FOMO: Everysince ChatGPT came out, the tech landscape
hasn’t been the same. As if suddenly hit by a sudden burst of enthusiasm, or FOMO, the titans
of the tech world have rapidly assembled massive AI departments and begun working. Facebook,
Amazon, Apple, Google and basically everyone else has embarked on a race to finally outdo
one another and come out as the supreme victor. Their goal? Simple, create the next big thing.
The next YouTube, the next Google, the next Instagram. They have funnelled an unprecedented
amount of resources in research, laboratories, compensation, marketing, hardware, software,
and everything else required to bring these remarkable innovations to market. The promise of
AI's potential was simply too enticing to ignore: self-evolving algorithms, human like machines,
unbelievable automation, and most importantly unthinkable riches and control. But, the reality
is that FOMO has blinded these giants to a simple yet glaring truth. They have already lost AI, and
pouring hundreds of billions into a lost battle isn’t going to change anything. Let me explain.
PAST PERFORMANCE:
In the stock market, there’s a famous saying “Past performance is not an indicator of future
results.” Aka, just because a stock has been performing well does not mean that it will
continue to perform well. Most investors say this tongue in cheek. They know that it’s true
but they continue to invest in companies and funds largely because they have performed well
in the past. Companies are even more susceptible to this logical fallacy as they have been directly
rewarded for such behavior in the past. The only reason that they got so big in the first
place is because they gambled big on their hero products whether that’s the iPhone or Google or
WhatsApp. They went against the grain and bet it all. Remember how much criticism Facebook
received for spending $19 billion on WhatsApp back in 2014? This gamble ended up paying off
but let’s not forget what it was: a gamble. Each time, these companies win a gamble, they’re more
inclined to think that they can dominate any industry they want if they just spend enough
money. But this notion is fundamentally flawed and you don’t have to look much further than
Meta. After making deca billion dollar bets with WhatsApp and Instagram and seeing them pay off,
Zuckerberg felt confident to start betting in the hundreds of billions with the Metaverse and I
think we all remember how that turned out. But the Metaverse is merely their most publicized failure.
Meta’s list of failures is far larger than that. Take Poke for example. In the early 2010s,
after seeing how well SnapChat was doing, and failing to acquire Snapchat, Facebook decided
to launch a clone called Poke. The premise seemed straightforward: leveraging their vast user base
and existing infrastructure to launch a rival app which should’ve been a slamdunk against SnapChat.
But, Poke would end up flopping so hard that Facebook would end up deleting Poke from the app
store without even publicly mentioning it. Jump forward a few years and Zuckerberg would start
betting on space, the apparent next big thing. He was gonna build this grand drone internet
until he quietly shut that down as well. The Metaverse gamble followed, as did bets on AI and,
most recently, the Threads endeavor. I mean, with Threads, their daily active users was literally
down over 80% within just a month of launch. With each and every one of these products, Zuckerberg
was trying to create the next big thing. The next big social media, the next big space project,
the next big VR project, and the next big AI project but each and evertime, they miserably
failed. This isn’t to say that the sector itself failed though. SnapChat has 400 million users.
Twitter has 370 million users. Starlink is doing great. And someone will eventually win VR. It’s
simply that that someone wasn’t Facebook. The reality is that Facebook has only launched 1
next big thing product in their entire history and that was their original product: Facebook.
They had 2 successful acquistions: Instagram and WhatsApp, but that pretty much sums up the entire
company. Everything else they tried was a complete failure. This isn’t a jab against Facebook as it’s
true with all of their peers as well. When was the last time that Google or Apple or Amazon actually
launched something that was even comparable to their hero product? Google has arguably had
the most number of successful products but at this point, it’s been over a decade since they
launched a winner as well. The reason is obvious, it’s simply ridiculously hard to replicate the
success of something like Facebook or YouTube even for companies that have already done it
once or twice. This brings us back to the original statement: “Past performance is not an indicator
of future results.” Just because Facebook launched a successful social media 20 years ago and Google
launched a successful search engine 25 years ago doesn’t mean that they have a better chance of
winning AI today. In fact, I would actually argue that it leaves them worse of. Let me explain.
BAGGAGE:
Everyone is so quick to point out all of the advantages enjoyed by these tech giants. They
command the finest engineers, possess unparalleled infrastructure, possess seemingly limitless
capital, and boast extensive reach, among other assets. But rarely do people consider these
companies’ biggest shortfall: an incomprehensible amount of baggage. Aside from Wall Street and big
pharma, big tech is likely the most hated industry in the world. People see them as
monopolies with way too much power, control, and influence. Not to mention the privacy concerns.
