How to lose at Generative AI!

The moats are in the customers, not the data. We predicted that the best generative AI companies could generate a sustainable competitive advantage through a data flywheel: more usage → more data → better model → more usage. While this is still somewhat true, especially in domains with very specialized and hard-to-get data, the “data moats” are on

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Sobriety source #2: AI as the next platform shift. Every wave of new companies that transforms their respective industries is fueled by a major platform or technology shift. The advent of the web did this. The smartphone and mobile applications did this. And there is no doubt that AI is our next wave. But does every new wave always necessarily favo... See more

With Generative AI’s budding reasoning capabilities, a new class of agentic applications is starting to emerge.

What shape do these application layer companies take? Interestingly, these companies look different than their cloud predecessors:

• Cloud companies targeted the software profit pool. AI companies target the services profit pool.


• Cloud compa

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Disruption Theory & risk-aversion don’t apply

Incumbents typically cede market space to startups wherever there’s new, unproven technology or a new, unproven market, especially in spaces where they can’t use past data to predict the future. But in AI, they’re rushing to embrace new technology and uncertain markets, spending historic amounts of ... See more

In a pre-AI world, in order to build an application, you needed to reduce your idea to a process—a set of rules by which your software would operate to accomplish the goal you set. Sometimes this was easy; for example, a customer relationship manager like Salesforce is naturally reducible to rules.

In a post-AI world, you can build applications for ... See more

Interface > Data > Models

While media still focuses on the “next best model” rat race, increasingly believe that the “interface” and “data” layers will further distinguish market leaders while the “models” layer becomes increasingly commoditized and pushed to the edge (becoming increasingly obvious as mobile chips get better and OSes g... See more