Understanding AI Systems

𝗧𝗵𝗲 𝗔𝗜 𝗔𝗴𝗲𝗻𝘁𝘀 𝗦𝘁𝗮𝗶𝗿𝗰𝗮𝘀𝗲 represents the 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲𝗱 𝗲𝘃𝗼𝗹𝘂𝘁𝗶𝗼𝗻 from passive AI models to fully autonomous systems. Each level builds upon the previous, creating a comprehensive framework for understanding how AI capabilities progress from basic to advanced: BASIC FOUNDATIONS: • 𝗟𝗮𝗿𝗴𝗲 𝗟𝗮𝗻𝗴𝘂𝗮𝗴𝗲 𝗠𝗼𝗱𝗲𝗹𝘀: The foundation of modern AI systems, providing text generation capabilities • 𝗘𝗺𝗯𝗲𝗱𝗱𝗶𝗻𝗴𝘀 & 𝗩𝗲𝗰𝘁𝗼𝗿 𝗗𝗮𝘁𝗮𝗯𝗮𝘀𝗲𝘀: Critical for semantic understanding and knowledge organization • 𝗣𝗿𝗼𝗺𝗽𝘁 𝗘𝗻𝗴𝗶𝗻𝗲𝗲𝗿𝗶𝗻𝗴: Optimization techniques to enhance model responses • 𝗔𝗣𝗜𝘀 & 𝗘𝘅𝘁𝗲𝗿𝗻𝗮𝗹 𝗗𝗮𝘁𝗮 𝗔𝗰𝗰𝗲𝘀𝘀: Connecting AI to external knowledge sources and services INTERMEDIATE CAPABILITIES: • 𝗖𝗼𝗻𝘁𝗲𝘅𝘁 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁: Handling complex conversations and maintaining user interaction history • 𝗠𝗲𝗺𝗼𝗿𝘆 & 𝗥𝗲𝘁𝗿𝗶𝗲𝘃𝗮𝗹 𝗠𝗲𝗰𝗵𝗮𝗻𝗶𝘀𝗺𝘀: Short and long-term memory systems enabling persistent knowledge • 𝗙𝘂𝗻𝗰𝘁𝗶𝗼𝗻 𝗖𝗮𝗹𝗹𝗶𝗻𝗴 & 𝗧𝗼𝗼𝗹 𝗨𝘀𝗲: Enabling AI to interface with external tools and perform actions • 𝗠𝘂𝗹𝘁𝗶-𝗦𝘁𝗲𝗽 𝗥𝗲𝗮𝘀𝗼𝗻𝗶𝗻𝗴: Breaking down complex tasks into manageable components • 𝗔𝗴𝗲𝗻𝘁-𝗢𝗿𝗶𝗲𝗻𝘁𝗲𝗱 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸𝘀: Specialized tools for orchestrating multiple AI components ADVANCED AUTONOMY: • 𝗠𝘂𝗹𝘁𝗶-𝗔𝗴𝗲𝗻𝘁 𝗖𝗼𝗹𝗹𝗮𝗯𝗼𝗿𝗮𝘁𝗶𝗼𝗻: AI systems working together with specialized roles to solve complex problems • 𝗔𝗴𝗲𝗻𝘁𝗶𝗰 𝗪𝗼𝗿𝗸𝗳𝗹𝗼𝘄𝘀: Structured processes allowing autonomous decision-making and action • 𝗔𝘂𝘁𝗼𝗻𝗼𝗺𝗼𝘂𝘀 𝗣𝗹𝗮𝗻𝗻𝗶𝗻𝗴 & 𝗗𝗲𝗰𝗶𝘀𝗶𝗼𝗻-𝗠𝗮𝗸𝗶𝗻𝗴: Independent goal-setting and strategy formulation • 𝗥𝗲𝗶𝗻𝗳𝗼𝗿𝗰𝗲𝗺𝗲𝗻𝘁 𝗟𝗲𝗮𝗿𝗻𝗶𝗻𝗴 & 𝗙𝗶𝗻𝗲-𝗧𝘂𝗻𝗶𝗻𝗴: Optimization of behavior through feedback mechanisms • 𝗦𝗲𝗹𝗳-𝗟𝗲𝗮𝗿𝗻𝗶𝗻𝗴 𝗔𝗜: Systems that improve based on experience and adapt to new situations • 𝗙𝘂𝗹𝗹𝘆 𝗔𝘂𝘁𝗼𝗻𝗼𝗺𝗼𝘂𝘀 𝗔𝗜: End-to-end execution of real-world tasks with minimal human intervention The Strategic Implications: • 𝗖𝗼𝗺𝗽𝗲𝘁𝗶𝘁𝗶𝘃𝗲 𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁𝗶𝗮𝘁𝗶𝗼𝗻: Organizations operating at higher levels gain exponential productivity advantages • 𝗦𝗸𝗶𝗹𝗹 𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗺𝗲𝗻𝘁: Engineers need to master each level before effectively implementing more advanced capabilities • 𝗔𝗽𝗽𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻 𝗣𝗼𝘁𝗲𝗻𝘁𝗶𝗮𝗹: Higher levels enable entirely new use cases from autonomous research to complex workflow automation • 𝗥𝗲𝘀𝗼𝘂𝗿𝗰𝗲 𝗥𝗲𝗾𝘂𝗶𝗿𝗲𝗺𝗲𝗻𝘁𝘀: Advanced autonomy typically demands greater computational resources and engineering expertise The gap between organizations implementing advanced agent architectures versus those using basic LLM capabilities will define market leadership in the coming years. This progression isn't merely technical—it represents a fundamental shift in how AI delivers business value. Where does your approach to AI sit on this staircase?

