Using AI to gain a competitive edge

More about the podcast

In this episode:

1. The benefits and risks of using generative AI for legal drafting and analysis
2. Best practices for boards to understand and oversee AI initiatives and strategies
3. The trends and innovations in the private company and PE-backed space regarding AI

Resources from this episode:

• GC AI
• AI Ethics & Board Oversight Certification

This transcript, which has been edited for clarity, captures the entire podcast episode.

Narrator: Welcome to the Corporate Director Podcast, where we discuss the experiences and ideas behind what's working in corporate board governance in our digital, tech-fueled world. Here, you'll discover new insights from corporate leaders and governance researchers with compelling stories about corporate governance strategy, board culture, risk management, digital transformation, and more.

Dottie Schindlinger: Hi, everybody, and welcome back to the Corporate Director Podcast, The Voice of Modern Governance. My name is Dottie Schindlinger, Executive Director of the Diligent Institute, and I'm joined once again by my fantabulous co-host, Rachel Simon, Senior Director of Product Marketing for Diligent. Rachel, how are you today?

Rachel Simon: I'm doing fantabulous. I want to borrow your word. You're my hype woman for life, Dottie.

Dottie Schindlinger: I love it. Well, there's so much cool stuff happening at Diligent these days. Rachel, what's going on in your world?

Rachel Simon: I'm spending a lot of time gearing up for our Elevate conference. We are working through getting our track set up and picking out some wonderful expert speakers. I know that you're doing that as well, so that's a really exciting thing. Coming up, I also know that you're doing some roundtables with Fortune magazine. Is that right, Dottie?

Dottie Schindlinger: Yeah, you're so right. There's a lot going on. We have a new relationship with Fortune that we started this year, and we have a joint newsletter that we're doing together called the Modern Board Newsletter that gets sent out to all of Diligent's customers. And we also are going to be doing a series of virtual roundtables with Fortune. So, the very first one is coming up this week.

Dottie Schindlinger: It's happening on May 9th, and the focus is going to be on human capital compensation and culture, which I'm very excited about, and we're going to be gathering about 30 to 50 public company directors, all at a peer level for a kind of off-the-record conversation facilitated by the editors at Fortune with some subject matter experts on that topic.

And then they will be writing a Chatham House rule-appropriate wrap-up of the event, and we'll be able to share that back with our customers. So, I'm excited to get this first one under our belts. We're going to have six of these over this year and early next year. And so, yeah, keep an eye out for those.

If you're a diligent customer, definitely keep your eyes and ears peeled for upcoming virtual roundtables.

Rachel Simon: Super exciting opportunity. Speaking of exciting, we had a great guest today.

Dottie Schindlinger: We really did. I mean, look, it is hard to talk about anything related to governance these days and not bring up generative AI. That just seems to be the topic on everyone's minds. So, we had the great good fortune to be introduced to Cecilia Ziniti, who is a serial general counsel with many technology firms, always in an AI-focused role.

And she has just started her own company called GCAI. So we wanted to talk to her about, what AI is doing to the legal profession and what board members should know about this. And she had some really, really interesting things to say. So why don't we give a listen to that interview:

Dottie Schindlinger: Joining us on the Corporate Director podcast today is Cecilia Ziniti, founder and CEO of GCAI. Cecilia is also an experienced general counsel, chief legal officer, AI investor and board member. Cecilia, welcome to the show.

Cecilia Ziniti: Thank you so much, Dottie. I'm excited to be here.

Dottie Schindlinger: Well, I'm excited to have a chance to talk to you because you've had this amazing career. You've served as the general counsel for many technology companies, and you've served in legal roles with even more technology companies, including many startups. So why don't we just start by having you share what drew you to working in this space?

