What would an AI-run company of the future look like?

The feasibility, economic viability, and organizational governance of an AI equivalent of a CEO, and what business leaders need to consider for the future.

In an age where headlines often spotlight the impact of mass layoffs on human employees, a more intriguing scenario looms on the horizon: Could a company’s leadership be replaced by artificial intelligence? While no Fortune 500 CEO has been replaced by an AI agent just yet, the prospect raises profound questions about the future of corporate governance and operations.

Imagine a CEO who, instead of rising early to strategize, has been prioritizing and optimizing all through the night. The AI equivalent of a CEO wouldn’t need sleep, and could theoretically refine strategies, analyze metrics, and execute decisions around the clock. But if you had to bet on a human CEO or an AI CEO leading your company, where would you place your wager today? What about in five or ten years? And, looking fifty years ahead?

Currently, a Fortune 500 CEO might not be able to stay up all night, but corporate board members are certainly losing sleep over the implications of artificial intelligence. Emily Glazer’s recent article in the Wall Street Journal highlights this concern, underscoring how boards are increasingly anxious about the risks and opportunities presented by AI.

The question arises: How quickly could a company be left in the dust by failing to adapt to AI advancements that enable entrepreneurs and competitors to take significant market share nearly overnight?

While an AI-run company is not a competitive threat in the immediate future, it’s a growing possibility. As with many technological advances, the shift to AI leadership might come slower than anticipated, yet faster than we are prepared for.

How Do AI-Run Companies Emerge?

The transition to an AI-run company could unfold in two primary ways. One approach might involve entrepreneurs building AI-run companies from scratch, using AI to conduct market research and design business strategies. It’s already the case that entrepreneurs are starting companies faster with limited time-to-market and serial entrepreneurs will start their next companies with much different tactics than those they founded prior. In this scenario, AI would need to gather information from diverse sources and construct a business model based on its findings.

Alternatively, an existing human-run company could transition to an AI-operated model. This process might involve a mass layoff of human employees, as the company shifts to an AI-only workforce. In this case, the AI would inherit the company’s existing databases, emails, and documents, potentially reducing the need for new primary market research.

Are AI-Run Companies Feasible?

While the idea of an AI-run company may seem distant, it's already within the realm of possibility, with several real-world examples pointing to this potential future. Let's explore three examples of increasing complexity that demonstrate how AI is already playing a significant role in business operations today.

First, we have consumer-grade tools that integrate with third-party services, allowing users to leverage generative AI for practical tasks, including using AI to send emails to potential customers or manage simple communication tasks.

Next, in the field of engineering, AI agents are already performing work of software engineers in an augmentation manner. Working from prompts that mimic job descriptions, agents can write code in specific languages, follow certain syntax rules, and adhere to required styling, effectively performing tasks that would typically require a human engineer. Tools like Sintra AI have emerged that provide 12 agents to cover a variety of functional areas of your business. These include customer support, copywriter, business development, recruiter, and more. While these agents provide the assistance needed in the functional areas, they require the input of a human manager.

Finally, we see the most advanced form of AI integration in "agent-based societies." Dr. Robert Yang, a former MIT professor, created Project Sid, where over 1,000 autonomous agents operated in a virtual world, developing their own government, economy, and culture. This model demonstrates how AI can manage complex systems, and similar approaches could be applied to running an entire business, with AI managing everything from strategy to operations.

 As we move closer to achieving artificial general intelligence (AGI), the likelihood of AI-led companies becoming not just viable but increasingly successful seems more and more probable.

What are the Organization Design Considerations for AI-Run Companies?

The structure of an AI-run organization would likely differ from traditional companies. While AI could streamline many processes and enhance efficiency, the design of AI systems would need to accommodate diverse functions and interactions. The question remains: Would AI models be organized in a way that mirrors current human organizational structures, or would new frameworks emerge?

