Morrison CEO Paul Newfield encourages businesses to think beyond small AI efficiency improvements

Businesses making incremental productivity gains through the use of artificial intelligence (AI) may still get left behind by someone reimagining their whole industry before they even realise they're a competitor, Paul Newfield, partner and CEO at infrastructure investor Morrison, suggests.

Newfield made these comments at the Institute of Finance Professionals New Zealand (INFINZ) annual conference in Auckland on Tuesday. Morrison has more than US$30 billion of assets under management including via Infratil which has investments in AI data centres.

"I find myself often in those kind of roundtable lunches that investment banks, consultants invite you to with CEOs of companies from a bunch of different industries in Australia or other markets," said Sydney-based Newfield while speaking about investment opportunities in an AI world.

"And the conversations constantly are, 'in this area of my business, we're implementing AI and we're finding a 5% productivity saving or a 10% productivity saving.' And I keep thinking, this feels like maybe I'm sitting in the boardroom of Borders [Group, the book retail chain] in the 1990s." 

You know, we're thinking about how you make this micro-change to your existing business model. Meanwhile, there's someone in a completely different room that you didn't know was a competitor yet, who was completely reimagining how your industry will work."

" And so I looked back. There was this really glorious article in the HBR [Harvard Business Review] about Borders and their amazing CEO in 1999," Newfield said. 

The article features all the "incredible things" Borders had done and how they'd created bookstores where people could go and "sit on a soft sofa and drink a mediocre flat whites and buy some books."

"And then they would have a console in the corner where if the book wasn't in stock, you could go and search and order it in. And this great quote where he said, given the fact that only 2% of books are sold through the internet, I'm not going to bet the whole business on one channel."

"And what you realise is he was already betting the whole business on one channel, just the wrong one. And he was thinking his competitor was a bookstore when actually it was Amazon," said Newfield.

He also recalled working at Boston Consulting Group at the time and attending an internal conference where someone had done analysis showing that, to justify Amazon's share price, it would have to sell every book in the world.

"And you realise, looking back, we didn't even understand what business Amazon was in. We thought they were a bookshop, and Borders thought they were in this completely different industry from Amazon."

"So I think the challenge we keep saying to our portfolio companies is, who's the Amazon to your borders? And if you're just focused on the little minute efficiency improvement you can get from AI, you're probably missing the game," Newfield said.

'A shiver down my spine'

He also shared two images of photos taken in in Far North Queensland by Morrison's Head of Strategy, Lewis Bailey. They are photos of cave engravings. One shows a series of pictures including some barramundi and sea turtles. And the second one shows a ship on the horizon.

"[The first photo] is [of] Indigenous Australian way of life that lasted 40,000 years. And actually, it's a picture of an economy that kept people happy for 40,000 years, a spiritual system."

"These Indigenous Australians, who've lived for 40,000 years in the longest-running civilization the world's ever known, saw a ship on the horizon."

"And here's a quote from...one of the elders who lived through that. She said, 'but I hope it will not keep changing. It has changed a lot already. No more changes, I hope'," said Newfield.

"And every time I look at it, it still puts a shiver down my spine. I think that's what we are feeling right now. We can see that ship on the horizon, and we think there is going to be a big change, and we're terrified of that change." 

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