Ever wondered where the future of AI is being built? I just visited the data centre in Finland that's making it happen. Nebius’ data centre is the powerhouse where AI models are trained. Thousands of GPUs working in unison. It’s expanding to host up to 60,000 GPUs dedicated to intensive AI workloads. They’re building a full-stack AI cloud platform. Here’s what I learned: 1. There is a scarcity of GPUs in the US • Clusters are being sold in massive packages • People who need smaller requirements can’t find them 2. Nebius are building a self-serve platform • Cover infrastructure requirements from a single GPU to big GPU clusters • They’re not a GPU reseller—they’re designing the servers and the racks from the ground up 3. Applications • Helped Mistral train their multimodal models • Provide full-stack infrastructure for AI model development Something else that was unique about the visit. Nebius cools the servers in Finland using the outside air. The heat that’s generated from the servers is then shipped back into the grid. This means Nebius not only heats the onsite building, But it also heats homes nearby, benefitting the local community. They’re able to recover 70% of the heat generated. And it’s the first in the world to have this heat reuse application connected to the local municipal grid. They’re now investing over $1B in AI data centres in Europe. I feel the future of AI depends on infrastructure like this that balances performance with sustainability. Follow me Alex Banks for daily AI highlights & insights.

"With recent advancements in artificial intelligence—particularly, powerful generative models—private and public sector actors have heralded the benefits of incorporating AI more prominently into our daily lives. Frequently cited benefits include increased productivity, efficiency, and personalization. However, the harm caused by AI remains to be more fully understood. As a result of wider AI deployment and use, the number of AI harm incidents has surged in recent years, suggesting that current approaches to harm prevention may be falling short. This report argues that this is due to a limited understanding of how AI risks materialize in practice. Leveraging AI incident reports from the AI Incident Database, it analyzes how AI deployment results in harm and identifies six key mechanisms that describe this process Intentional Harm ● Harm by design ● AI misuse ● Attacks on AI systems Unintentional Harm ● AI failures ● Failures of human oversight ● Integration harm A review of AI incidents associated with these mechanisms leads to several key takeaways that should inform AI governance approaches in the future. A one-size-fits-all approach to harm prevention will fall short. This report illustrates the diverse pathways to AI harm and the wide range of actors involved. Effective mitigation requires an equally diverse response strategy that includes sociotechnical approaches. Adopting model-based approaches alone could especially neglect integration harms and failures of human oversight. To date, risk of harm correlates only weakly with model capabilities. This report illustrates many instances of harm that implicate single-purpose AI systems. Yet many policy approaches use broad model capabilities, often proxied by computing power, as a predictor for the propensity to do harm. This fails to mitigate the significant risk associated with the irresponsible design, development, and deployment of less powerful AI systems. Tracking AI incidents offers invaluable insights into real AI risks and helps build response capacity. Technical innovation, experimentation with new use cases, and novel attack strategies will result in new AI harm incidents in the future. Keeping pace with these developments requires rapid adaptation and agile responses. Comprehensive AI incident reporting allows for learning and adaptation at an accelerated pace, enabling improved mitigation strategies and identification of novel AI risks as they emerge. Incident reporting must be recognized as a critical policy tool to address AI risks." By Mia Hoffmann at Center for Security and Emerging Technology (CSET)

