AI - The Year in Review & The Year Ahead | Andy Sack and Adam Brotman | Forum3

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1:37Learn more at typeface.ai.com. Welcome marketers, advertisers, and those who love them to Chief Marketing Officer Confidential. CMO Confidential is a program that takes you inside the drama, the decisions, and the politics that go with being the head of marketing at any company in what is one of the most scrutinized jobs in the executive suite. I'm Mike Linton, the former chief marketing officer of Best Buy, eBay, Farmers Insurance, and Ancestry.com, here today with my guests, Adam Brotman and Andy Sack. Today's topic, AI, the year in review, and the year ahead. Adam was the chief digital officer of Starbucks, as well as the EVP of Global Retail Operations.

2:22He also served as the president and chief experience officer and co-CEO of J.Crew. He probably went the longest business cards anybody's ever had. Andy is the managing partner at Keene Capital and the Innovation Arts Group and has many experiences in the digital and financial world. They founded Forum 3, a company focused on the intersection of artificial intelligence and digital transformation, and wrote a book called AI First, which is a really good book. I actually have a signed copy. I can vouch for it. It's really good. They joined us over a year ago for a show called It's a Bird. It's a Plane.

2:59Holy shit, it's AI, where they laid out the case for how AI would change business and the world. and now they're back to tell us how it's going. Welcome Andy and Adam. Thanks for having us. Great to see you guys again. Hey now let's start just with a general update. You know we're almost at the close of 2025 and you've been in the catbird seat on what's really going on in the year. Give us a report from the front lines of what happened in AI writ large in this year?

3:38I'll dive in. I mean, I'm going to broaden it because it was two years ago, almost to the day, Mike, that Adam and I had our first interview for our book, AI First, with Sam Altman at the OpenAI headquarters. And it's almost three years to the day that ChatGPT 3.5 was announced. And so in three years, ChatGPT is now doing, I think they're serving a billion weekly active users. Just in recent times, OpenAI has released a browser, Sora 2.

4:23you know it's just mind-boggling the amount of technology advancement that has occurred in the last two to three years and it's easy to forget that chat GPT launched three years ago so what happened this year I don't know but we're now at a billion weekly active users and have full video capability. I watched a video that was totally AI generated of Sam Altman talking about really the geopolitical landscape of US versus China and the impact it has on really the future of the world and frankly, whether we're going to get along and the role that AI plays in political decision making. So we've come a long way in a couple of years.

5:17And are we picking up speed? Because I would say that is a really good perspective. Let's look back three years and say the revolution is here and it's gathering momentum as it goes downhill. But you would say, I guess, it's still just the beginning of all this stuff, right? My sense is where I can feel just myself just in this year when you look at what's been released by the large language models that were on an exponential curve. And I feel it just trying to keep pace with the announcements. Adam, how about you? Yeah, I agree with everything you said. I mean, it's actually interesting looking back at this year because I can't believe it feels like in this space, things are happening so fast and progressing so fast that it feels like it's been longer than a year.

6:07So, for example, at about this time last year, roughly, is when reasoning models first came out. Like you'd think that reasoning models and thinking models, which were transformative in the space. Like it went from just a simple chat model that could make a lot of mistakes and couldn't do higher order reasoning all the time to where now if you just, if you're using the thinking model specifically of ChatGBT5, for example, or if you're using Gemini 2.5 Pro or whatever, one of these ones were reasoning and thinking is built in. Like a year ago, that was brand new. Right. which is wild to think about.

6:44Secondly, the Trump administration came online this year. Like that wasn't last year. Right. So there has been this like from a from a federal policy perspective, there's been this like accelerationist sort of stance. And then thirdly, we did get chat GPT five. We did get Gemini Pro 2.5, 2.5 Pro. We've gotten Claude Heavy, like, I'm sorry, Grok Heavy and Claude, like 4.5. Like these things were like this year and they are significant steps up in capability. And yet we're kind of all being boiled like frogs in a way thinking like, wow, like, is it really accelerating? Is it what's going on? And in the meantime, the ability for these models to do incredible things is still is happening recently.

7:37And then you've got this also this year, the rise of these long duration task agents like Replit's Agent 3, which can sit there and code and check its own code and actually test itself for like hours at a time. And that's like, so the concept of the improvement of the models, the reasoning models themselves, and these improvements, like, it's been a hell of a year. And I think as a result, right now, at the end of this year, it's like all, and I know we're going to get to this, you're hearing about, like, there's just insatiable demands for these chips and for the data infrastructure. The energy to run them.

8:19Yeah. The energy, the chips, the data infrastructure, the hyperscalers behind all this, the crazy amount of value in the stock market that's happening. And I, you know, putting aside, we'll get to predictions in a minute. It's just been a year of just incredible progress. And I think when Andy mentions it, there's almost a billion weekly active users of ChatGPT alone. In terms of adoption, consumer and business adoption, it's been a huge... That's the fastest ever, right? Yes. I want to talk about, you mentioned it, you guys both touched on it. it's all these tie-ups between all the companies in AI, the chip makers, the AI models, the companies, everyone is co-investing or tying each other up.

