I’ve spent a few weeks mainly in Silicon Valley, meeting with many people and companies, speaking at events, and reviewing the market for my portfolio companies. AI is everywhere. Most companies try to understand and utilize it in some way, founders are looking for new opportunities, and most networking events focus on it.
At the same time, tech stocks are falling, and investors warn about an AI bubble. What should we conclude? The most promising markets often overheat, but this market fundamentally differs from the blockchain and crypto markets.
Real Use Cases
One great experience was testing Waymo’s self-driving car service. It currently operates in San Francisco and Phoenix and is expanding to Los Angeles and Austin. The experience was smooth, with no worries about what kind of driver you get. As someone who dislikes driving in cities and searching for parking, I’m eager to see these services expand globally. This is a prime example of how AI (or whatever we call it—data analytics, machine learning) is creating real-world applications and transforming our lives.
I also met with one of the leading law firms in Silicon Valley. A partner mentioned that they must seriously consider how AI will change their work. They have just hired their first-ever Chief Innovation Officer. It’s not only about how AI could serve their clients but also how it can significantly change their internal work and processes. For example, AI could help senior partners better share their knowledge with junior team members.
I spoke with someone from a military organization about how to better utilize open-source intelligence and internal intelligence. He mentioned that many colonel-level officers spend days reading papers and writing reports; this is no longer an effective approach. We discussed solutions to use AI for evaluating geopolitics, assessing local situations in different countries, and understanding operational environments.
An entrepreneur shared with me a new tool they’ve developed to help find relevant information about potential customers before sales calls. It identifies business details, operations, contact persons and their roles, and potential needs. While this information is not hard to find using various tools, if this team can create an easy-to-use tool integrated into CRM systems, providing salespeople with all this data automatically, it would offer real value.
Four points for the AI market
These are all concrete examples of AI being applied to real needs and providing tangible benefits. However, it’s complex to assess what AI truly means for different businesses and who the winners and losers will be.
There are four important points I would emphasize in the current AI market:
- Know Where LLM and GenAI Work. LLM and generative AI are not superintelligent; they are powerful for many use cases, but you must know where and how to derive value from them. Especially, LLM and GenAI have enabled the utilization of text-format data in AI and the development of new types of interactive user interfaces.
- AI Solves Real Problems. AI offers many valuable use cases and helps solve real problems. Unlike blockchain and cryptos, where the value often stems from speculative assets and addressing nonexistent problems, AI addresses genuine issues. However, AI solutions might become obsolete or commoditized before they can become profitable, so it is not easy to build business on them.
- How to Make AI Business. It’s easy and cost-effective to use existing AI tools, but building fundamental tools is expensive. So, where is the sweet spot for businesses? I would highlight two areas: a) finding a unique way to combine the best available AI tools with proprietary data and models, and b) using AI to address an existing need, even if your business isn’t primarily focused on AI or tech solutions.
- Changes in Societies and Politics. AI will also impact societies and politics. While it’s a natural progression, similar to the Industrial Revolution, it will take years or even decades to find a new balance. This transition could cause significant changes for many individuals and create political uncertainties. The Industrial Revolution fundamentally altered societies and politics, and AI is likely to do the same.
Learning to Make AI Business
Many AI startups and projects will inevitably fail, and some are currently overvalued. However, given that AI can solve real problems and provide genuine value, it’s here to stay and will fundamentally change our work and business environments.
The more critical question for each individual and business is how to use AI effectively to improve their operations. For those who want to build AI-based services and technology, the fundamental question is how to establish a defensible position. This change may not always be easy, but it is unavoidable. Therefore, it’s better to prepare, experiment, and learn.
