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- [00:00]
ADP Representative
ADP knows any big thing, any small thing, any trendy thing, even a trendy thing that everyone knows isn't a great idea, but management just wants us to give it a try for a bit. Can change the world of work. From HR to payroll, ADP designs forward thinking solutions to take on the next anything.
- [00:19]
Bell Lin
Welcome to Tech News briefing. It's Thursday, January 16th. I'm Bell Lin for the Wall Street Journal. The latest big investment for venture capital is accounting firms. Our reporter Mark Maurer tells us how they're shaking up a quiet corner of the business world and what artificial intelligence has to do with it. And then what does the future hold for tech like AI, electric vehicles and robotics? It might actually be possible to get better answers. We'll find out why. That starts with simply asking better questions. But first, venture capitalists are known for making big bets on risky moonshot technologies. But now some venture investors are getting excited about accounting firms. Bessemer Venture Partners, General Catalyst and Thrive Capital are among the venture outfits taking stakes in accounting firms on the heels of a series of deals led by private equity. So what do these VCs think is the payoff? Our reporter Mark Maurer is here to tell us. So Mark, why are these venture capital firms suddenly interested in investing in accounting firms?
- [01:37]
Mark Maurer
There are at least two key reasons. One is that venture capital firms have been watching this wave of private equity investors pour into the space. In 2021, private equity firms started taking stakes in mid sized accounting firms. And that pace of acquisitions has only been picking up. It's becoming increasingly crowded space. Revenue has soared at many of these firms in that period of time. Another key reason is that venture capital has a little bit of a different take here. Some VCs see generative AI technology as being able to really enhance a traditional service business and make it more profitable. You know, accounting as we know, has a lot of repetitive tasks. It relies heavily on sort of knowledge type work. And so this is an opportunity in their eyes for these firms to become more scalable. Private equity investors have also started exiting from these firms and so VCs might see them as attractive targets after watching private equity benefit from them. That's something that one lawyer told us.
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Bell Lin
So you touched on generative AI a little bit. Tell us a little bit more about the whole importance of AI in this trend.
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Mark Maurer
Car Riggs and Ingram is one of the accounting firms that recently received money from venture capital firms. And they said that they're planning to use that money to take hours out of work in areas like tax returns and audits for clients.
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Bell Lin
And one of the venture capital firms you talked to is General Catalyst. You spoke with them about their strategy. Tell us, how do they plan to make money off of their investments in services firms?
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Mark Maurer
General Catalyst thinks there's a big opportunity right now to roll up accounting firms and automate a lot of the workflow. They would allow accounting firms to take on twice as many clients. They say that surge in the number of clients therefore could help turbocharge the revenue. General Catalyst says they don't intend people to lose their jobs with this greater push into AI. Instead, people would be freed up in a way to do a lot more work, perhaps two to three times the amount of work the firm's in.
- [03:57]
Bell Lin
That was our reporter Mark Maurer. Coming up, in a world of potentially transformative technology, is there a way to predict which tech will actually be transformative? We'll get some answers after the break.
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ADP Representative
ADP imagines a world of work where smart machines become too smart.
- [04:20]
Bell Lin
Copier.
- [04:21]
ADP Representative
I need 15 copies of this printing, by the way, irregardless. Not a word, Janet.
- [04:28]
Stephen Rosenbush
Yeah, I know.
- [04:29]
ADP Representative
Page 6 should be regardless of or irrespective of, just print them, please.
- [04:34]
Bell Lin
If it were a word, Janet, it.
- [04:35]
ADP Representative
Would mean without irregard, which is copier. Switch to silent mode. Let's put a pin in it. Anything can change the world of work. From HR to payroll. ADP helps businesses take on the next anything.
