10 ms·

This rings true to my ears: > There is no technical moat in this field, and so OpenAI is the epicenter of an investment bubble. Thus, effectively, OpenAI is to

by cs702 2y ago

This rings true to my ears: > There is no technical moat in this field, and so OpenAI is the epicenter of an investment bubble. Thus, effectively, OpenAI is to this decade’s generative-AI revolution what Netscape was to the 1990s’ internet revolution. The revolution is real, but it’s ultimately going to be a commodity technology layer, not the foundation of a defensible proprietary moat. In 1995 investors mistakenly thought investing in Netscape was a way to bet on the future of the open internet and the World Wide Web in particular. OpenAI has a short-ish window of opportunity to figure out how to build a moat. "Trying to spend more" is not a moat, because the largest US and Chinese tech companies can always outspend OpenAI. The clock is ticking.

neals 2y ago
I get the moat idea. But are there really any moats? What's a good moat these days anyway? Isn't being first and "really good" fine as well?
- kridsdale1 2y ago
  Network effects are a moat. A vertically integrated system that people depend on with non-portable integrations is a moat. Regulatory Capture is a moat.
  - trhway 2y ago
    What is the moat of the Google Search? To me the LLM is the first and the only disruptor so far of the Search.
    - andrewflnr 2y ago
      It used to be their high search quality, difficult to replicate technology. Now they don't have one.
      - asadotzler 2y ago
        Their moat is lock-in across services now. People are "Google" users not just "web search" users.
      - deleted 2y ago
        [deleted]
      - mcphage 2y ago
        Well, Google’s willingness to pay potential competitors tens of billions of dollars per year to disincentivize developing a competing search engine is kind of a moat.
    - brookst 2y ago
      Google’s moat is eroding (filling?), but over the years it shifted from best product/tech to best brand.
      - Ekaros 2y ago
        Google is still good enough for most searches. Say finding web page of restaurant or some cursory information on popular topic. I suppose competitor would have to be really good on those times most users need something better. So it is the brand and familiarity. It would need to get really bad even on most basic things to be replaced.
    - discordance 2y ago
      muscle memory
- ninth_ant 2y ago
  The Network effect, and cultural mind share are two pretty effective moats. Meta and X proven surprisingly resilient in the face of pretty overwhelming negative sentiment. Google maintains monopoly status on Web Search and in Browsers despite not being remarkably better than competition. Microsoft remains overwhelmingly dominant in the OS market despite having a deeply flawed product. Amazon sells well despite a proliferation of fake reviews and products. Netflix thrives even while cutting back sharply on product quality. Valve has a near-stranglehold on PC games distribution despite their tech stack being trivially replicable. The list goes on.
  - skydhash 2y ago
    Almost all of these are either free or a marketplace (which is free to access). Only Windows is technically not free, but it comes free with the hardware you buy. And they came at a time when there was not a real competition. It's very hard to beat a free product.
    - cloverich 2y ago
      Good point. Thinking... Facebook's infrastructure is enormously expensive to run. But they manage that for free. And chatgpt can place ads as easily as google. So openai needs to make it cheap to run, then ads, then victory. People citing their current high prices would be right. But human brains are smarter than chatgpt, and vastly more energy efficient. So we know it's possible. Does this oversimplify?
  - nemomarx 2y ago
    To be fair despite Valve's tech stack being easy to replicate, their actual competition mostly hasn't replicated their feature set in full? Epic took a while to ramp up to "shopping carts" despite having a pretty large funding model, still doesn't have little gimmicks like trading cards and chat stickers, w/e. That's not really moat but it seems like the competition doesn't want to invest to exact parity. (And a lot of stores like Ubisofts or EA's were very feature lite tbh.)
    - 2y ago
- GolfPopper 2y ago
  Here's an idea for a moat: "You know all the ethically extremely questionable grabbing of personal data and creative work we did to build our LLM? Yeah, that's illegal now. For anyone else to do, that is."
- otterley 2y ago
  Copyright is an outstanding moat. Think Disney.
toddmorey 2y ago
Genuinely curious if anyone has ideas how an LLM provider could moat AI. They feel interchangeable like bandwidth providers and seem like it will be a never ending game of leapfrog. I thought perhaps we’d end up with a small set of few top players just based on the scale of investment but now I’ve also seen impressive gains from much smaller companies & models, too.
- wmf 2y ago
  You'd have to have either a breakthrough algorithm (that you keep secret forever) or proprietary training data.
- deleted 2y ago
  [deleted]
- scarmig 2y ago
  1) Push for regulations around data provenance. If you train on anything, you have to prove that you had the rights to train on it. This would kill all but the largest providers in the USA, though China would still pose a problem. You could work around that bit by making businesses and consumers liable for usage of models that don't have proof of provenance. 2) If you had some secret algorithm that substantially outperformed everyone, you could win if you prevented leakage. This runs into the issue that two people can keep a secret, but three cannot. Eventually it'll leak. 3) Keep costs exceptionally low, sell at cost (or for free), and flood the market with that, which you use to enhance other revenue streams and make it unprofitable for other companies to compete and unappealing as a target for investors. To do this, you have to be a large company with existing revenue streams, highly efficient infrastructure, piles of money to burn while competitors burn through their smaller piles of money, and the ability to get something of value from giving something out for free.
  - sdesol 2y ago
    > China would still pose a problem Not if regulation prohibits LLMs from China, which isn't that far fetched to be honest. I think LLM will turn into a commodity product and if you want to dominate with a commodity product, you need to provide twice the value at half the cost. Open AI will need a breakthrough in reliability and/or inference cost to really create a moat.
bruce511 2y ago