Cecilia Ziniti: Yeah. So I've been very lucky to be a lawyer for these big tech shifts. I came to Silicon Valley in 2002 when Yahoo! was really leading in sponsored search and leading in search with Google, and I saw the Internet really become a business in that time and similarly went to work for Morrison & Foerster. Where I represented Apple, saw the mobile phone take off and since then every wave. Right? So cloud and now AI. But the through line for me has always been really interesting adoption and legal issues, and so been lucky enough to represent companies doing that and have some really fun experiences and through it all kind of thinking, what is the opportunity here while protecting the risk and the downside?

Dottie Schindlinger: Well, so now you've founded your own company, GCAI. So tell us a little bit about the inspiration behind forming the company and what does GCAI actually do?

Cecilia Ziniti: Yeah, so in terms of origin story, I had been a lawyer for AI for a long time, so back in 2013 I started working on a device that at the time was still in alpha and beta. It turned out to be Amazon Alexa, so now maybe it'll still fire here in my room. But basically the idea then was that AI will affect every aspect of our lives and I made a career bet on that.

I went to work for a robotics company, went to work for Cruz on super interesting legal issues around autonomous vehicles that we're seeing play out today. And essentially had AI sort of as a career thing in addition to legal lots of interesting IP issues, privacy considerations, consumer protection all these things. And got to a point where when GPT came out, my company at the time, Replit, had a software engineering AI and I was seeing software engineers use AI every day for their work and I started to use it for legal work.

My company had a deal with OpenAI back in '21 for basically GPT-2 at the time, and saw that it was really hyper capable and just like a step change. I started to use it and I had that same 'wow' moment that some people got the first time they used an iPhone. So I had that 'wow' moment, started using it for my legal work quite frequently and realized pretty quickly, this is different.

This is different from prior iterations of legal tech, which while helpful, are not in the core work, the drafting, the analysis, the things that we traditionally consider and that are legal tasks. So started to use it for that and basically had this realization. I quit my job on November 1st and incorporated the company on November 8th.

Dottie Schindlinger: That's amazing. But listen, I know that there's a lot in the legal profession, especially general counsels, that are eyeing generative AI with kind of a combination of skepticism and concern. Right. So, you know, we know quite famously that generative AI hallucinates, and I know that's gotten at least a few legal professionals in some hot water. And there's also the potential that AI can eliminate jobs in the legal profession.

I'm thinking, for example, you know, law clerks and paralegals and things like that. So it's also interesting to note, you know, GPT-4 last year just passed the bar exam with a score in the 90th percentile. So if I'm an attorney, what would you say to me are some of the benefits of AI that should outweigh some of these risks and how should I be thinking about AI?

Cecilia Ziniti: Yeah. So look, I think that Chief Justice John Roberts got it right. So last year he put out a report, December 31st on the state of the federal judiciary. And in it, he does an extensive review of AI. And he says the opportunity for access to justice, the opportunity for increasing the level of the profession, is very high.

And he literally says something to the effect that legal work, legal research will, quote, "soon be unimaginable without AI." So that's the chief justice. But he gives the right approach, which he says, 'Look, you approach it with caution and humility, the way that we as as as lawyers and legal professionals approach really anything else.' Right. Critical thinking, using it to our advantage.

We have a duty under the professional rules to be diligent and zealous in representing our clients. No matter if you are a corporate attorney, if you are a litigator, if you work in criminal law and if you have this type of tool, the best analogy that I can think of, there's two: one is imagine legal work before online research before Google. Literally using the books, you know, 95 F.3d 157, pulling the books.

Were we better lawyers then? I don't think so. We're better lawyers now, right? So, I look at it as that level of play is going to increase with this tech. Now in terms of the risk, yeah, sure, there's risks to any kind of technology, but just as well as you learned how to use Google and have critical thinking and look at the results, so too, and through my classes or through my product, through any of a number of means, will you pick up the ability to to use this tool to your and your client's advantage and that's what I'm seeing every day among our users in my classes.