- [04:52]
Bell Lin
Rather than asking whether technology works well or lives up to expectations or meets revenue forecasts, let's try asking better questions. Silicon Valley pioneer and venture capitalist Vinod Khosla has a suggestion. What is the technology's rate of change? WSJ Enterprise Tech bureau chief and columnist Stephen Rosenbush says that approach could help us predict the future of tech. And he's here now with more. Stephen, you spoke with Vinod Khosla and you zeroed in on his idea of looking at the rate of change. Why exactly is that a useful measure when it comes to tech predictions?
- [05:32]
Stephen Rosenbush
Well, there's this analogy of the lily pad that's really commonplace in the tech and the VC world. And if you look at a lily pad, it starts off as almost an invisibly small spot in a pond, and it keeps doubling and doubling and doubling and doubling. And then before you know it, the entire pond is covered in lily pad and everything has changed. The rate of change was constant throughout the entire process. The outcome was only obvious to the casual observer toward the end of the process. But if you can look at that process from the very beginning and dial into the Rate of change, you can kind of project where things are going. It's still at least as much art as it is science. But as Vinod Khosla told me, he thinks that it is possible to understand the future direction of technology with something like 60 to 70% accuracy.
- [06:35]
Bell Lin
I'll take those odds. Let's talk about Vinod Khosla for a moment. He's a famed investor and you spoke with him about how he identified OpenAI as a worthy investment target. And this was well before the AI boom in 2019, where he put $50 million into the company. What has he said about that investment?
- [06:55]
Stephen Rosenbush
The investment process actually began in 2018 at a point at which, by his own admission, the performance of many, many AI based products and tools and platforms was poor, if not laughable, relative to human benchmarks. But yet he had enough conviction to make what was the largest initial investment by a factor of two in his entire career. His point was that he looked beyond how AI tools were performing at that moment, and he looked at the rate of change within OpenAI's own research, as well as its ability to attract talent, human talent, which is sort of another rate of change. And then he looked also more broadly, just at the rate of change within AI itself as a field. He looked at the progress that was going on elsewhere at Google and at Baidu, and he decided that based on the rate at which those models were improving and based on the rate at which talent was pouring into the startup, that he felt very, very confident that the company, the technology, were going to take off.
- [08:19]
Bell Lin
Does Khosla have any thoughts around where AI is heading now, now that we're in the beginning of 2025? What is the rate of change in AI in this current day and age?
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Stephen Rosenbush
Vinod is confident, if not certain, that the world is headed towards something called artificial general intelligence, and that this threshold will be crossed in five to seven years, roughly by the end of the decade. People have all sorts of different definitions of AGI. It means that AI is approximating human levels of thinking in some important ways. And he has a very, very specific view, which is sort of a pragmatic definition. In his view, we reach AI when AI can perform 80% of the work that goes into 80% of the world's economically valuable jobs. We should say at the outset that there are plenty of skeptics, plenty of people who argue that that is not the case, that it won't happen in five to seven years, that it may never happen. But that is very much where he is at right now.
- [09:27]
Bell Lin
Okay, and what about other areas of technology? I'm sure that Khosla's thinking beyond AI, maybe robotics or maybe the life sciences. Does he think that the rate of change there is happening just as quickly or as quickly?
- [09:44]
Stephen Rosenbush
He's struck by the rate of change in a number of areas. He's been investing in nuclear fusion technology. He's been investing heavily in robots, humanoid robots and other forms of robotics. He's been very, very interested in sustainability and clean tech. He sees some innovation in quantum computing, although he seemed a little less struck by the pace of innovation there.
- [10:13]
Bell Lin
That was our enterprise Tech bureau chief and columnist Stephen Rosenbush. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producer Katherine Milsop logging off. I'm Bell Lin for the Wall Street Journal. We'll sign back in this afternoon with TNB Tech Minute. Thanks for listening.
- [10:38]
ADP Representative
ADP knows any big thing, any small thing, any trendy thing, even a trendy thing that everyone knows isn't a great idea, but management just wants us to give it a try for a bit can change the world of work. From HR to payroll, ADP designs forward thinking solutions to take on the next anything.