There is no technical moat, but that doesn't mean there isn't a moat. Amazon might be a good analogy here. I'm old enough to remember when Amazon absorbed billions of VC money, making losses year over year. Every day there was some new article about how insane it was. There's no technical moat around online sales. And lots of companies sell online. But Amazon is still the biggest (by a long long way) (at least in the US). Their "moat" is in public minds here. Google is a similar story. As is Facebook. Yes the details change, but rhe basic path is well trodden. Uber? Well the juries still out there. Will OpenAI be the next Amazon? Will it be the next IBM? We don't know, but people are pouring billions in to find out.
- chubot 2y ago
  Amazon does have a technical moat - fast shipping and warehouse operations. It’s not something that Walmart or Target can replicate easily. Retail margins are razor thin, so the pennies of efficiency add up to a moat
  - lotsofpulp 2y ago
    Walmart and Target have tons of warehouse expertise. Amazon’s moat is their software, where they have a far longer head start and they can afford to pay their employees due to AWS and other services’ high margins, as well as executing well on growth resulting in being able to compensate with equity. Walmart and Target were far better than Amazon at logistics at the beginning, but they couldn’t execute (or didn’t focus on) software development as well as Amazon. Meanwhile, Amazon figured out how to execute logistics just as good or better than the incumbents, giving them the edge to overtake them.
    - chubot 2y ago
      Walmart and Target already had warehouses, but the end-to-end system you need for 2-day, 1-day, same day shipping, which includes warehouses/trucks/drivers, is not something they had They were built for people to come to their store, and the website was a second class citizen for a long time. But that was Amazon's bread and butter. They built that fast-shipping moat as a pretty established company, and the big retailers were caught off guard
mrtksn 2y ago
> In 1995 investors mistakenly thought investing in Netscape was a way to bet on the future Maybe they were just too early, later on it turned out that the browser is indeed a very valuable and financially sound investment. For Google at least. So having a dominant market share can indeed be even if the underlying tech is not exactly unobtainable by others.
- rchaud 2y ago
  A browser would be worthless to Google without DoubleClick ad network monopoly, which they acquired years before Chrome. Netscape tried to charge for their browser and stopped because Microsoft was giving away Internet Explorer free with every Windows PC.
chii 2y ago
> OpenAI has a short-ish window of opportunity to figure out how to build a moat. and they are probably going to go with regulatory moat over technical moat.
Nasrudith 2y ago
I guess that explains all of the 'our product is an existential threat' chuunibyou bullshit. Trying to get a regulatory moat instead.
florakel 2y ago
Why is everyone so sure that technology can’t be the moat? Why are you convinced that all AI systems will be very similar in performance and cost, hence be interchangeable? Isn’t Google the perfect example that you can create a moat by technological leadership in a nascent space? When Google came along it was 10X better than any alternative and they grabbed the whole market. Now their brand and market position make it almost impossible to compete. I guess the bet is that one of the AI companies achieves a huge breakthrough and a 10X value creation compared to its competitors…
- amelius 2y ago
  Maybe because for 99.9% of users (usecases) what today's llm technology offers is already good enough? Or maybe nvidia has the moat. Or silicon fabs have it.
- esafak 2y ago
  ChatGPT isn't ten times better than Gemini or Claude, is it? Even if they magically released such a model, the competition would quickly catch up. The competition has similar or better resources.
  - Breza 2y ago
    This is key. I remember when Google came out. It was amazingly better than anything else I'd tried up to the point. By contrast, I'd argue that OpenAI's advantage is smaller today than it was when they launched GPT3 in 2020.
BeefWellington 2y ago
> OpenAI has a short-ish window of opportunity to figure out how to build a moat. See the scramble to make themselves arbiters of "good AI" with regulators around the world. It's their only real hope but I think the cat's already out of the bag.
fmap 2y ago
Adding to this, inference is getting cheaper and more efficient all the time. The investment bubble is probably the biggest reason why inference hardware is so expensive at the moment and why startups in this sector are only targeting large scale applications. Once this bubble bursts, local inference will become even more affordable than it already is. There is no way that there will be a moat around running models as a service. --- Similarly, there probably won't be a "data moat". The whole point of large foundation models is that they are great priors. You need relatively few examples to fine tune an LLM or diffusion model to get it to do what you want. So long as someone releases up to date foundation models there is no moat here either.
n_ary 2y ago
I believe that, their brand “ChatGPT” is the moat. Here in EU, every news media and random strangers on the streets who don’t understand anything beyond TikTok also knows that AI=ChatGPT. The term is so ubiquitous with AI that, I am willing to bet when someone tells someone else about AI, they tell ChatGPT and the new person will search and use ChatGPT without any knowledge of Claude/Gemini/LLama et. al. This is the same phenomenon as web search is now = Google, despite other prominent ones existing. The competitions are mostly too narrow(programming/workflow/translation etc) and not interesting.
- otterley 2y ago
  A brand isn't much of a moat: MySpace's brand was a moat for a few years. Then Facebook came and ate their lunch.
boh 2y ago
Honestly the more I use ChatGPT, the more I see of their "moat-ish" opportunities. While the LLM itself may be ultimately reproducible, the user experience needs a UI/UX wrapper for most users. The future is not user exposure to "raw" LLM interactions but rather a complex workflow whereby a question goes through several iterations of agents, deterministic computation using "traditional" processing, and figuring out when to use what and have it all be seamless. ChatGPT is already doing this but it's still far from where it needs to be. It's totally possible for a company to dominate the market if they're able to orchestrate a streamlined user experience. Whether that will ultimately be OpenAI is an open question.
cyanydeez 2y ago
....or they could bewikipedia. But greeed isgood!
yalogin 2y ago
This is what I have been asking people in the know too. It seems like developing this is straight forward. So not sure why OpenAI has a lead. That too with how fast things are, the gap should be instantly closed.