Last week, Chinese AI company DeepSeek shocked the AI industry with the release of R1, their open-sourced reasoning model. Yesterday, the stock market noticed too. To help us understand the significance of this technological and geopolitical moment, I’ve co-authored a piece in The Washington Post about DeepSeek and open-source models. DeepSeek-R1, which matches models like OpenAI’s o1 in logic tasks including math and coding, costs only 2% of what OpenAI charges to run, and was built with far fewer resources. And most importantly, it’s an open-source model, meaning that DeepSeek has published the model’s weights, allowing anyone to use them to create and train their own AI models.   Up until now, closed-source models like those coming out of American tech companies have been winning the AI race. But my co-author Dhaval Adjodah and I argue in our piece that DeepSeek-R1 should make us question our assumption that closed-source models will necessarily remain dominant. Open-source models may become a key component of the AI ecosystem, and the United States should not cede leadership in this space. As we conclude in our article: “America’s competitive edge has long relied on open science and collaboration across industry, academia and government. We should embrace the possibility that open science might once again fuel American dynamism in the age of AI.” It was a pleasure to collaborate on this article with Dhaval, whose company MakerMaker.AI is on the cutting-edge of AI technology, building AI agents that build AI agents. What do you think about the future of open vs. closed-source AI? Read the full op-ed here: https://lnkd.in/eXK5YdWk. 

AI Engineering has levels to it: – Level 1: Using AI Start by mastering the fundamentals: -- Prompt engineering (zero-shot, few-shot, chain-of-thought) -- Calling APIs (OpenAI, Anthropic, Cohere, Hugging Face) -- Understanding tokens, context windows, and parameters (temperature, top-p) With just these basics, you can already solve real problems. – Level 2: Integrating AI Move from using AI to building with it: -- Retrieval Augmented Generation (RAG) with vector databases (Pinecone, FAISS, Weaviate, Milvus) -- Embeddings and similarity search (cosine, Euclidean, dot product) -- Caching and batching for cost and latency improvements -- Agents and tool use (safe function calling, API orchestration) This is the foundation of most modern AI products. – Level 3: Engineering AI Systems Level up from prototypes to production-ready systems: -- Fine-tuning vs instruction-tuning vs RLHF (know when each applies) -- Guardrails for safety and compliance (filters, validators, adversarial testing) -- Multi-model architectures (LLMs + smaller specialized models) -- Evaluation frameworks (BLEU, ROUGE, perplexity, win-rates, human evals) Here’s where you shift from “it works” to “it works reliably.” – Level 4: Optimizing AI at Scale Finally, learn how to run AI systems efficiently and responsibly: -- Distributed inference (vLLM, Ray Serve, Hugging Face TGI) -- Managing context length and memory (chunking, summarization, attention strategies) -- Balancing cost vs performance (open-source vs proprietary tradeoffs) -- Privacy, compliance, and governance (PII redaction, SOC2, HIPAA, GDPR) At this stage, you’re not just building AI—you’re designing systems that scale in the real world. What else would you add?

The AI gave a clear diagnosis. The doctor trusted it. The only problem? The AI was wrong. A year ago, I was called in to consult for a global healthcare company. They had implemented an AI diagnostic system to help doctors analyze thousands of patient records rapidly. The promise? Faster disease detection, better healthcare. Then came the wake-up call. The AI flagged a case with a high probability of a rare autoimmune disorder. The doctor, trusting the system, recommended an aggressive treatment plan. But something felt off. When I was brought in to review, we discovered the AI had misinterpreted an MRI anomaly. The patient had an entirely different condition—one that didn’t require aggressive treatment. A near-miss that could have had serious consequences. As AI becomes more integrated into decision-making, here are three critical principles for responsible implementation: - Set Clear Boundaries Define where AI assistance ends and human decision-making begins. Establish accountability protocols to avoid blind trust. - Build Trust Gradually Start with low-risk implementations. Validate critical AI outputs with human intervention. Track and learn from every near-miss. - Keep Human Oversight AI should support experts, not replace them. Regular audits and feedback loops strengthen both efficiency and safety. At the end of the day, it’s not about choosing AI 𝘰𝘳 human expertise. It’s about building systems where both work together—responsibly. 💬 What’s your take on AI accountability? How are you building trust in it?

