OpenAI has the right strategy, but is unlucky

OpenAI is a deeply mismanaged company. Most recently, a blog post that feels like it has got to have dozens of PR violations, responding to the Apple lawsuit.

More broadly, OpenAI's main problem is that it does not have a real competitive advantage. No real models do; the real differentiation is price; they will become commodities.

So while at first it may look like OpenAI is doing too much, it is a desperate attempt to create some kind of real, defensible business, and show some proof of such before they IPO. If they do not do so, public market investors will cut their throats, and they will see a valuation drop like no other, regardless of where we are in the capital cycle. If they delay IPO plans, it will become clear they are in shambles. They are far behind in the enterprise game, which is short-term anyway. Their best bet is hardware; credit to Altman and co for realizing this, although Apple is a roadblock, which I hope, for the sake of competition, is removed.

Now Anthropic having a more coherent strategy of focusing on enterprise from the start is better; it is still not defensible. Perhaps because of the fact that the cost of paying Anthropic is far too great and outweighs any form of customer captivity. Plus, an enterprise gets maximum leverage by training a model, ideally a cheap one, on its own data so it can get insights tailored to the enterprise specifically, something Anthropic cannot deliver. Anthropic's fall will likely be in line with the broader capital cycle.

I try to articulate ideas around tech companies' business strategy and specifically capital cycles and how models are commodities here -

https://taikhooms.substack.com/