by cs702 2y ago

neals 2y ago

I get the moat idea. But are there really any moats? What's a good moat these days anyway? Isn't being first and "really good" fine as well?

kridsdale1 2y ago
Network effects are a moat. A vertically integrated system that people depend on with non-portable integrations is a moat. Regulatory Capture is a moat.
- trhway 2y ago
  What is the moat of the Google Search? To me the LLM is the first and the only disruptor so far of the Search.
  - andrewflnr 2y ago
    It used to be their high search quality, difficult to replicate technology. Now they don't have one.
    - asadotzler 2y ago
      Their moat is lock-in across services now. People are "Google" users not just "web search" users.
    - deleted 2y ago
      [deleted]
    - mcphage 2y ago
      Well, Google’s willingness to pay potential competitors tens of billions of dollars per year to disincentivize developing a competing search engine is kind of a moat.
  - brookst 2y ago
    Google’s moat is eroding (filling?), but over the years it shifted from best product/tech to best brand.
    - Ekaros 2y ago
      Google is still good enough for most searches. Say finding web page of restaurant or some cursory information on popular topic. I suppose competitor would have to be really good on those times most users need something better. So it is the brand and familiarity. It would need to get really bad even on most basic things to be replaced.
  - discordance 2y ago
    muscle memory
ninth_ant 2y ago
The Network effect, and cultural mind share are two pretty effective moats. Meta and X proven surprisingly resilient in the face of pretty overwhelming negative sentiment. Google maintains monopoly status on Web Search and in Browsers despite not being remarkably better than competition. Microsoft remains overwhelmingly dominant in the OS market despite having a deeply flawed product. Amazon sells well despite a proliferation of fake reviews and products. Netflix thrives even while cutting back sharply on product quality. Valve has a near-stranglehold on PC games distribution despite their tech stack being trivially replicable. The list goes on.
- skydhash 2y ago
  Almost all of these are either free or a marketplace (which is free to access). Only Windows is technically not free, but it comes free with the hardware you buy. And they came at a time when there was not a real competition. It's very hard to beat a free product.
  - cloverich 2y ago
    Good point. Thinking... Facebook's infrastructure is enormously expensive to run. But they manage that for free. And chatgpt can place ads as easily as google. So openai needs to make it cheap to run, then ads, then victory. People citing their current high prices would be right. But human brains are smarter than chatgpt, and vastly more energy efficient. So we know it's possible. Does this oversimplify?
- nemomarx 2y ago
  To be fair despite Valve's tech stack being easy to replicate, their actual competition mostly hasn't replicated their feature set in full? Epic took a while to ramp up to "shopping carts" despite having a pretty large funding model, still doesn't have little gimmicks like trading cards and chat stickers, w/e. That's not really moat but it seems like the competition doesn't want to invest to exact parity. (And a lot of stores like Ubisofts or EA's were very feature lite tbh.)
  - 2y ago
GolfPopper 2y ago
Here's an idea for a moat: "You know all the ethically extremely questionable grabbing of personal data and creative work we did to build our LLM? Yeah, that's illegal now. For anyone else to do, that is."
otterley 2y ago
Copyright is an outstanding moat. Think Disney.