And, obviously I'm passionate to go out in the industry and talk to hundreds of GCs. And there is that sort of initial trepidation. But I think the advice from the chief justice is absolutely right to try it. Swearing it off, to me? My guess this is probably a spicy take, Dottie, but I think it's probably 3 to 5 years before it would actually be a violation of our duties not to use AI.

Dottie Schindlinger: That's really fascinating. Well, speaking of some of those benefits and some of the opportunities, I know that you have a lot of experience in the private-company space and especially in the private-equity space. So what are some of the distinct advantages of AI for those types of companies, in particular? And you know, what are some of the things you've been seeing that might differ from, let's say, public companies?

Cecilia Ziniti: Yeah, so I would put those into three buckets. One is AI gives private companies a lot of the same tech that my former clients had access to. For example, Amazon has pretty advanced algorithms around deciding the size of packaging. So, you know, you have a pen or microphone or something awkwardly shaped what size box is going to optimize the amount of corrugated cardboard or plastic or whatever is used for shipping.

And that algorithm, I think they've estimated internally and done a podcast about it, saves like $100 million a year. So if you imagine, if you're a small shipper or if you're a competing person and you can use AI in that way, the way that Amazon is to optimize their operations, it gives you new capabilities you didn't have before. So AI usage in your operations would be number one.

Number two is, private companies can deliver an experience to their users that is based on what they do best, right? So if you are, for example, an e-commerce provider and you sell specialized golf equipment, you have lots and lots of content interactions and relationships and all these things specific to your business that you can now harness in a way that doesn't require structured data over lots of time.

So you can apply AI to those. You can generate content. There's lots of things you can do. So this sort of like, personalized experiences to your business would be the second one.

And then third, you know, a lot of it is like there's a huge conversation in Silicon Valley around the one-person unicorn. So a company with one software engineer or CEO, business person all in one that has sort of like superpowers from AI.

So you will see a lot of operational things become easier, right? So, the thought of doing finance before Excel, right? That's not a thing, like thinking about that. And now all of us use Excel. And in fact, Excel is the most used programming environment in the world because Excel allows people to do basic programming.

So when you think about that same ability, it's a related point, but I think companies can do more with less. So the playing field for everyone, public company, private company, whatever it is, will go up.

Dottie Schindlinger: So, I know we've been sort of focusing on what's happening in the legal space, but most of our listeners are corporate directors. And so I want to kind of level the conversation up now to look at this from the board lens. And we certainly know from the research we do at Diligent Institute that, there's plenty of companies using AI, incorporating it into their long-term strategic plans.

But at the board level, board members themselves are still feeling really unsure about the best way to understand AI. They sort of feel it's out of their depth. They feel a little uncomfortable, you know, raising questions sometimes they're not quite sure how to how to do this. What would be some of your advice to board members on where they can start and what are some of the things that you're seeing boards do that are innovative around their use of AI?

Cecilia Ziniti: Yeah, so timely thing. Basically, the CEO of Goldman Sachs came out and said he sees a huge opportunity. Jamie Dimon, of JPMorgan said the same thing. It looks like, I think, BlackRock has an additional 2 trillion under management with the same staffing firm use of AI. So there's definitely this sort of opportunity side that I mentioned. But in terms of getting smart about AI as a board member, I would point three ways.

One, try to use it and use as a good board member using your company's products is probably like the number one thing you can do. And just even literally you can ask like, "Hey, can we get a demo of how you're thinking about AI?" And that question from the board level will spur into action the company, even if they're not already.

Now we see from public company director calls or, investor relations calls on earnings, 26% of companies mentioned AI in some fashion. So, where are you fall on that spectrum, the ability to get smart about what your company's potential is with AI, use the product and get smart about that. That's my first piece of advice.

My second is, try to and this is, you know, I think Diligent does a really good job of this of really giving the business opportunities as well. But there will be a whole industry of folks trying to explain how risky this is and just make sure that the risk people don't block the opportunity people. And, this is funny as a lawyer, maybe I'm sort of conflicted, but I think it's my in-house background. And, yes, it's important to have systems and governance, but, you have to have a business to be governed.

