OpinionHow to tell a revolutionary breakthrough from an ordinary techno-bubble
Opinion
How to tell a revolutionary breakthrough from an ordinary techno-bubble
"Each new advance in AI has been welcomed as a huge leap for humanity and the boom in generative models is the logical continuation of this complex trend. However, it is naive to label technology as either revolutionary or a passing fad without grounding that assessment in real-world, capitalist terms," writes Igor Ryabenkiy, the founder and managing partner of AltaIR Capital
Believe it or not, I wrote this article myself—with no help at all from ChatGPT, and without dictating it to a virtual assistant in the metaverse while lounging in the back seat of a self-driving car. This doesn’t mean I’m a Luddite: every successful venture investor absorbs vast quantities of information on the latest technologies in a wide range of industries. Only in this way is it possible to see past the hype and separate the wheat from the chaff.
Walk into a trendy coffee shop in any major European or U.S. city and you’re almost certain to see a couple of starry-eyed founders excitedly discussing their latest startup. Chances are, their whole idea boils down to packaging ChatGPT in a slick interface and selling it to entrepreneurs on Instagram, the creators of OnlyFans, etc. It should come as no surprise, then, that venture investors around the world have been inundated with a tsunami of such projects in recent months.
Inexperienced investors often feel an almost religious ecstasy over each new technological breakthrough while old-timers recognize them as a natural part of the market cycle. This was true concerning blockchain, self-driving cars, and the metaverse, to name a few. Every major technological advance is accompanied by a flurry of enthusiasm in social networks and a spate of articles explaining how it will make everything else obsolete, destroy millions of jobs, and solve all of life’s mysteries. Every time this happens, I recall Douglas Adams’ classic book The Hitchhiker’s Guide to the Galaxy in which a super-intelligent supercomputer named Deep Thought reports that the answer to life’s greatest question is…42. That’s it, just a number, with no further explanation given.
People tend to experience a metaphysical thrill from major breakthroughs. Investors, while not entirely immune to such feelings, are more interested in whether the new technology will generate real business opportunities. They know that the vast majority of precocious startups utilizing this breakthrough will ultimately fail for a variety of reasons—but the main reason is how long it takes for even the best ideas to gain a solid foothold in the market. This has been true of blockchain, self-driving cars, and the metaverse. They will undoubtedly change our lives, but not nearly as quickly as Twitter is updated. Only when the market is ready to absorb a winning business solution does the next unicorn appear.
I first read about neural networks 50 years ago in a popular science magazine for children. Artificial intelligence has become far more powerful since then and I have been investing in AI-related startups for the last 10 years now. Each new advance in AI has been welcomed as a huge leap for humanity and the boom in generative models is the logical continuation of this complex trend. However, it is naive to label technology as either revolutionary or a passing fad without grounding that assessment in real-world, capitalist terms. With AI, the only thing we can say with certainty is that there is one clear leader and a handful of others not far behind. This indicates that no single company will corner the market on generative models. In fact, any of the serious contenders might come up with the next super-successful AI-based business solution; it might even be those starry-eyed fellows you saw in the coffee shop.
Igor Ryabenkiy is the Founder and Managing Partner of AltaIR Capital, an early-stage global VC firm.
