AI: Startup Vs Incumbent Value - Learning how to learn

AI: Startup Vs Incumbent Value - Learning how to learn

In the world of technology and innovation, there is a constant battle between startups and incumbents to capture the most value from emerging trends. One such trend is the rise of artificial intelligence (AI), which has seen a significant shift in value distribution from startups to incumbents.

Looking back at previous waves of technological advancements, we can see a pattern emerge. During the first internet wave, the majority of value went to startups such as Google, Amazon, and Facebook, while some incumbents like Microsoft and IBM managed to extend their franchises onto the internet. This resulted in a 60:40 or 70:30 split between startups and incumbents.

Similarly, in the mobile space, most of the value went to incumbents like Apple and Google, with startups like WhatsApp and Uber also capturing a significant share. The split here was more skewed towards incumbents, with a 20:80 ratio of startup to incumbent value capture.

However, when it comes to the crypto industry, we see a completely different story. Here, almost 100% of the value creation has been captured by startups such as Bitcoin, Ethereum, and Coinbase, with existing financial services and infrastructure companies playing a minimal role. This shows that incumbents have struggled to keep up with the disruptive nature of crypto technology.

So, why have incumbents been more successful in capturing value from AI compared to startups? One possible explanation is the data advantage that incumbents have had. They have been able to leverage their vast amounts of data and existing customer base to develop AI applications that resonate with users. However, this advantage may be diminishing as startups gain access to broader internet data and develop models that work effectively with smaller datasets.

To overcome the advantage of incumbents, startups need to either build something dramatically better or focus on a new customer segment or distribution moat that the incumbents cannot serve. In other words, they need a 10X better product. This is where the current wave of AI technology comes into play.

Unlike previous waves, the current AI technology wave is characterized by its speed of innovation and the potential to create 10X better products. While GPT-3, a state-of-the-art language model, has not yet seen widespread adoption by startups, a future model that is 5-10X better could create a whole new startup ecosystem while also enhancing incumbent products.

What sets this wave apart from previous ones is the presence of infrastructure-centric companies that are driving broad adoption and rapid usage growth. These companies, such as OpenAI, Stability.AI, Hugging Face, and Weights and Biases, provide startups with access to the necessary technologies and create more opportunities within the ecosystem.

In addition to technology advancements, it is also important for startups to understand the key principles of effective learning. Learning how to learn is a crucial skill that can help individuals and organizations stay ahead in the rapidly evolving world of AI.

One aspect of effective learning is understanding how the brain works. The brain operates in two modes: focused and diffused. The focused mode involves sustained attention on a specific task, while the diffused mode allows the mind to wander and make new connections. Both modes are essential for learning and problem-solving.

Another important principle is to forget about your learning style. While many students believe that their learning style influences their performance, recent research suggests otherwise. It is more important to use learning strategies that maximize recall, such as spacing out study sessions, testing oneself, and experiencing the content in multiple ways.

Lastly, it is crucial to embrace the process of learning. Learning is not a one-time project with a defined beginning and end. It is a continuous journey that requires dedication and perseverance. By falling in love with the process and trusting in it, individuals and startups can go from good to great.

In conclusion, the distribution of value in AI has historically favored incumbents over startups. However, the current wave of AI technology presents an opportunity for startups to capture a larger share of the value. By leveraging advancements in AI and adopting effective learning strategies, startups can overcome incumbent advantages and thrive in this rapidly evolving landscape.

Actionable advice:

• 1. Embrace the process of learning and understand the principles of effective learning. This will help you stay ahead in the AI industry.

• 2. Take advantage of infrastructure-centric companies that provide access to AI technologies. This will create more opportunities for startups.

• 3. Focus on actual end user needs and unserved markets. By identifying these, you can develop products that truly benefit from the exciting technology of AI.