And so really thinking, 'Okay, we're going to roll this out responsibly. And we've seen from a board perspective, a lot of you all have experience with privacy and information security.' I wouldn't necessarily put AI that differently. A lot of the same things [apply]. Inventorying what you have, diligence in your vendors, these kinds of things, hiring a great legal team, of course, that's probably self-interested, as well.

But look, I think, ask for training is the other thing. I mean, I think there is a variety of training being done. And my personal thing is, try to ask for it in-house, because in the process of educating you, it will educate the team. So that's another thing.

There's lots of good sort of outside resources that you can follow. AI newsletters, I write one, Axios has a good one. Diligent, puts out great materials, as well. So, you know, being open to that. But in terms of opportunity, every commentator I've heard puts it on par with the Internet and the iPhone.

Dottie Schindlinger: Those are really, really great pieces of advice. I know you were mentioning Axios and I know you had flagged a really interesting article for us. I don't if you want to touch on that briefly that, it seems like a number of boards are starting to integrate into their own boardrooms. Do you want to talk a little bit about that?

Cecilia Ziniti: Yeah. So just like every other aspect of operations can be improved with AI. Boards are finding they can improve their boardroom operations with AI. So the particular article this morning talked about companies appointing an AI board observer. Now, you know, that's sort of like, 'the robots are coming' and there's all kinds of dystopian ways to look at that.

But the point is, business today has moved to real time. And the article makes the point, 'why look at board materials once a quarter and get sort of a true lagging indicator of revenue, of business success or issues or whatever it is, when you could actually have the ability to get that real time?' So, some of the future forward things we used to talk about at Amazon are coming true today, right?

Cecilia Ziniti: So, I commonly record my meetings using software like Otter or Fathom, among many startups that do this. Essentially, the idea is to have this incredible, always-on, smart intern to apply to your business. How do you do it?

Dottie Schindlinger: Well, I want to shift gears a bit and pick your legal brain, if you don't mind. There's quite a bit of conversation and chatter happening in the regulatory space around AI. The SEC recently charged two investment advisors with AI washing, for example. I'd love to get your take on that particular story and what you think the implications will be.

And also, where do you think we're heading, especially here in the U.S., on the regulatory front around AI? It seems like kind of the Wild West right now. What are your thoughts?

Cecilia Ziniti: Yeah, regarding the AI washing cases, the SEC and Chair Gensler essentially came out and fined two companies, Delphia and Global Connections, for very similar issues. They deemed it AI washing. The crux of it is that the two companies made representations that their businesses were AI-enabled, using AI in a particular way. And in point of fact, they were not. In the case of Global Connections, it claimed to have the first AI investment advisor and said something like, 'We spot companies before everybody else can because we have this advanced ML.' In point of fact, they had collected some data but had not actually applied ML to it.

Similarly, Delphia's claims were about the business. But the fundamentals, as a board member, you're used to kind of pushing your company on what's true. This has certainly been true for me as a corporate secretary, supporting founder CEOs. I love founder CEOs; they're my favorite. I am one now. But that ability to tell a story that is in the future, you know, those traditional forward-looking statements.

That is the CEO founder CEO superpower — painting that picture. People famously said Steve Jobs had a reality distortion field. So as a board member, sometimes, you know, it's on you to be that reality check, like, 'Hey, give us a demo of this.' I know what investment advisor, if they had taken that advice that I gave you earlier in the call, perhaps that wouldn't have happened.

Now, that being said, I do think the SEC is staking out, you know, saying, 'Hey, we're looking at this.' But again, the fundamentals of substantiating a claim, reviewing parts of your business, these are not new for your listeners; this is part of the job. And so that's where I would lean.

