As an early stage investor, I have seen numerous technological advancements…from the rise of the internet to the emergence of mobile apps, each new wave of innovation has brought with it the promise of unprecedented growth and the potential for massive disruption.
But of all the technologies that I have evaluated, none have been as exciting - or as potentially scary - as generative AI.
At its core, generative AI refers to computer algorithms that are capable of creating new and unique content, such as images, text, or even music, by learning from existing data. This means that machines are no longer limited to simply processing information, but can actually create it as well.
The potential applications for this technology are vast and varied. For example, generative AI could be used to create personalised content and advertising for individual users, or to generate realistic simulations for scientific research and training.
However, this also means that generative AI poses a significant risk of disruption to both incumbent and relatively new technologies. For example, traditional content creation industries, such as music and film production, could see a shift towards AI-generated content that is cheaper and faster to produce. Similarly, companies that specialize in data analysis and machine learning may find themselves competing with new entrants that are able to leverage the capabilities of generative AI.
As an investor, this presents a unique challenge. On the one hand, generative AI represents an incredible opportunity for growth and innovation. On the other hand, it also presents a significant risk for disruption, as it is difficult to predict which companies will be able to effectively navigate the new world including generative AI.
That is why it is more important than ever to evaluate the competitive moat of any company. In other words, what is the unique advantage that a particular company has over its competitors, and how does it plan to protect that advantage in the face of potential disruption?
For example, a company that has developed proprietary algorithms and has access to vast amounts of data may have a strong competitive moat, as it would be difficult for new entrants to replicate their technology and data sets. Alternatively, a company that has developed a strong brand and customer base may be able to weather disruption by leveraging their loyal customer base.
In the end, the key to success in the world of generative AI will be the ability to effectively navigate the potential risks and opportunities that this technology presents. As investors, it is our job to evaluate the competitive moat of every company that we consider, and to make informed decisions based on the strengths and weaknesses of each potential investment.
* This post was written by ChatGPT