9:11How should we think about that? And in the long run, are there winners and losers here? And then I want to flip over to winners and losers in the marketplace or consumers as well. But tell me about the tie-ups. um i mean adam you wanted to you go first sure i actually um i i'm actually a little bit in the middle in terms of am i thinking that these types make total sense or are they circular nonsense i mean i actually i'm closer to they make sense than the other uh in the sense that um it seems it feels like they're just sort of making up money out of thin air on and on some levels you could say that because you've got like for example nvidia does a deal with open ai where they are going to invest in open ai the more that open ai buys nvidia chips and so there's just money going to them to is there money going from nvidia to open ai then turn around as an investment and they turn around just buy the chips and that makes which we remember when the dot-com bubble burst that was people would that was circular money that really didn't produce anything we're now going to take a quick break to hear from our sponsor, Typeface.

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11:25Now back to our episode with Andy Sack and Adam Brotman. That's right. They call it lazy Susan deals or whatever you want to call them. In this case, though, unlike that, one thing I heard recently that I thought was interesting is back in, I remember those days. I was quite a bit younger, but I do remember the dot-com days and all the fiber being laid and all that stuff. And the difference is like 90 % at the time, 90 % of the fiber was dark or something like that when all those deals were happening. And also, the internet was still a promise, not a thing that's happening. Today, when you think about how much the utilization of these chips is at like full utilization across, you know, a dozen different hyperscalers that are like absolutely using the chips.

12:18And you're getting consumers that are like in demand and enterprise users that are in demand. So right now, I feel like if anything, it's demand driven. And then, of course, if you're a chip maker like NVIDIA, you should want to get a piece of the upside of the model company. So to me, it's less circular and it's more a factor of I think that there's a number of these companies that realize that they're going to all be worth several trillion dollars, if not$10 trillion, in the next five years or so. And if that's the case, I don't blame them for doing the deals that they're doing. Andy? So is this creating winners and losers?

13:02Like if you don't have a tie-up deal or if you get left out of this game, can you still survive? I mean, so let me answer your winners and losers question before. Let me chime in first and build on what Adam was saying. My take on the majority of these deals is that they're exposing a level of capitalism that generally business people, the investing public are not that familiar with. If you're Costco and you want to have the Kirkland brand and you want to release a new hoodie, you're going to lock up supply. You've got your idea of where you want to get that supply and you're going to go to the supplier and you're going to lock it up because you want to make sure you have supply across the United States to fulfill it.

13:55And so I think what you're seeing in the technology space, in the AI space, because demand is so high by the LLMs for training, the need for chips and electricity is through the roof. One could argue that instead of trying to lock up supply one way or the other through the supply chain, that the LLMs should have collaborated and done training together. Like, do all these companies really need their own proprietary one? It would be much more efficient if a couple of them pooled together and were like, yeah, we'll share the results in some way. That would have been a more efficient approach, but it doesn't, these, I don't, I don't have a problem with these lockup deals or supply chain deals as I think of them.

14:52Oh, you guys would say it's capitalism at its best. Tell me, you know, and I was going to get to your winners and I was going to get to your winners. All right, go ahead. Winners and losers. Yeah, there's a game that's being played, and capitalism is the game, and there has never been a bigger prize available for the person or the entity, the company that gets the AGI. And you saw that play out this year with Meta trying to get back in the game and offering billion-dollar salaries. And it's because there are winners and losers here, and there's about seven companies that are playing. I think next year there'll be five companies playing maybe.

15:36I think that it's hard to keep pace with the level of investment that is required. Interesting. So, Adam, you guys have been on a tour after the book, and I'm sure you're talking to a lot of boards and a lot of CEOs. You know, how are people that are getting traction getting traction? And what are the biggest obstacles to progress as we take this down to the company level? it's it's it's a subject that andy and i were just talking about this morning in fact because the um that the first of all most boards and ceos let's start there are still in the i wonder how fast we should go with this i don't think anybody's saying oh i wonder if this is a real thing they're just they're still questioning how much to lean in um we've seen a few that are like they're fully leaning in right and you've seen you see these ai first ceo memos and and the boards are behind them and they're going really fast and then there's that's the exception not the rule i think most of the boards and the ceos we talked to are still having their aha moment like now and then they're they're sort of trying to figure out what it means to lean in and uh what What I'd say is we've seen that the only way that you're really going to be able to take advantage of this, if you have a combination of real CEO sponsorship.