🚨 AI Privacy Risks & Mitigations Large Language Models (LLMs), by Isabel Barberá, is the 107-page report about AI & Privacy you were waiting for! [Bookmark & share below]. Topics covered: - Background "This section introduces Large Language Models, how they work, and their common applications. It also discusses performance evaluation measures, helping readers understand the foundational aspects of LLM systems." - Data Flow and Associated Privacy Risks in LLM Systems "Here, we explore how privacy risks emerge across different LLM service models, emphasizing the importance of understanding data flows throughout the AI lifecycle. This section also identifies risks and mitigations and examines roles and responsibilities under the AI Act and the GDPR." - Data Protection and Privacy Risk Assessment: Risk Identification "This section outlines criteria for identifying risks and provides examples of privacy risks specific to LLM systems. Developers and users can use this section as a starting point for identifying risks in their own systems." - Data Protection and Privacy Risk Assessment: Risk Estimation & Evaluation "Guidance on how to analyse, classify and assess privacy risks is provided here, with criteria for evaluating both the probability and severity of risks. This section explains how to derive a final risk evaluation to prioritize mitigation efforts effectively." - Data Protection and Privacy Risk Control "This section details risk treatment strategies, offering practical mitigation measures for common privacy risks in LLM systems. It also discusses residual risk acceptance and the iterative nature of risk management in AI systems." - Residual Risk Evaluation "Evaluating residual risks after mitigation is essential to ensure risks fall within acceptable thresholds and do not require further action. This section outlines how residual risks are evaluated to determine whether additional mitigation is needed or if the model or LLM system is ready for deployment." - Review & Monitor "This section covers the importance of reviewing risk management activities and maintaining a risk register. It also highlights the importance of continuous monitoring to detect emerging risks, assess real-world impact, and refine mitigation strategies." - Examples of LLM Systems’ Risk Assessments "Three detailed use cases are provided to demonstrate the application of the risk management framework in real-world scenarios. These examples illustrate how risks can be identified, assessed, and mitigated across various contexts." - Reference to Tools, Methodologies, Benchmarks, and Guidance "The final section compiles tools, evaluation metrics, benchmarks, methodologies, and standards to support developers and users in managing risks and evaluating the performance of LLM systems." 👉 Download it below. 👉 NEVER MISS my AI governance updates: join my newsletter's 58,500+ subscribers (below). #AI #AIGovernance #Privacy #DataProtection #AIRegulation #EDPB

Three major developments in the last week should have every HR leader, employer, and AI vendor paying attention: 1. The AI Civil Rights Act was reintroduced in the US Congress Led by Senator Ed Markey and Representative Yvette D. Clarke, this legislation places hard guardrails around AI and algorithmic systems used in decisions related to hiring, housing, healthcare and beyond. It demands transparency, bias testing, and accountability. Think of it as GDPR for bias, but with broader implications across HR, tech, and operations. “We will not allow AI to stand for Accelerating Injustice.” – Senator Ed Markey for U.S. Senate 2. California’s new workplace AI discrimination laws are now in effect. The new rule governing companies' use of automated decision-making technology will likely create a situation where companies are liable for hiring practices if a system violates anti-discrimination laws. As other U.S. states also implement laws and regulations containing similar ADMT protections, companies deploying the technology will need to be proactive in their record keeping and vetting of third-parties while auditing their own tools to understand how the software functions. It’s no longer enough to trust your tools and vendors, you must prove they’re fair. 3. Insurers are backing away from covering AI risks AIG, Great American, and WR Berkley are asking regulators to exclude AI-related liabilities from their policies. Why? Because the risks (from chatbots hallucinating to algorithmic bias in hiring) are seen as “too opaque, too unpredictable.” When insurers are pulling cover, it’s a warning sign: you own the risk. 👁 What this means for HR and recruitment business leaders: We’ve officially entered the age of AI Accountability. That means: ✅ You need visibility into how your AI systems work, especially if they’re used for hiring, performance management, or workforce planning. ✅ You must audit your HR tech stack (yes, that includes Workday, ATS platforms, and even AI resume screeners). ✅ You need to document fairness, not just assume it. ✅ You must rethink your contracts with AI vendors. If the tech goes wrong, insurers may not have your back. 🛡 If you haven’t already, it’s time to start building your AI Governance Playbook. 📌 Audit all AI tools in use 📌 Build an internal AI ethics committee 📌 Ensure legal, DEI and HR alignment on tool deployment 📌 Partner only with vendors offering bias mitigation, auditability, and indemnification

