Incumbent Consensus

R&D departments don't predict the future

“Most of the value created by AI will be captured by incumbents.”

This feels like the consensus in tech right now.

Just an observation, but… I think it’s wrong.

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TLDR on why investors believe incumbents will win big: they have massive advantages across distribution, data, and developers. They also won big with recent advents, mobile & the cloud. This is all valid. 

What I think this misses is the degree to which the paradigm is shifting. 

To-date, most AI products are just better versions of traditional software workflows: write an email, create a marketing graphic, analyze a data file, etc.

However, in this decade, I believe how consumers and businesses engage with technology will change radically: the paradigm is going to shift altogether.

How we interface with and define technology will transition from the current incumbent-use-case-with-AI-sprinkles to new modalities of software and hardware altogether. The former is a world where incumbent tech wins big, and it will exist for some amount of time.

The latter is harder to comprehend today.

It’s a future that likely consists of autonomous systems, asynchronous decision-making, and a big leap forward in robotics. Filling in and extrapolating the gaps from there is harder to do, and underscores why newcomers are so well positioned: Envisioning, building, and ringing in a new era of technology will fall in the hands of visionary, ambitious entrepreneurs — not a public company R&D departments.

Moreover, between the size of the prize, and the depth of technology capital markets, it will be increasingly difficult for incumbents to acquire the best AI companies. Quick aside: I’m not sure Facebook would have gotten its hands on Instagram had venture been as institutionalized in 2012 as it is today. 

This will all take a long time. 

We’re in the first inning of this shift. There are several potential geopolitical and societal setbacks. And enterprises are remarkably bad at adopting new technologies.

But it is going to happen. And the incumbent consensus, in my view, is a failure to zoom out and extend the timescale. It’s also a generous extension of Microsoft, Apple, and Google (where I am bullish) to the rest of the incumbency.

Last note: OpenAI is not an incumbent (:

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