And again, with AI, it's not, you know, I think it's with the democratization of it. I think you'll see companies say, like, 'Look, we're using the Writer Team API and applying it in X, Y or Z way,' and that would be true and that can deliver. I've seen that deliver 150X efficiency gains on the legal side and similar across industries.

Dottie Schindlinger: Well, this has all been exceptionally good advice and interesting insight. Any final thoughts for the audience before we wrap up our interview today?

Cecilia Ziniti: Yeah, again, I pushed on the opportunity, you know, so you have this incredible vantage point as a board member to really help your companies be forward-thinking and make it to the new era. And I think that's something that I take very seriously as a board member and I think is really fun. Like, the fun part of business. So that would be my message.

Dottie Schindlinger: All right. So before I let you go, there are three questions that we like to ask all the guests who join us on the show. What is the biggest difference between boardrooms today and ten years from now?

Cecilia Ziniti: Oh, come on, that's a softball. So, for sure, I love it, Dottie. No. So, look, I think AI-enabled everything essentially first drafts. You know, the level of discourse will improve because you will see outstanding board texts prepared with the help of AI. You'll see real-time dashboards instead of, you know, a poor bus-ops person spending all night putting together dashboards.

You will see that. And I think diligence has been part of that. So I definitely think it's going to be something along the lines of AI enablement.

Dottie Schindlinger: I feel like I could have predicted that answer.

Cecilia Ziniti: And you're not AI.

Dottie Schindlinger: All right. Well, the next question is, what's the last thing that you read or watched or listened to that made you think about governance in a new light?

Cecilia Ziniti: Yeah. So again, on the AI topic, I saw the CEO of Rippling — so Rippling is an HR software company that has really made a great business of being the source of truth for HR data. Their CEO famously had been pushed out of his prior company for governance considerations. But he came out, and Rippling now raised a $13 billion valuation. I think it was higher than its prior valuations.

Bbut he actually said something to the effect of, 'I'm not that into AI, you know, Rippling is just software and it's great.' And he said, 'I don't think anybody wants to chat with their HR bot.' And I heard that. I thought, that's interesting. That's an example of being very forthright.

That is like the opposite of AI washing, where he's like, 'Look, we have a great business, regardless of AI and here's all the customers that we have. Here's the value that we're delivering.' So that made me think like, yes, as I've talked about for half an hour here, like AI is a huge opportunity, but there are a lot of ways to succeed in business.

And from a governance standpoint, you could, as a board director, say, 'Look, we're going to double down on, example if you were Disney. Like, they have great tech, but really it's about life experiences, right? So coming out of the pandemic, that's what's you know, it would be very logical for Disney to double down on that. And people are going to want more human connection.

So from a governance standpoint, I guess I would say it made me think, you have to think about AI, but you also have to think about what are your key business fundamentals and what is your business and how can you win?

Dottie Schindlinger: Some great insight. And finally, to tell you, I think I know the answer to this one, too, but what is your current passion project?

Cecilia Ziniti: Yeah, so it's really the company I will say, you know, even as a board member and as the general counsel, that being a founder CEO now it's different, right? You know, being an exec and I've had y’know been in venture-backed companies and had equity and so on, but when the whole company, that responsibility is is so big and it's been so much fun.

Cecilia Ziniti: But thankfully I have a strong belief and I don't know if it's you know, maybe not religious but when you do something that is that you are passionate about, which I'm very passionate about AI and helping lawyers and launching this company, the cookies crumble your way. And I've just been continuously excited. Like we've seen sales growth. You know, I got invited by an old friend to this podcast like, you know, things are just happening that are so positive and that's that's really fuels this virtuous cycle of I love the passion project. And then I do better and then it does better and then just great.

Dottie Schindlinger: Well Cecilia, thank you so much for joining us on the show today. It's been a really interesting conversation.

Cecilia Ziniti: Thank you so much, Dottie. It was really fun.

Dottie Schindlinger: We've been joined today by Cecilia Ziniti, founder and CEO of GCAI. Cecilia, thank you so much.