toddmorey 2y ago

Genuinely curious if anyone has ideas how an LLM provider could moat AI. They feel interchangeable like bandwidth providers and seem like it will be a never ending game of leapfrog. I thought perhaps we’d end up with a small set of few top players just based on the scale of investment but now I’ve also seen impressive gains from much smaller companies & models, too.

wmf 2y ago
You'd have to have either a breakthrough algorithm (that you keep secret forever) or proprietary training data.
deleted 2y ago
[deleted]
scarmig 2y ago
1) Push for regulations around data provenance. If you train on anything, you have to prove that you had the rights to train on it. This would kill all but the largest providers in the USA, though China would still pose a problem. You could work around that bit by making businesses and consumers liable for usage of models that don't have proof of provenance. 2) If you had some secret algorithm that substantially outperformed everyone, you could win if you prevented leakage. This runs into the issue that two people can keep a secret, but three cannot. Eventually it'll leak. 3) Keep costs exceptionally low, sell at cost (or for free), and flood the market with that, which you use to enhance other revenue streams and make it unprofitable for other companies to compete and unappealing as a target for investors. To do this, you have to be a large company with existing revenue streams, highly efficient infrastructure, piles of money to burn while competitors burn through their smaller piles of money, and the ability to get something of value from giving something out for free.
- sdesol 2y ago
  > China would still pose a problem Not if regulation prohibits LLMs from China, which isn't that far fetched to be honest. I think LLM will turn into a commodity product and if you want to dominate with a commodity product, you need to provide twice the value at half the cost. Open AI will need a breakthrough in reliability and/or inference cost to really create a moat.

bruce511 2y ago

There is no technical moat, but that doesn't mean there isn't a moat. Amazon might be a good analogy here. I'm old enough to remember when Amazon absorbed billions of VC money, making losses year over year. Every day there was some new article about how insane it was. There's no technical moat around online sales. And lots of companies sell online. But Amazon is still the biggest (by a long long way) (at least in the US). Their "moat" is in public minds here. Google is a similar story. As is Facebook. Yes the details change, but rhe basic path is well trodden. Uber? Well the juries still out there. Will OpenAI be the next Amazon? Will it be the next IBM? We don't know, but people are pouring billions in to find out.

chubot 2y ago
Amazon does have a technical moat - fast shipping and warehouse operations. It’s not something that Walmart or Target can replicate easily. Retail margins are razor thin, so the pennies of efficiency add up to a moat
- lotsofpulp 2y ago
  Walmart and Target have tons of warehouse expertise. Amazon’s moat is their software, where they have a far longer head start and they can afford to pay their employees due to AWS and other services’ high margins, as well as executing well on growth resulting in being able to compensate with equity. Walmart and Target were far better than Amazon at logistics at the beginning, but they couldn’t execute (or didn’t focus on) software development as well as Amazon. Meanwhile, Amazon figured out how to execute logistics just as good or better than the incumbents, giving them the edge to overtake them.
  - chubot 2y ago
    Walmart and Target already had warehouses, but the end-to-end system you need for 2-day, 1-day, same day shipping, which includes warehouses/trucks/drivers, is not something they had They were built for people to come to their store, and the website was a second class citizen for a long time. But that was Amazon's bread and butter. They built that fast-shipping moat as a pretty established company, and the big retailers were caught off guard

mrtksn 2y ago

> In 1995 investors mistakenly thought investing in Netscape was a way to bet on the future Maybe they were just too early, later on it turned out that the browser is indeed a very valuable and financially sound investment. For Google at least. So having a dominant market share can indeed be even if the underlying tech is not exactly unobtainable by others.

