Why Starting a Business Around GPT-3 is a Bad Idea and Why Clubhouse Failed in Japan

Glasp

Glasp

Jul 05, 2023 • 4 min read

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Why Starting a Business Around GPT-3 is a Bad Idea and Why Clubhouse Failed in Japan

In recent times, there has been a lot of hype around technologies like GPT-3 and platforms like Clubhouse. These innovations have garnered attention for their potential to revolutionize industries and create new business opportunities. However, it is important to critically analyze the viability and sustainability of building a business solely around these technologies.

Starting with GPT-3, there are several reasons why building a business solely around this technology may not be a wise decision. Firstly, the ease of adoption and low barriers to entry mean that competition will be fierce. If GPT-3 is easy to use and build products with, incumbents in the market will also adopt it, making it harder for any single company to differentiate itself. This is especially true since most products built on GPT-3 are likely to be identical to each other, lacking any meaningful edge.

Moreover, the fact that companies don't own the core technology behind GPT-3 limits their ability to improve beyond the baseline performance. Any proprietary progress made on GPT-3 is likely to be wiped out by future iterations like GPT-4 and GPT-5. This continuous cycle of technological advancements makes it challenging for businesses to establish a sustainable competitive advantage.

While the algorithm itself is not the only factor that determines a product's success, the ability to improve on the base algorithm experience in a proprietary way is limited with GPT-3. This makes it difficult for businesses to reach the sweet spot of the improvement curve and requires substantial investment to achieve meaningful differentiation.

Furthermore, the financial aspect of building a business around GPT-3 adds another layer of complexity. While the beta API may be free, OpenAI will eventually start charging for API access. This means that as a business gains more users and usage increases, the cost of using GPT-3 will also increase. This cost structure is more akin to a Spotify model rather than an Amazon model, further impacting the business's profitability and scalability.

Moving on to the case of Clubhouse, we can draw insights from its failure in Japan. Despite being successful in the United States, Clubhouse failed to gain traction in Japan. One of the reasons for this is the existence of a robust podcasting ecosystem in the country. Prior to the rise of Clubhouse, Japan had already developed a thriving podcasting culture, with high-quality programs and a platform for amateurs to share their content.

The difference in the cultural and lifestyle preferences of the conservative rural population and the urban mini-real generation played a role in the success of podcasting over Clubhouse in Japan. The ability to create valuable content by professionals and the platform for amateurs to express themselves made podcasting a preferred choice for reaching the urban population.

The failure of Clubhouse in Japan highlights the importance of understanding the existing ecosystem and user preferences within a specific market. It serves as a reminder that even innovative products can face challenges when entering a market that already has established alternatives.

Taking these insights into consideration, here are three actionable pieces of advice for entrepreneurs:

  • 1. Focus on differentiation: Instead of solely relying on a technology or platform, invest in building a unique value proposition for your business. Consider factors like user experience, product design, customer support, and additional human services to differentiate yourself from the competition.
  • 2. Diversify your offerings: Rather than solely relying on one technology or platform, explore multiple avenues for innovation and business growth. This will help mitigate the risks associated with relying on a single product or service.
  • 3. Understand the market dynamics: Before entering a market, thoroughly research and analyze the existing ecosystem, user preferences, and potential competition. This will enable you to make informed decisions and tailor your offerings to meet the specific needs of your target audience.

In conclusion, while technologies like GPT-3 and platforms like Clubhouse offer exciting possibilities, it is essential to approach them with a critical lens. Building a business solely around these innovations may not be the most sustainable or profitable strategy. By understanding the limitations, market dynamics, and opportunities for differentiation, entrepreneurs can make informed decisions and navigate the ever-evolving landscape of technological advancements.

Resource:

  1. "Starting a Business Around GPT-3 is a Bad Idea - Allen Cheng", https://www.allencheng.com/starting-a-business-around-gpt-3-is-a-bad-idea/ (Glasp)
  2. "日本で早くも飽きられたClubhouseが、米国では根強く残ると言い切れる理由", https://blogos.com/article/523366/?p=2 (Glasp)

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