Only a vocal minority voice their concerns about these companies or go as far as ditching WhatsApp
or Gmail. But that isn’t to say that everyone else is happy with these platforms. And likely the best
example of this is with YouTube creators. When a YouTuber starts using too much clickbait or too
many thirst traps, only a vocal minority will call them out. Everyone else will just be less inclined
to watch their next video. When you compound this over months and years, that’s how you end up with
a dead channel. It’s the same thing with big tech. People aren’t going to ditch Gmail just
because Google is notorious for collecting data or implementing anti consumer friendly
policies. But when they eventually get the chance to choose between Bard and ChatGPT, they’re gonna
choose ChatGPT everyday of the week. In fact, I would argue that this bias is the number 1 reason
that otherwise great products don’t take off. Take Threads for example. One of the biggest critiques
of Threads is that it’s just a ripoff of Twitter but that’s quite a funny argument because that
was never a showstopper before. Facebook itself wasn't the pioneer in the realm of social media.
Does Friendster and MySpace ring a bell? And what about Google, is there a single thing that
they’ve launched that’s not a rip off? They didn’t create search engines or email or video sharing or
browsers or smartphones or really anything. They just made it better and that was enough. Recent
products like Threads and Bard, however, appear to be judged more by their perceived lack of
originality than by their actual merits. This phenomenon is more about optics than product
authenticity. Imagine if Threads was a startup. If Threads was a startup, the optics would be
completely different. Threads would’ve been seen as the valiant underdog taking on the once great
Twitter that was ruined by Elon Musk. But, since Threads is from Facebook, people perceive it as:
Oh great, greedy Facebook is trying to expand their monopoly to yet another sector. Woohoo.
You could almost see this playing out real time. After Threads launched, everyone checked it out
just to see what all the hype was about but no one really resonated with the product or story. And
this is why it’s so dangerous for these big tech companies to enter the AI scene. More than likely,
they’re just gonna burn extraordinary amounts of money and end up losing anyway. In fact,
this trend has already begun with Bard. The common sentiment around Bard is that ChatGPT
was the OG revolutionary product and that Bard just copy pasted ChatGPT but this is completely
false. Google has been working on AI for longer than OpenAI’s entire existence. Now, you might
be saying, “Oh well, Google probably wasn’t as focused as OpenAI”, but this is also completely
false. In total, OpenAI has raised $11.3 billion which is an insane amount for a startup. But,
do you wanna guess how much Google has invested into AI? Maybe $20 billion? $40 billion? Well,
it’s actually upwards of $200 billion. Google has literally been investing OpenAI’s entire funding
into AI every 6 months for the past decade to come up with Bard. But, unfortunately for Google,
it looks like Bard is gonna end up as the next Bing while ChatGPT ends up as the next Google.
The bottomline is that people have already made up their minds about big tech. So, outspending the
competition isn’t gonna to allow these companies come out on top. But then, what’s the solution?
DIVERSIFICATION VS CONCENTRATION:
Well, the solution is easy, FAANG must comes to terms with reality. The reality that AI will
only yield a limited number of true winners, and statistically speaking, it's highly improbable
that the big tech giants will emerge as these winners despite their vast resources. Combine
this with overwhelming negative public sentiment against these companies and it becomes damn near
impossible for FAANG to “win” AI. So, should they just sit back and watch as their fortunes crumble
thanks to up and coming AI products? Well of course not, that would be braindead behavior.
But, if sitting back is a bad idea and going all in is also a bad idea, what in the world are they
supposed to do? Well, easy. Instead trying to strike gold themselves, they should be selling
the shovels. This is exactly what Nvidia has been doing and I mean, the results speak for
themselves. Nvidia was originally a consumer brand focused on selling GPUs to gamers. They
screwed up their PR with gamers when they started embracing cryptocurrency miners though. Gamers
felt like Nvidia betrayed them and that Nvidia was just milking gamers and yadayadayada.
When AI starting gaining steam, Nvidia could’ve easily tried to make their own inhouse consumer
AI platform. They had all the tech and money to do so. But instead, they chose to bet on something
far more consistent and reliable: selling shovels. Now, it doesn’t matter to them who wins the AI
game. It could be Apple or Google or Facebook or OpenAI or some startup no ones has ever heard of.
It doesn’t matter because they’re all using Nvidia GPUs. In this sense, Nvidia has already won AI and
secured their future within the new era without actually having to take the massive gamble of
creating the next big thing. The same thing can be said about Microsoft. About 10 years ago, they
decided that they were gonna be a backend company focused on supporting great solutions instead of
creating great solutions. The result? After 17 years of stagnation, Microsoft would nearly 7X
within 4 years. Now of course, supporting these solutions wont be as lucrative as creating them
but the probability of success is also more like 90% as opposed to less than 1 in a million. Also,
for the record, supporting AI is already insanely lucrative. Google seems to be recognizing this
paradigm shift, as they’ve starting focusing more on expanding their cloud business rather
than solely launching consumer-centric products. Facebook on the other hand though is still going
all out on gambles whether that’s the Metaverse, AI, or Threads. And it’s the same case with many
of the other companies at the top as they’ve all been blinded by FOMO. And all there gonna
have to show for it in 5 or 10 years is a slew of undesired products and hundreds of billions
of dollars less in the bank. The problem is that much of big tech is trying to buy naked calls on
AI when the smarter solution is to just sell puts, by offering the foundational tools and
support necessary for the AI landscape to flourish and laugh all the way to the bank. But that’s
just what I think. If you’d like to learn about how AI got to this point, check out this video.