AI in 2023: The Application Layer Has Arrived

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Aug 15, 2023
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AI in 2023: The Application Layer Has Arrived
The world we live in today has dramatically changed over the past century, yet our brains remain the same. However, with the solidification of the platform layer and the emergence of the application layer, artificial intelligence (AI) has become one of the most compelling forces in technology. In the coming years, we can expect AI applications to become even more advanced, providing us with personalized experiences and revolutionizing various industries.
Two primary forces have driven technology in the past decade: mobile and cloud. Mobile technology facilitated the rise of large consumer internet companies, and cloud technology enabled the explosion of software-as-a-service (SaaS) and the value of data. However, AI is expected to surpass these forces in the 2020s.
One exciting aspect of AI is its ability to replicate personalized experiences at scale. For example, the shopping app SHEIN uses AI to analyze competitor websites and Google Trends to determine the latest fashion trends. It then quickly designs its own products, forecasts demand, and adjusts inventory in real-time. This showcases the potential for AI to provide a 1-on-1 experience to millions of users.
Another interesting observation is that people tend to prefer richer media formats. Instagram, primarily focused on photos, has always been more popular than text-based platforms like Twitter. TikTok, primarily focused on videos, has been gaining popularity and challenging Instagram. This preference for richer media formats is expected to continue with generative AI, where images will be prioritized over text, followed by video, and eventually immersive 3D experiences.
Advancements in AI models have led to significant improvements in quality. For instance, Stable Diffusion has moved diffusion from the pixel space to the latent space, resulting in a profound increase in the quality of image models. However, training larger models with hundreds of billions of parameters can be extremely expensive. Nonetheless, companies like OpenAI, Hugging Face, and Stability.ai have provided valuable infrastructure for generative AI.
AI has the potential to revolutionize both creativity and productivity. It has lowered the barriers to content creation, as seen with platforms like TikTok, where a majority of users actively create content. Industries involving human creation will be greatly impacted by AI, and companies will need to find ways to stay ahead of the competition and build competitive moats.
SaaS companies are expected to thrive in the AI landscape. With predictable recurring revenue, high gross margins, and net dollar retention, SaaS companies can leverage AI to enhance their offerings. However, the challenge lies in building defensibility and developing moats to differentiate themselves from competitors.
One innovative company in the AI space is PromptBase, which operates as a marketplace for text-to-image prompts. It sells access to highly-specific prompts that result in stunning AI-generated art. This highlights the growing market for AI-driven creativity.
When a technology transforms the production of a broad range of goods or services, it is considered a "general-purpose technology." The Agricultural Revolution, the Industrial Revolution, and the onset of the internet are examples of such technologies. Transformative AI is poised to be the next general-purpose technology, revolutionizing various industries and shaping the future.
In conclusion, AI has reached a critical point in its development, with the application layer taking center stage. The potential for personalized experiences, advancements in generative AI, and the impact on creativity and productivity make AI a force to be reckoned with. As we navigate the AI landscape, it is crucial for companies to stay ahead of the competition, leverage SaaS models, and build defensibility to thrive in this transformative era of technology.
Three actionable advice:
- 1. Embrace AI in your business: Assess how AI can enhance your products or services and explore partnerships with AI-driven companies.
- 2. Stay ahead of the curve: Continuously monitor advancements in AI technology and be prepared to adapt and innovate in response to changing trends.
- 3. Foster a culture of creativity and productivity: Encourage employees to embrace AI as a tool to amplify their creative abilities and increase productivity in their daily work.
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