An AI agent acting as a city manager can significantly increase profits by micromanaging operations and improving all key performance indicators.
Kavak tested an AI 'CEO' for a city, achieving a 50% profit increase by micromanaging daily operations and improving customer satisfaction and inventory rotation. ✦ AI generated
Ali Massa · a16z Podcast · 2026-08-10 · original ↗
starts at this moment · 16:13
“What is like what is an example of maybe a hard to design area for Evals or one where you had to spend extra amount of time?”
So when we decided to to to to redesign the company around the AI you ask the question, okay, is is AI going to be able to do this job, like even the CEO job or or jobs where the leadership is? And the answer honestly is probably yes, like in 2035 with a rate of improvement, it will be able to do so. We said, okay, let's let's try it now. Let's try and build an AI CEO. So we carved out a city in Mexico, it's it's Cuernavaca, and we put like an agent in one of our harnesses as a CEO and it starts learning and it starts making decisions and evaluating on those decisions. And it's only been running for for 6 weeks now. The goal of the first month was to double the the the profits of of Cuernavaca. It didn't reach it, but it was 1.5x, like 50% more profits. Just like managing the the city, which is it's crazy, right? It's it's amazing and and it's it's a CEO, like people were like that was the last job AI was supposed to stick, and no, it isn't, really. And how did this happen? And and it's like very smart person, like like Fields Medal level smart, like going into every single number, every single customer, making the perfect forecast, and going to micromanage every single things that needs to be executed every day to reach a plan. So, customer satisfaction grew, we got a better inventory, we rotated better, better financing penetration, like every KPI started to to improve.
verbatim transcript · starts at 16:13
16:13you ask the question, okay, is is AI going to be able to do this job, like even the CEO job or or jobs where the leadership is? And the answer honestly is probably yes, like in 2035 with a rate of improvement, it will be able to do so. We said, okay, let's let's try it now. Let's try and build an AI CEO. So we carved out a city in Mexico, it's
16:38it's Cuernavaca, and we put like an agent in one of our harnesses as a CEO and it starts learning and it starts making decisions and evaluating on those decisions. And it's only been running for for 6 weeks now. The goal of the first month was to double the the the profits of of Cuernavaca. It didn't reach it, but it was 1.5x, like 50% more profits. Just like
17:05managing the the city, which is it's crazy, right? It's it's amazing and and it's it's a CEO, like people were like that was the last job AI was supposed to stick, and no, it isn't, really. And how did this happen? And and it's like uh very smart person, like like Fields Medal level smart, like going into every single number, every single customer, making the perfect forecast, and going
17:34to micromanage every single things that needs to be executed every day to reach a plan. So, he'll literally send messages to all the physical workers in in Cuernavaca with their plans for the day and ask them to send voice notes back to to know their their progress. So, customer satisfaction grew, uh we got a better inventory, we rotated better, better financing penetration, like every KPI started to to improve.
18:04Um so, it's super cool, it's super exciting. Now, what are the jobs where where we think uh we're still like training and hiring humans. Those are related to the physical world. So, when we talk about mechanics, Kavak has around I think in Mexico around 800 uh mechanics. There's lots of dexterity and and senses that's super hard to substitute. So, there we also build this agents with exact same harness that's
18:33scaling. And the the mechanics have the psychic. Um I was telling you guys earlier, it's like the the movie Ratatouille, like the the mouse that's actually a chef collaborating with a with a human. It's kind of like that. So, it's a psychic, we call it El Mike, and it tells them how to inspect a car and gives them tips and and shows them the way to to do it, and