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How's that different from any other tech startup? Tech and software have always been a commodity. Twitter is barely more than a CRUD. You always had to build y

How's that different from any other tech startup? Tech and software have always been a commodity. Twitter is barely more than a CRUD. You always had to build your moat, i.e. network effect or data. The only difference is whereas we used to do "tech" with "algorithms" now replace that word with "AI", and it works a lot better. Seriously, replace all instances of "AI" with "algorithms" in this article and it could've been written 20 years ago. IMO very empty virtue signaling article.

Mistletoe 3y ago
Well I can't build a Twitter on my own PC (need other users) like I assume I can in a few years with LLMs you run locally. AI is more general purpose and can do lots or all of the things the algorithms could do before and I needed specialization for. Not only that, but Microsoft and the big players are going to make an AI that is better integrated and more advanced than any startup could for my purposes.
SoftTalker 3y ago
Twitter, Facebook, other social media have social lock-in. You use it because your friends use it, and then their friends use it, and so on. And you don't use anything else because your friends are not on those platforms. The moat is deep. For AI stuff, is there anything like that? Why do I care if it's ChatGPT or some other AI writing my paper or my code or whatever else people do with these. The AI is (at least somewhat) fungible.
- deleted 3y ago
  [deleted]
- coffeemug 3y ago
  For the same reason you go to google.com instead of bing.com.
  - SoftTalker 3y ago
    I used Google when it was better than AltaVista. I use Duck Duck Go now. Google is pretty bad these days.
j-wang 3y ago
Good point—that is the point. When there's a hype cycle, people often check their normal business sense at the door in terms of customers, value generation, and defensibility. Are there any of these? No, but it's crypto. Or now AI. I do go somewhat beyond that in pointing out exactly why most of these startups don't have defensibility. Perhaps for some people it doesn't need to be said, but back when I wrote this... and now... the market seems to suggest that it isn't that obvious.
lemmsjid 3y ago
I think you're really re-stating his case, which is interesting because you then call it 'empty virtue signaling'. He's applying a standard analytical lens to AI startups, e.g. looking for their moats through finding differentiators in economics, data, scalability, etc. He finds that "doing AI" is not a stable enough differentiator to compel him as a VC. He then lays out his reasons. There are plenty of startups selling themselves on their AI platform and/or acumen, so it's rather automatically relevant to a VC at least.
- JumpCrisscross 3y ago
  > finds that "doing AI" is not a stable enough differentiator to compel him as a VC This is a better thesis than the article's. Uber for X / AI for Y is not a valid pitch. But the article goes further. It surmises the only two valid moats are a capital advantage (compute) or intellectual property (data). These are the most trivially-verifiable moats for a third party. Which makes sense for a VC to prioritise them. But they're far from the dominant mode of differentiation. Plenty of "AI" start-ups will do well because they found a niche, had the right team to sell to it, and developed quickly enough to keep customers hooked. They won't win because of AI per se. But they won't lose for lack of access to more compute or special data either.
  - danielmarkbruce 3y ago
    Exactly. Scale, stickiness and getting the details right via focus are all things. The author seems to be misguided - no one is really suggesting AI is a way to win. It's a value prop thing, not a competitive thing. SaaS was a value prop thing, not a competitive thing. Mobile was a value prop thing, not a competitive thing. WWW was a value prop thing, not a competitive thing.
- VirusNewbie 3y ago
  If we replace all instances of AI with SaaS, his point still stands. However, many VCs aren't looking for a moat when they invest in Saas, they're looking for a good product with good founders and a good team. IF you're only looking for moats, you're going to be a bad VC.
metabagel 3y ago
What on earth is virtue signaling, and how did it get into this discussion?
- xanderlewis 3y ago
  It’s when people say things they think will increase their social status, regardless of whether it’s truly helpful to do so or whether or not they even believe it. I have no idea how it relates to this discussion.
xanderlewis 3y ago
I don’t necessarily disagree, but replacing ‘AI’ with ‘algorithms’ seems a bit suspect (not least because one is a subset of the other). It seems unlikely anyone would have imagined even twenty years ago that there wasn’t room for a multitude of startups developing their own algorithms, because even today that’s the case. Current ‘AI’ itself virtually is (built on) a single example of an an algorithm, which is why on the surface there seems to be far less scope for differentiation. There’s room for genuinely new architectures and techniques, but that’s not what most of these ‘AI startups’ are offering (even if they pretend otherwise).
jtriangle 3y ago
They're not any different than any other startup. It's difficult to get a business off the ground, profoundly so. Most of that difficulty is in management, not the actual product. You can have a very middling product, raise capital well, hire the right personnel, scale out at the right time, spend money where it's needed and avoid spending money where it's not, and find yourself very, very successful before long. The opposite is also true, you can have something that is in earnest revolutionary, and fumble it to the point you're left with nothing, you could also just fail your luck roll and be left with nothing, many many more paths to failure than there are paths to success. That's why most fail, it's simply more likely. The important thing to remember is, you don't just get one roll at it. You can try as many times as you have time to do so. Most of the wildly successful people I know were wildly unsuccessful before they were wildly successful. The ones that hit it off the hop had more money up front to brute force things into success which ultimately works out to them just being able to finance their failures, not that they were without failure because of their starting position. But yeah, this article is basically just pulp.

