https://www.semianalysis.com/p/google-we-have-no-moat-and-ne...
"We Have No Moat, And Neither Does *"
The problem with building AI products is that as long as you don't know why or how it works, your competition can just imitate the surface-visible results and it's as good as your product because they also have no clue about why or how it works, just like you.
> Google has been contacted for comment but it is understood that the document is not an official company memo. [1]
There are moats to products, but less so to pure language models trained on the same web-scale scraped data that many share.
Not all data is readily available to language models, and integration can be difficult.
A company that specializes in say AI for trash sorting likely still has a moat.
Microsoft integrating AI into Windows still has a moat (for Windows).
GPT-4 is ~200 Elo better than the next best semi-public Vicuna-13B in Chatbot Arena [2]. That is a non-zero moat - perhaps due to hosting larger models, training data, licensing, output postprocessing, etc.
[1] https://www.theguardian.com/technology/2023/may/05/google-en...
Its a non-zero advantage.
A moat is something that inhibits someone from closing an advantage.
(Also, its odd that the biggest models, outside of the big vendor centralized ones, they are testing are 13B-14B when 30B-ish and 65B-ish versions exist.)
However, if the advantage is due to things like inference infrastructure to support a massive model, that isn't easy to duplicate.
I would also say that the quality of these smaller models are good, but we also may not be measuring them correctly. Recent papers suggest that these smaller LMs dont fully capture ChatGPT quality in ways that may not have appeared with crowd worker ratings [1]. It's easy to have your inputs be inside a happy distribution for a paper but fail in the real world in ways that GPT-4 doesnt.
Lmsys would love to compare with bigger models but have limited resources. Contributions are welcome [2]
[1] https://arxiv.org/abs/2305.15717
[2] https://lmsys.org/blog/2023-05-25-leaderboard/#next-steps
If someone just has an approach to solving the problem, i.e. code that does this that and the other, then there is no moat.
So it's a.. memorandum?
this is not implied by the name "Google memo".
What I'm really curious about is why you think this isn't a Google Memo, and why you think that's a false narrative.
Random engineer memos can certainly still be influential, but they do not dictate company direction.
(1) https://www.engadget.com/2011-02-08-nokia-ceo-stephen-elop-r...
But it wasn't. It was an opinion written down by an individual, for no other reason than to share their personal opinion. It was closer to an HN comment, not a document necessary as part of business operations.
Is the most the trash data
"Anything you create can be created without investment cost while also being unique in design as well as delivering the same function or experience"
From - https://dakara.substack.com/p/ai-and-the-end-to-all-things
Those will be good businesses, and founders will do well, though they may not be billion dollar businesses. Their moat will be industry comprehension and then their integration and embedding into business operations.
That does leave a question as to the purpose of VC in AI though.
Google owns several platforms used by billions. If that is not the moat, what is?
Google has moats. They just suck at executing. That is why they are not dying, still making more and more money, but looking like they are losing. That is the benefit of having moats.
At some point, AI people are going to learn that most AI capabilities are usually features, not products.
What’s the moat for Apple (after all, they’re all phones and computers)?
What’s the moat for Microsoft (after all Google and insert thousands of other competitors offer docs, sheets, etc)?
What’s the moat for Facebook (after all, it’s just a social network)?
What’s the moat for Google search (it’s just another search box)?
The moat isn’t the product, it’s the business. Every one of these companies built a business that served customers well (people who want the best phone, company IT departments, advertisers, and advertisers again). The moat is a business so good at serving its customers that you can afford to offer a better/cheaper/faster product than others because you serve a well paying customer the best. Done well, your moat is then the momentum of being the default option.
Long time back when Google first came about.. I remember reflexively switching from the default Yahoo browser to Google. It felt painful even trying out Yahoo Search Engine... I was just a kid back then and even I wondered why I was doing this.. Google's Page Rank algorithm was simply superior..
Paypal's moat was being able to handle cyber criminals/hacking.. their competitors were getting wiped out because they were losing millions of dollars due to attacks and they did not have the technical know how..
pg's viaweb's moat was being able to rapidly add features because pg grokked lisp pretty hard at that time..
Google search results were far superior.
Same thing with Apple.. I never had a mac/iphone crash on me ever.. they just worked..
For Facebook.. the killer feature was the wall.. that and the network effects..
The wall was cloned, but the wall (ultimately moreso Newsfeed) enabled you to become one of the biggest sites on the internet - which turned out to be really valuable to advertisers. Which in turn, allowed you to invest in features, buy potential competitors and invest in AI research teams that open source models that make you competitive in AI. The sum of those things makes you a $671B company throwing off enormous sums of cash. That turns out to be a pretty sustainable moat for a while - long after your product becomes table stakes.
The problem with thinking that this is impossible in AI is because it ignores all of the other times it’s been done. Facebook was JUST a social network that would “be a fad” and “never take off”. It was “just another website” that “anyone could build”. The difference is they built it. And then they built on it.
Same thing will happen here. And now the question is, will it be one of the current incumbents that crack it or does a newcomer have a shot.
> Viaweb's example has been influential in Silicon Valley's entrepreneurial culture, largely due to Graham's widely read essays[11] and his subsequent career as a successful venture capitalist.[12]
Basically - rich guy tricked some other rich people early on in their career - attributes future success to this early "success" despite it probably being a bad idea and having less to do with innovation and more to do with big-dicking clueless investors.
PG should edit that Wikipedia entry and fix that last part to read less like what you imply. However, if you check the timeline, you can come to the same conclusion.
Under any sane regulatory regime they never would have been allowed to get to this point but that didn’t happen.
The only problem here is they aren’t going to be able to replicate that for the next big tech shift.
The moat isn’t “the product” the only great product they had was the search engine and that doesn’t make any money. The moat came when they were allowed to use it to dominate markets in advertising, mobile, email platforms, and so on.
Its a lead, but its not a barrier to competitors acquiring users even if they can offer better value for price outside of network size, nor is it a barrier to competitors development.
Anyone more than just a casual observer knows how far from the truth that it is.