Key takeaways
- Goldman Sachs spins out a LinkedIn competitor, the AI-powered Louisa platform
- The banking giant’s share price was briefly up on Friday morning at the news
- It’s a reminder for investors that AI innovation can come from avenues other than Big Tech
In headlines we weren’t expecting any time soon, Goldman Sachs has spun off an AI-powered social media platform. Yep, you read that right. The banking giant had used its internal networking site, Louisa, for two years before taking the product to other customers just a few weeks ago.
It’s a reminder to investors that it’s not just Big Tech innovating in the AI space: there are plenty of other different avenues, with plenty of money to fund new projects, that shouldn’t be ignored. Goldman Sachs is clearly one of them. We’ve got the latest on Louisa, how the market reacted and why professional services might just be the new AI frontier.
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What is Louisa?
So what exactly is the spin-off, and what’s its potential for the industry? Louisa works by automatically creating user profiles from an employer’s database and making connection suggestions for people who might benefit from knowing one another.
“Think of Louisa as an A.I.-powered LinkedIn on steroids,” said CEO and founder Rohan Doctor at the announcement, explaining the AI scans through millions of articles a week and suggesting potential connections from there.
Goldman Sachs had funded the project for an undisclosed sum and had been using the tech internally for over two years. According to Goldman Sachs’ case study, Louisa was part of the banking titan’s inaugural incubator program, GS Accelerate, and now has 25,000 monthly active users.
The incubator is for employees to pitch start-up ideas; Doctor was head of banking solutions at Goldman Sachs’ Hong Kong office before going full-time on Louisa. It’s likely that after 17 years at the company, Louisa will still have close ties with Goldman Sachs even if it’s operating under an independent name.
Now, Louisa is expanding to new clients as its own independent start-up to solve the ‘missed connections’ issue big businesses can have. “This is costing companies billions of dollars in terms of missed opportunities, disconnected colleagues and fractured client experiences,” Doctor said.
Goldman Sachs’ share price saw a small increase on Friday, jumping to $322 from $320, before losing its momentum again after another difficult week for the industry.
Goldman Sachs’ AI report
The move isn’t completely out of nowhere, given Goldman Sachs recently released a report on the future of work alongside AI. The study predicted AI could increase the global GDP by $7 trillion and increase productivity by 1.5 percentage points in just ten years.
The report admitted 300 million jobs could be affected by AI in that time, with two-thirds of occupations potentially seeing part of their roles automated. But it was quick to point out that AI brings just as much opportunity as it does potential obsoletion, with 60% of roles today not existing back in 1940.
“Generative AI can streamline business workflows, automate routine tasks and give rise to a new generation of business applications,” Kash Rangan, senior U.S. software analyst in Goldman Sachs Research, said in the report.
It came before a Microsoft AI report reached similar conclusions, with 75% of the 31,000 employees surveyed believing AI could help with creativity and that business leaders were twice as interested in using AI to help worker productivity rather than cutting job roles.
Goldman Sachs clearly intends to capitalize on the AI momentum, having previously pointed out the tech’s potential to transform the healthcare and education industries. If it continues to nurture promising AI start-ups with solutions for businesses, then investors should keep an eye on the professional services industry as a surprise sleeper contender in the AI wars.
Professional services: a sleeper AI contender
It’s no secret professional services, like the banking and legal industries, have been forced to innovate in the last decade. Now many have in-house innovation labs and incubators to develop white-label products for internal or client use. Some examples include JPMorgan’s recent DeFi and crypto lab in Athens and KPMG spinning out its AI security platform, Cranium last month.
Could we see a renaissance of professional services-led AI development? With the deep pockets of banks plus law firms and innovation leaders headhunted from Big Tech positions, it’s possible.
With Goldman Sachs, its incubator program started in 2019 with 500 applications for funding. It’s likely there are plenty more Goldman Sachs-funded AI start-ups waiting in the wings at different stages of development, which could lead to further announcements from the bank – and more potential profits to be made, which will keep Wall Street happy.
The focus has been on the flashy consumer chatbots like ChatGPT, Bing and Bard; but for businesses and investors, the real potential lies in enterprise AI products that aren’t terrible to use and make a difference in employee productivity. Whoever cracks that code first is onto a winner – and it may not be the likes of Google and Microsoft.
The bottom line
Goldman Sachs’ AI spin-out marks an intriguing line in the sand for professional services. Traders will now look at the industry’s big players and their start-up accelerator programs to see if any promising AI products lie in wait.
But overall, it’s a reminder that while Microsoft and Google have dominated the AI conversation so far, there are other options out there for investors to gain either indirect or direct upside. Not to mention, more AI innovation that isn’t concentrated in the hands of a few is a good thing – as long as the proper guardrails are in place.
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