Mistletoe 3y ago

Well I can't build a Twitter on my own PC (need other users) like I assume I can in a few years with LLMs you run locally. AI is more general purpose and can do lots or all of the things the algorithms could do before and I needed specialization for. Not only that, but Microsoft and the big players are going to make an AI that is better integrated and more advanced than any startup could for my purposes.

SoftTalker 3y ago

Twitter, Facebook, other social media have social lock-in. You use it because your friends use it, and then their friends use it, and so on. And you don't use anything else because your friends are not on those platforms. The moat is deep. For AI stuff, is there anything like that? Why do I care if it's ChatGPT or some other AI writing my paper or my code or whatever else people do with these. The AI is (at least somewhat) fungible.

deleted 3y ago
[deleted]
coffeemug 3y ago
For the same reason you go to google.com instead of bing.com.
- SoftTalker 3y ago
  I used Google when it was better than AltaVista. I use Duck Duck Go now. Google is pretty bad these days.

j-wang 3y ago

Good point—that is the point. When there's a hype cycle, people often check their normal business sense at the door in terms of customers, value generation, and defensibility. Are there any of these? No, but it's crypto. Or now AI. I do go somewhat beyond that in pointing out exactly why most of these startups don't have defensibility. Perhaps for some people it doesn't need to be said, but back when I wrote this... and now... the market seems to suggest that it isn't that obvious.

lemmsjid 3y ago

I think you're really re-stating his case, which is interesting because you then call it 'empty virtue signaling'. He's applying a standard analytical lens to AI startups, e.g. looking for their moats through finding differentiators in economics, data, scalability, etc. He finds that "doing AI" is not a stable enough differentiator to compel him as a VC. He then lays out his reasons. There are plenty of startups selling themselves on their AI platform and/or acumen, so it's rather automatically relevant to a VC at least.

JumpCrisscross 3y ago
> finds that "doing AI" is not a stable enough differentiator to compel him as a VC This is a better thesis than the article's. Uber for X / AI for Y is not a valid pitch. But the article goes further. It surmises the only two valid moats are a capital advantage (compute) or intellectual property (data). These are the most trivially-verifiable moats for a third party. Which makes sense for a VC to prioritise them. But they're far from the dominant mode of differentiation. Plenty of "AI" start-ups will do well because they found a niche, had the right team to sell to it, and developed quickly enough to keep customers hooked. They won't win because of AI per se. But they won't lose for lack of access to more compute or special data either.
- danielmarkbruce 3y ago
  Exactly. Scale, stickiness and getting the details right via focus are all things. The author seems to be misguided - no one is really suggesting AI is a way to win. It's a value prop thing, not a competitive thing. SaaS was a value prop thing, not a competitive thing. Mobile was a value prop thing, not a competitive thing. WWW was a value prop thing, not a competitive thing.
VirusNewbie 3y ago
If we replace all instances of AI with SaaS, his point still stands. However, many VCs aren't looking for a moat when they invest in Saas, they're looking for a good product with good founders and a good team. IF you're only looking for moats, you're going to be a bad VC.

metabagel 3y ago

What on earth is virtue signaling, and how did it get into this discussion?

xanderlewis 3y ago
It’s when people say things they think will increase their social status, regardless of whether it’s truly helpful to do so or whether or not they even believe it. I have no idea how it relates to this discussion.

xanderlewis 3y ago

I don’t necessarily disagree, but replacing ‘AI’ with ‘algorithms’ seems a bit suspect (not least because one is a subset of the other). It seems unlikely anyone would have imagined even twenty years ago that there wasn’t room for a multitude of startups developing their own algorithms, because even today that’s the case. Current ‘AI’ itself virtually is (built on) a single example of an an algorithm, which is why on the surface there seems to be far less scope for differentiation. There’s room for genuinely new architectures and techniques, but that’s not what most of these ‘AI startups’ are offering (even if they pretend otherwise).

jtriangle 3y ago

They're not any different than any other startup. It's difficult to get a business off the ground, profoundly so. Most of that difficulty is in management, not the actual product. You can have a very middling product, raise capital well, hire the right personnel, scale out at the right time, spend money where it's needed and avoid spending money where it's not, and find yourself very, very successful before long. The opposite is also true, you can have something that is in earnest revolutionary, and fumble it to the point you're left with nothing, you could also just fail your luck roll and be left with nothing, many many more paths to failure than there are paths to success. That's why most fail, it's simply more likely. The important thing to remember is, you don't just get one roll at it. You can try as many times as you have time to do so. Most of the wildly successful people I know were wildly unsuccessful before they were wildly successful. The ones that hit it off the hop had more money up front to brute force things into success which ultimately works out to them just being able to finance their failures, not that they were without failure because of their starting position. But yeah, this article is basically just pulp.