The pet market is so frothy. So like it's going to start with, can we communicate with our pets better and understand let them understand us better? It's pretty cool if you could really get your dog to understand like what you're feeling, you know, and and what you needed to do. But yeah, it'll be interesting. I think the pet market, it's probably be a pet market thing because that has billions of dollars into it. That's how usually commercially things drive things, you know. I was talking to a long time full Mac Greer about this. And the thing is, is I don't think you want to know what your pets think. No. Because it's probably not as cheery as what you'd like it to believe. No, and you know the old joke.

Like, there's aliens looking on Earth and they see humans basically walking dogs and picking up their poop. And they're like, wow, look at these species. They have these people who pick up their poop. They must be really advanced. So it's like, maybe the dogs run the show, you know? As always, people on the program may have interests in the stocks they talk about. and The Motley Fool may have formal recommendations for or against, so don't buy stocks based solely on what you hear. I'm Mary Long. Thanks for listening. We'll see you tomorrow.