In an AI-driven organization, the role of human employees would be redefined. Instead of traditional job roles, the workforce might consist of various AI models, each tasked with specific functions. This shift could lead to a fundamentally different organizational dynamic, where human roles are replaced by algorithms and data-driven models.

A current threat over the next 12 months is the loss of institutional knowledge in large organizations. As Carolyn Crist highlights in her recent article published on HR Dive, “75% of people leaders are considering leaving their roles in the next 8-12 months”. This has the potential to dramatically impact long-term business scalability. One potential advantage of an AI-driven organization is the reduction in employee turnover. With AI models in place, institutional knowledge would be preserved, as machines don’t leave for new opportunities. This continuity could mitigate some of the risks associated with losing experienced personnel and could lead to more stable operations.

What are the Governance Implications for AI-Run Companies?

In the evolving discussion about AI potentially replacing human CEOs, one of the central concerns is how such a transformation would be governed. The current model of corporate governance is designed with human leadership in mind, where boards of directors, made up of experienced professionals, oversee the performance of the CEO, make critical strategic decisions, and hold the executive team accountable. However, introducing AI into the equation would radically change this structure.

If a company were to be led by an AI CEO, the responsibilities of the board of directors would expand far beyond their traditional role. Instead of evaluating human leadership qualities—such as vision, communication, and decision-making—boards would now need to understand and monitor the intricacies of AI algorithms, including how decisions are being made, the ethical implications of these decisions, and the potential biases embedded in the AI's programming. This could involve significant re-skilling of board members or the hiring of AI specialists to sit on boards, ensuring they can make informed judgments about the AI's performance and behavior.

The question of hiring and firing AI CEOs introduces a new layer of complexity. Unlike human CEOs, who can be judged on both tangible metrics (like company performance) and intangible qualities (such as leadership or cultural fit), an AI would be assessed purely on its ability to optimize and execute business strategies. If an AI model underperforms, would the board replace it with a newer model or reprogram its algorithms? Moreover, who would be accountable for the AI's mistakes—its developers, the board, or the company as a whole?

AI decision-making, though data-driven, can lead to unintended outcomes or ethical dilemmas, such as discrimination in hiring practices or biased decision-making in customer relations. Current governance structures may not be equipped to handle these complexities. Therefore, corporate governance would need to evolve to develop new frameworks for accountability and oversight, ensuring that AI-driven decisions align with legal, ethical, and societal standards.

Are AI-Run Companies Economically Viable?

An AI-run company can’t just be feasible, it must also be economically viable. The economic viability of AI-run companies depends on multiple factors, including the cost of AI development, the reduction in human labor costs, and the efficiency gains from automated decision-making. In theory, an AI-run company could operate with significantly lower overhead, as AI systems do not require salaries, benefits, or working conditions. This reduction in labor costs could make AI-run companies highly competitive, particularly in industries where human labor represents a large portion of expenses. Additionally, AI systems can work around the clock without the need for rest, further driving productivity and output.

However, the initial investment in developing and maintaining advanced AI infrastructure could be substantial. High-level AI models capable of running a company would require continuous training, updates, and substantial computational resources. Moreover, there may be hidden costs associated with oversight and risk management. The potential for errors or biases in AI decision-making could also lead to costly legal or reputational issues.

In the long run, as AI technology matures and becomes more accessible, the economic model could shift dramatically in favor of AI-run companies, especially for industries that rely heavily on data-driven decision-making. For these companies, the efficiency gains could outweigh the initial costs, leading to increased profitability. However, sectors that rely on human creativity, relationship-building, and complex decision-making may find it harder to fully transition to AI leadership, limiting the overall economic viability in certain industries.

The rise of AI corporate leadership poses both challenges and opportunities. As we move forward, the questions of emergence, feasibility, organizational design, governance, and economic viability will be crucial in shaping the future of business. While a fully AI-run company may seem slightly dystopian and remain on the distant horizon, the conversation about its potential impact is already underway, signaling a significant shift in how we conceive of corporate leadership and governance.