17:09And, you know, this is not a tech implementation. This is a change management, strategic change management for the whole organization type moment. And those CEOs and boards that get that and lean into it in that way are going to get more traction because they're going to lead by example. They're going to empower a playbook for their organization that's going to allow this to happen. And by the way, this kind of transformation is hard. Like we're talking about this isn't some tech pilot implementation. And that's where I think people get confused. They read these bait clicky article headlines about corporate pilots that are failing and whatnot.

17:50And so you can be kind of hesitant. In reality, this is a multi-month CEO-led transformation that these companies need to go through. And we've seen the ones that are doing it. And they're getting results. And they're getting buy-in. And it's working. And for those that sort of tiptoe in, it becomes more of a game of like what pilot is working and not working. And we did a whole show on this about the cold start problem that laid a lot of the blame on the board and said, if you're just delegating this and saying, go make AI happen and let me know, you're failing because you've got to pick use cases and be in it with the company.

18:31Or else you'll just run a bunch of experiments and not really understand anything. and and you'll be managing by clickbait which i think is is that hey hey so in your estimation or estimate what percent of companies are really well underway and what are just what percent are just getting started andy you're always good at the math on this five percent and 95 percent 95 % not underway, really. I mean, no, 5 % well underway. Well underway, yeah, yeah. 95 % have gotten started and are doing stuff, but they're not very far. I think in general, we continue to, when we talk publicly and do boot camps, we continue to be reminded that people don't even know the difference between the different models.

19:29Like there's some very basic things about how to use AI that people just don't understand. And when they see it, they do it. They're like, oh, it can do that. And now we're continually blown away by the lack of understanding. And that lack of understanding comes from a lack of use and lack of understanding. And so that limits the ability for people to have, like we're sitting here going, holy shit. our episode a year ago was the whole, is it a bird, is it a plane, it's the holy shit moment. One of my favorite titles of CMO Confidential all time. Mine too, mine too. We wanted to name the book after it, Mike.

20:11I know, that's what makes that so good. I'll add that, Mike, I think a lot of what happens here and is still happening here is even when a board or a CEO decides to go for it, they have their aha moment, they realize, holy shit, this is a transformative technology, they'll turn around and they'll give it to their technology department to go implement. And by the way, it doesn't mean that a head of IT or a CIO or a CTO can't be the right champion. In many cases, they are. We have many examples where the right champion is the technology leader. However, it's not because they're the technology leader and this is a technology implementation and when and i'd say i don't know more than 50 of companies today that we run into are still muscle memory into like oh i'm gonna have my cto or my ceo lead this even if that person isn't of the right growth mindset and understanding of the transformative nature of this technology are you are you all seeing a lot of blockers like a bunch of people in there you know remember when i you know and and we've talked about this on a couple shows yeah remember when the martech stack was being built out a bunch of people bought every single thing and then there's a whole bunch of like cfos or you know people that kind of were a little more sober about it going we bought too much stuff uh we should be cautious are there a lot of blockers out there on this or is it really more just people unwilling to get involved I mean, the block, I'd say the primary blocker is really is human.

21:53It's human change and it's understanding and usage. There are other blockers, which are there's a lot of vendors. There's a lot of different tools. There's complexity. There's data security. But the primary blocker is there's a current way of doing business. People are busy doing business. and this takes some effort and time and behavior change of human beings and that's hard. Hey, Adam, let's flip over and talk about the consumers. You said there's a billion users out there, you know, growing, I'm sure, exponentially. Where is the marketplace and, you know, the end consumer really in the adoption curve?

22:40And then let's talk about what that means for companies. I think the end consumer is, this was the year that the end consumer just absolutely got on board. There's still a lot of, I'll call it AI hate and AI skepticism in the consumer space in general, which is interesting because it gets, it's out there and I think affects the end consumer. But I'd say the average end consumer totally has ChatGPT or Gemini or something on their phone that they're using. They're aware of the power of it. But I would say this. They are, just like enterprise, 90 % of the end consumer is underutilizing or misunderstanding the power of this technology.

23:35So this was a year that the consumer is using it. And you're seeing that in, you know, the rise of AI search and the rise. Zero click search and all kinds of stuff. Yeah, exactly. So you're seeing the effect of that. And by the way, and then they're bringing it to work with them under the table a lot of the times because the enterprise hasn't given them the right access to the right tools to use in the right way at the company. So you're starting to see this stream of consumer usage, but still not fully understanding how to take advantage of it and the power of it, using it nonetheless. They bring it into work.

24:15And it's going to affect things like search, like we said. It's going to affect everything from creativity to homework to companionship, which is a huge topic in this space. It's crazy how many people are using it for companionship. And I teach a couple of college classes and you have to just give them assignments, assuming that AI is the basis for everything. Yeah, for sure. I mean, it's going to change education. Thank God for K through 12 teachers and schools, because I think they're going to be more important than they've ever been in a lot of ways in the age of AI. Hey, are companies keeping up with the consumer on this?