Cecilia Ziniti: Thanks again.

Rachel Simon: Dottie, that was an absolutely fascinating interview. I feel like I took away so much from that conversation. It feels like, you know, I really took home her message about boards needing to balance between risk and opportunity. And I appreciated hearing from a legal professional kind of advocating on behalf of the opportunity side of things.

Dottie Schindlinger: I did, too. I mean, that is kind of unusual, right? You sort of expect to speak to the legal team when you need to know all the risks involved. But it's interesting to yeah, it's kind of refreshing to hear a legal person be a booster for something. But I thought it was really interesting at the end when we were asking her our sort of, you know, three standard questions that she brought up this issue of, whether or not AI is always the right choice for your business model.

She was talking about the one company, the CEO of Rippling who said that, you know, look, we have this amazing company and what we're doing is really important and valuable. And so we're you know, we're going to use AI in ways to help us with that business, but we're not changing what we do. And I thought that was I thought that was a really interesting comment because she's right.

And I think the CEO of Rippling may turn out to be right, that there are lots of ways that you can benefit from AI that don't involve you becoming an AI company. I think that's an important thing to just hear and say. It doesn't require you to become an AI company for AI to change the way you do business, give you lots of benefit, streamline, save costs, improve customer satisfaction, etc. You don't have to become an AI company, and I think that's helpful for board members to hear.

Rachel Simon: Absolutely. And even like how can AI help boards themselves to do their jobs better and general councils to do their jobs better? And that's certainly something we've been discussing a lot here at Diligent, to say the very least, and having a number of conversations with our customers, as well. Thinking about how AI can feed into our own technology to make, for example, the preparation of more materials more efficient, the consumption of board materials more efficient.

And then beyond that, I heard her mention dashboards and surfacing up the right data points, automating that. And that is 100% something that we've been working on and launching to our customers here at Diligent. So, it was really validating to hear that that's kind of directionally where she sees things going, as well.

Dottie Schindlinger: Yeah, it's an exciting new world. Honestly, there's so much going on, but you know, it doesn't come without risk. And so, it's very important for board members and leaders to get their arms around both and, you know, shameless plug time.

I think that's a good reason to take our AI Ethics & Board Oversight program. Yes, we talk a lot about both the risk and the opportunities, and we want to make sure to give you a nice, balanced view and some tools that you can use to help you think about these things, make good decisions, ask intelligent, thoughtful questions and not feel off at sea with this technology. Not be afraid of it, but really dive into it.

You know, no matter what your background is, you should be able to ask good, thoughtful, ethical questions about how AI is being managed in your organization that will really help your management team. So shameless plug. Check it out. You can find it at DiligentInstitute.com. I think it's a great program. I am extremely biased, but you can take it and tell me if I was wrong.

Rachel Simon: We forgive you.

Dottie Schindlinger: Well, Rachel, that wraps up another episode of The Corporate Director Podcast, The Voice of Modern Governance. Let's say a few special thank yous. First and foremost to our legal and AI expert Cecilia Ziniti, founder and CEO of GCAI, podcast producers Kira Ciccarelli, Edna Frimpong and Sophia Hadef. The team at Oxenfree for making this podcast a reality, and most especially Diligent Corporation for sponsoring this show.

Please let us know what you think of the show by rating us on Apple Podcasts — five stars only please — and by contacting us on email at podcast@diligent.com, you can learn more about our episodes at Diligent.com/resources/podcasts and you can also check out our sister show Inside Today's Boardrooms presented by Diligent Institute, a weekly web show covering best practices for today's corporate boards and committees.

Dottie Schindlinger: Thank you so much for listening.

Narrator: You've been listening to the Corporate Director podcast to ensure that you never miss an episode. Subscribe to the show in your favorite podcast player. If you'd like to learn more about corporate governance and tools to help directors do their job better. Visit www.diligent.com. Thank you so much for listening. Until next time.