The Death of The Middle: How the Internet and Abundance Reshape Industries

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Aug 04, 2023

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The Death of The Middle: How the Internet and Abundance Reshape Industries

In today's digital age, the internet has reshaped industries in a way that fits a barbell distribution curve, leading to what some call "the death of the middle." This phenomenon can be seen in various aspects of our lives, from consumer preferences to business strategies.

The internet has given people access to a vast array of options and information, leading to a shift in our preferences. Rather than settling for moderate options in the case of scarcity, people now gravitate towards either highly niche offerings or mass-market products. This can be observed in the prominence of platforms like Substack, where highly niche bloggers thrive alongside mass-market content creators.

The rise of the internet has changed the game for consumers. We now have the ability to choose exactly what we want or opt for the most convenient and consistent option. The middle ground, where products and services used to cater to a broader audience, is now being left behind. Consumers are no longer satisfied with anything that falls short of their exact desires.

Interestingly, the removal of friction in the digital space doesn't necessarily level the playing field. Instead, it leads to a polarization of choices. More people are inclined to choose hyper-targeted options or default to the most convenient and consistent ones. This phenomenon creates winner-take-all effects, where a few options dominate the market, while others struggle to gain traction.

To thrive in this new landscape, businesses must adapt to the changing preferences of internet consumers. Offering a middle-of-the-road product or service is no longer sufficient. Instead, companies must strive to be as differentiated as possible, serving customers exactly what they want. The winners in this new paradigm are those that embrace the power law, allowing the winners to pick them.

For startups, being in the middle can be challenging. While it's possible to find customers, it's difficult to gain pricing power over industry giants or outrun numerous competitors. Startups must aim to either disrupt the market with a highly differentiated offering or find ways to complement existing incumbents by adding AI or other advanced technologies.

Moving on to the topic of AI revolution and large language models (LLMs), we see how sequential inventions and discoveries have paved the way for transformative technologies. The emergence of Transformer models, invented at Google and implemented at OpenAI, has revolutionized natural language processing (NLP). These models, such as GPT-3, have the potential to reshape industries in the next five years.

In the realm of AI, we can expect three types of companies to emerge: platforms and infrastructure providers, stand-alone de-novo applications, and tech-enabled incumbents. Platforms and infrastructure providers will focus on building the foundation for AI applications. Stand-alone applications will leverage advanced machine learning breakthroughs to create innovative solutions. Tech-enabled incumbents will enhance their existing products by incorporating AI capabilities.

The potential applications of LLMs are vast. They hold promise in areas such as sales and marketing tools, consumer applications, doctor and lawyer assistants, and even ERP disruption. LLMs can revolutionize the way we search, create content, and interact with various industries. However, the success of these applications will depend on striking the right balance between scientific breakthroughs and engineering advancements.

As the AI field evolves, there is a need for better tooling, software stacks, and interconnects to maximize the performance of AI systems. Startups in the silicon space for ML must emphasize software development and interconnectivity to compete effectively. While raw performance is crucial, a strong software stack can make AI systems more accessible and user-friendly.

Looking into the future, the advancements in AI and LLMs raise interesting questions about consciousness and the potential for sentient digital lifeforms. As AI models become more advanced, there is a possibility of them achieving sentience. This raises ethical questions about the treatment of these digital beings and their potential to compete with humanity.

In conclusion, the internet and the rise of advanced technologies like AI and LLMs have reshaped industries and consumer preferences. The death of the middle has led to a polarization of choices, where consumers either want highly specific offerings or convenient and consistent options. To thrive in this new landscape, businesses must embrace differentiation and the power law. Additionally, the AI revolution presents opportunities for startups and incumbents alike, with the potential to transform various industries. However, it is crucial to strike the right balance between scientific advancements and engineering to fully unlock the potential of AI.

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