rchaud 2y ago
A browser would be worthless to Google without DoubleClick ad network monopoly, which they acquired years before Chrome. Netscape tried to charge for their browser and stopped because Microsoft was giving away Internet Explorer free with every Windows PC.

chii 2y ago

> OpenAI has a short-ish window of opportunity to figure out how to build a moat. and they are probably going to go with regulatory moat over technical moat.

Nasrudith 2y ago

I guess that explains all of the 'our product is an existential threat' chuunibyou bullshit. Trying to get a regulatory moat instead.

florakel 2y ago

Why is everyone so sure that technology can’t be the moat? Why are you convinced that all AI systems will be very similar in performance and cost, hence be interchangeable? Isn’t Google the perfect example that you can create a moat by technological leadership in a nascent space? When Google came along it was 10X better than any alternative and they grabbed the whole market. Now their brand and market position make it almost impossible to compete. I guess the bet is that one of the AI companies achieves a huge breakthrough and a 10X value creation compared to its competitors…

amelius 2y ago
Maybe because for 99.9% of users (usecases) what today's llm technology offers is already good enough? Or maybe nvidia has the moat. Or silicon fabs have it.
esafak 2y ago
ChatGPT isn't ten times better than Gemini or Claude, is it? Even if they magically released such a model, the competition would quickly catch up. The competition has similar or better resources.
- Breza 2y ago
  This is key. I remember when Google came out. It was amazingly better than anything else I'd tried up to the point. By contrast, I'd argue that OpenAI's advantage is smaller today than it was when they launched GPT3 in 2020.

BeefWellington 2y ago

> OpenAI has a short-ish window of opportunity to figure out how to build a moat. See the scramble to make themselves arbiters of "good AI" with regulators around the world. It's their only real hope but I think the cat's already out of the bag.

fmap 2y ago

Adding to this, inference is getting cheaper and more efficient all the time. The investment bubble is probably the biggest reason why inference hardware is so expensive at the moment and why startups in this sector are only targeting large scale applications. Once this bubble bursts, local inference will become even more affordable than it already is. There is no way that there will be a moat around running models as a service. --- Similarly, there probably won't be a "data moat". The whole point of large foundation models is that they are great priors. You need relatively few examples to fine tune an LLM or diffusion model to get it to do what you want. So long as someone releases up to date foundation models there is no moat here either.

n_ary 2y ago

I believe that, their brand “ChatGPT” is the moat. Here in EU, every news media and random strangers on the streets who don’t understand anything beyond TikTok also knows that AI=ChatGPT. The term is so ubiquitous with AI that, I am willing to bet when someone tells someone else about AI, they tell ChatGPT and the new person will search and use ChatGPT without any knowledge of Claude/Gemini/LLama et. al. This is the same phenomenon as web search is now = Google, despite other prominent ones existing. The competitions are mostly too narrow(programming/workflow/translation etc) and not interesting.

otterley 2y ago
A brand isn't much of a moat: MySpace's brand was a moat for a few years. Then Facebook came and ate their lunch.

boh 2y ago

Honestly the more I use ChatGPT, the more I see of their "moat-ish" opportunities. While the LLM itself may be ultimately reproducible, the user experience needs a UI/UX wrapper for most users. The future is not user exposure to "raw" LLM interactions but rather a complex workflow whereby a question goes through several iterations of agents, deterministic computation using "traditional" processing, and figuring out when to use what and have it all be seamless. ChatGPT is already doing this but it's still far from where it needs to be. It's totally possible for a company to dominate the market if they're able to orchestrate a streamlined user experience. Whether that will ultimately be OpenAI is an open question.

cyanydeez 2y ago

....or they could bewikipedia. But greeed isgood!

yalogin 2y ago

This is what I have been asking people in the know too. It seems like developing this is straight forward. So not sure why OpenAI has a lead. That too with how fast things are, the gap should be instantly closed.