25:04You've got zero click search. You've got all kinds of, you know, the consumer behavior is probably changing at speed and in terms of the marketing funnel and adopting to, you know, how consumers are absorbed information to make decisions. Are companies keeping up with that?

25:25Andy, what would you say? I mean, I'd say it's what I said before, 5%, 95%. I think companies lag, and I think it's hard. Like, the technology is moving. What's so unique about this technology is the speed with which it's being developed. It's super powerful, but it's the speed that it's changing that is so insane. And we have difficulty keeping up. So it doesn't surprise me. and I don't fault anyone for it and they need help, which is, you know, I mean, it's frankly why we're in business at Forum 3. Like, this is hard to do. The change management part is hard to do. The tool's simple, but its implications are profound.

26:12Yeah, I would also say that it's interesting because, for example, Gemini came out with this incredible photo editing and creation capability called Nano Banana. that they it's built in Gemini and it it just absolutely took off and so I think I think in pockets um the consumer is starting to like see VO3 or Sora for video they're starting to realize that they can do incredible things with images on Nano Banana for example or even just on ChatGPT And then that leaks into social media, leaks into TikTok. And so my guess next year, the consumer like the enterprise will start to realize how powerful this technology is.

27:05But right now, everyone's just still getting their feet wet. I read one forecast that said that 50 % of consumer purchasing decisions will be AI-driven, will involve an LLM next year. 50 % of purchase decisions. So cars, travel, all the products, electronics that you buy, you're going to consult an LLM first. And that's just, you know, three years ago that didn't exist. even when ChatGPT launched, it's really the reasoning and the consumer behavior. That's an incredible statistic. And it's going to end up being, it is an incredible statistic. And think about the fact that the lines are getting blurred as well on that kind of statistic.

27:53Because when you do a Google search now, think of how often you're getting this AI overview. So is that, like, am I getting, is that Google or is that AI, right? Is that, you know, in other words, LLMs are going to like creep their way into everything we do. And then I think it's, you know, rumors are flying around when Siri on Apple is going to end up having, I'll call it Gemini or whatever they decide to use embedded into it. And pretty soon it's going to go from 50 % to 100 % because you're not going to be able to do anything that doesn't have LLMs embedded into it. So it's not going to, for a while there, it was like one or the other.

28:31And pretty soon it's just going to all happen. And again, you wonder why, you know, these hyperscalers and these chip stocks are, you know, as high as they are, because it's, you know, the amount of usage is just astronomical. Hey, so let's write marketers into this story. One of your challenges to all of marketing is think bigger as a marketer. You know, we know everybody starts down the efficiency route. Are many marketers thinking bigger yet within their company? And what does thinking bigger kind of mean when you say that? I would say marketing of the departments is doing a better job than other departments in terms of adopting the technology.

29:20You're seeing this year you saw a number of instances where full-on advertisements, video advertisements, are being released. They're being released on TV. There are a number of examples of that. And separate from that, you've got the whole marketing stack and paid advertising and increasingly segmentation as well as virtual customers testing things. So I think marketing has come along and is beyond just the efficiency thing. And they're actually, because of the nature of the business of marketing, ideas, et cetera, they're actually pushing on the tool to not just be an efficiency play, but also to be like an ideation play, an insight play, and a full automation.

30:14An experienced play, a person with so many plays you could make. If you were telling our audience, go look at, here's some best practice companies, or here's some best practice agencies that are on the cutting edge, who would you tell them to look at? I mean, well, for starters, on kind of the extreme side, I would tell them to look up what's happening with video creative in the area. There's an influencer name. I think his name is PJ Harvey. He created the ad that ran during the NBA finals this year for Kalshi. If you haven't Googled or looked up the Kalshi AI ad, and then you can actually - Is it Kalshi or Kalshi?

31:08Kalshi, yeah. Kalshi, okay. K-A-L-S-H-I. Potato, patata. Yeah, exactly. So the call she had is one that I would look at. Also, there's another one that was done for a company called IM8. The letters I and M and the number eight. They're just an incredible example of the power of what you can do with AI video. And I encourage people to look at that. in terms of understanding what can be done. Beyond that, in terms of like companies to look at for best practices in using AI for marketing, honestly, like it gets pretty diffuse after that in terms of, I would say, Andy mentioned, it's actually much more of the individual marketer.

32:03And we do see this a lot. Andy's right. We do see marketers being particularly early adopters of thinking about the different micro solutions of how they themselves can use vision from an AI perspective or the reasoning model from an AI perspective to really create synthetic personas to do testing against, to take all of their data they have on their customers and their marketing efforts, and then run those through a reasoning model and effectively look for insights, look for optimization. I think marketers in general are pretty early to look for an edge and look for something to differentiate what they're doing so they can actually, by definition, drive some sort of comp store sale.