Your AI Decisions Are Now Auditable Assets. Because, the EU AI Act is not a distant threat.  It's enforcement is rolling out 𝐟𝐫𝐨𝐦 𝐀𝐮𝐠𝐮𝐬𝐭 𝟐𝟎𝟐𝟔, and it is focused on high-risk systems across:  Credit scoring Hiring Medical diagnostics Safety-critical alerts. Everything you deploy now needs to be 𝐭𝐫𝐚𝐜𝐞𝐚𝐛𝐥𝐞 𝐚𝐧𝐝 𝐞𝐱𝐩𝐥𝐚𝐢𝐧𝐚𝐛𝐥𝐞.  Regulators, auditors, and even internal governance teams will ask:  Why was this decision made? Who approved it? What data and model were used? Your full decision history such as inputs, transformations, model versions, confidence scores, human interventions will be scrutinised. If you cannot produce this, you are not just exposed to fines, you are eroding trust in AI itself. These are some implications are emerging now with the regulation: 𝟏. 𝐓𝐫𝐚𝐜𝐞𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐢𝐬 𝐫𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐫𝐞𝐚𝐥𝐢𝐭𝐲.  High‑risk AI deployments must document inputs, models, validations, updates, and decision trails. And be ready for inspection by supervisory authorities. 𝟐. 𝐄𝐱𝐩𝐥𝐚𝐢𝐧𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐢𝐬 𝐛𝐞𝐜𝐨𝐦𝐢𝐧𝐠 𝐚 𝐟𝐨𝐫𝐦𝐚𝐥 𝐞𝐱𝐩𝐞𝐜𝐭𝐚𝐭𝐢𝐨𝐧.  Where AI affects individual rights or outcomes, organisations will have to provide meaningful explanations of decisions when requested. 𝟑. 𝐆𝐨𝐯𝐞𝐫𝐧𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐥𝐨𝐧𝐠𝐞𝐫 𝐚 𝐜𝐡𝐞𝐜𝐤𝐛𝐨𝐱.  The Act requires quality and risk‑management systems around AI that persist across deployments, not just at launch. While companies debate models and vendors, the clock is already ticking.  Your AI outputs are no longer ephemeral. They are corporate assets and they will be audited. Organisations that embed 𝐠𝐨𝐯𝐞𝐫𝐧𝐚𝐧𝐜𝐞, 𝐯𝐞𝐫𝐬𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐫𝐨𝐥, 𝐬𝐞𝐦𝐚𝐧𝐭𝐢𝐜 𝐜𝐥𝐚𝐫𝐢𝐭𝐲, 𝐚𝐧𝐝 𝐚𝐮𝐝𝐢𝐭-𝐫𝐞𝐚𝐝𝐲 𝐩𝐫𝐨𝐜𝐞𝐬𝐬𝐞𝐬 from the start will use AI defensibly. This is the shift that separates risky experimentation from enterprise-grade intelligence. Because by 2026, it won’t be a hypothetical question. It will be a requirement. Curious to hear, if someone walked in today and asked you to reconstruct a production AI decision from last year, could your team do it confidently? #AIRegulation #AIGovernance #ResponsibleAI #AICompliance #EnterpriseAI #ExplainableAI

AI agents are not yet safe for unsupervised use in enterprise environments The German Federal Office for Information Security (BSI) and France’s ANSSI have just released updated guidance on the secure integration of Large Language Models (LLMs). Their key message? Fully autonomous AI systems without human oversight are a security risk and should be avoided. As LLMs evolve into agentic systems capable of autonomous decision-making, the risks grow exponentially. From Prompt Injection attacks to unauthorized data access, the threats are real and increasingly sophisticated. The updated framework introduces Zero Trust principles tailored for LLMs: 1) No implicit trust: every interaction must be verified. 2) Strict authentication & least privilege access – even internal components must earn their permissions. 3) Continuous monitoring – not just outputs, but inputs must be validated and sanitized. 4) Sandboxing & session isolation – to prevent cross-session data leaks and persistent attacks. 5) Human-in-the-loop, i.e., critical decisions must remain under human control. Whether you're deploying chatbots, AI agents, or multimodal LLMs, this guidance is a must-read. It’s not just about compliance but about building trustworthy AI that respects privacy, integrity, and security. Bottom line: AI agents are not yet safe for unsupervised use in enterprise environments. If you're working with LLMs, it's time to rethink your architecture.