"AI: The Shift in Value Distribution and the Role of Composable Membership in Web3"

"AI: The Shift in Value Distribution and the Role of Composable Membership in Web3"

Introduction:

The distribution of value in the AI industry has seen a significant shift over the years, with incumbents capturing the majority of the value in previous waves. However, the current wave of AI innovation is showing signs of a different trend, where startups are poised to take a larger share of the value generated. This article explores the reasons behind this shift and the role of composable membership in the Web3 era.

The Dominance of Incumbents in Previous Waves:

Looking back at the first wave of the internet, we witnessed the majority of the value being captured by startups such as Google, Amazon, and Facebook. While incumbents like Microsoft and Apple also extended their franchises onto the internet, the split was roughly 60:40 or 70:30 in favor of startups. Similarly, in the mobile era, incumbents like Apple and Google dominated, but startups like WhatsApp and Uber still managed to capture a significant portion of the value. The split here was around 20:80 in favor of incumbents.

The Crypto Revolution and Startup Capture:

In stark contrast, the rise of cryptocurrencies has seen startups capturing almost 100% of the value created. Bitcoin, Ethereum, Coinbase, and other crypto companies have thrived, while existing financial services and infrastructure firms have played a minimal role in value creation. This trend highlights the potential for startups to disrupt established industries and create entirely new markets in the realm of AI.

Challenges in Beating Incumbents:

To overcome the advantages of incumbents, startups usually need to offer a product that is at least 10 times better. This could mean building something dramatically superior or targeting a new customer segment or distribution moat that incumbents cannot cater to. However, one possible reason for incumbents' success is their data advantage, which may now be diminishing as startups leverage the broader internet as an initial training set and adopt models that work efficiently with smaller datasets.

The Role of Composable Membership in Web3:

In the Web3 era, composable membership plays a crucial role in generating social capital within communities. While having a token brings a community together financially, composable membership strengthens the bonds through social capital. It allows for access, discovery, permissions, responsibility, and status weight within a community. Unlike in Web2, where membership forms around services, Web3 sees services forming around membership.

The Importance of Actual End User Needs:

Amidst the excitement of technological advancements, it is crucial to focus on addressing actual end user needs. Identifying unserved markets and understanding the requirements of the target audience will be vital in leveraging the possibilities offered by AI. By prioritizing user needs, startups can ensure that their products align with the demands of the market and stand out in a sea of innovative technologies.

Actionable Advice:

• 1. Build a 10X Better Product: To compete with incumbents, startups must aim to create products that are significantly superior in terms of value proposition, user experience, or efficiency. This requires relentless innovation and a deep understanding of customer pain points.

• 2. Embrace Composable Membership: In the Web3 era, leveraging composable membership can help startups foster a sense of community, trust, and ownership among users. By focusing on social capital, startups can create long-term engagement and loyalty.

• 3. Prioritize User Needs: Instead of searching for problems to solve with AI, startups should identify actual end user needs and develop solutions that cater to those needs. Understanding the market and user requirements will be crucial in generating value from AI.

Conclusion:

The AI industry is experiencing a shift in the distribution of value, with startups poised to capture a larger share in the current wave of innovation. This shift can be attributed to advancements in technology, the rise of composable membership in Web3, and the focus on addressing actual end user needs. By building 10X better products, leveraging composable membership, and prioritizing user requirements, startups can position themselves for success in the evolving AI landscape. Exciting times lie ahead for startups as they finally begin to unlock the true value of AI.