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OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

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Re: OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

#201

Post by swiftcoder »

noch wrote: post #167
bruce511 wrote: post #136

Earlier quoted context omitted.

There is no technical moat, but that doesn't mean there isn't a moat. Amazon might be a good analogy here. I'm old enough to remember when Amazon absorbed billions of VC money, making losses year over year. Every day there was some new article about how insane it was. There's no technical moat around online sales. And lots of companies sell online. But Amazon is still the biggest (by a long long way) (at least in the…

> There is no technical moat, but that doesn't mean there isn't a moat. Gruber writes: " My take on OpenAI is that both of the following are true: OpenAI currently offers, by far, the best product experience of any AI chatbot assistant. There is no technical moat in this field, and so OpenAI is the epicenter of an investment bubble. " It's amusing to me that he seems to think that OpenAI (or xAI or DeepSeek or DeepMi…

> How much would you invest for a given probability that the company you invest in will be able to manufacture intelligence at scale in 10 years?

What's the expected return on investment for "intelligence"? This is extremely hard to quantify, and if you listen to the AI-doomer folks, potentially an extremely negative return.

Re: OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

#202

Post by LittleTimothy »

tiffanyh wrote: post #172

> defensible moat … investors mistakenly thought investing in Netscape was a good way to bet on the future Yet Chrome for Google did help create a moat. A moat that’s is so strong the DoJ is investigating if Chrome should be a forced divesture from Google/Aplhabet. Note: I do generally agree with the article, but this also shows why you shouldn’t use analogies to reason.

I don't think you're analyzing this right. The web browser itself has no defensible moat. The reason that Chrome is winning is because Google has a massive money printer in the basement run by 3 guys and a hungry Alsatian (trained to bite anyone who messes with the money printer), and then 100,000 smart engineers desperately trying to find some application to throw that money at.

The result is Chrome, Google invests in it because they don't want to be intermediation between them and eyeballs - it's a strategic play, not necessarily a direct money maker. So that's why they do it. But there is no moat, they have the number 1 browser because they spend enormous sums of money hiring top engineers to build the number 1 browser.

And this has been true of the browser for a long time, Internet Explorer won because they forced people to use it and used a tonne of anti-competitive practices to screw the competition. Firefox still managed to disrupt that simply by building a better product. This is the clear evidence there is no moat - the castle has been stormed repeatedly.

Re: OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

#203

Post by huijzer »

bruce511 wrote: post #136
cs702 wrote: post #21

This rings true to my ears: > There is no technical moat in this field, and so OpenAI is the epicenter of an investment bubble. Thus, effectively, OpenAI is to this decade’s generative-AI revolution what Netscape was to the 1990s’ internet revolution. The revolution is real, but it’s ultimately going to be a commodity technology layer, not the foundation of a defensible proprietary moat. In 1995 investors mistakenly…

There is no technical moat, but that doesn't mean there isn't a moat. Amazon might be a good analogy here. I'm old enough to remember when Amazon absorbed billions of VC money, making losses year over year. Every day there was some new article about how insane it was. There's no technical moat around online sales. And lots of companies sell online. But Amazon is still the biggest (by a long long way) (at least in the…

> Their "moat" is in public minds here.

Same for OpenAI. Anytime I talk to young people who are not programmers, they know about ChatGPT and not much else. Never heard of Llama nor what an LLM is.

Re: OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

#204

Post by alexey-salmin »

tiffanyh wrote: post #172

> defensible moat … investors mistakenly thought investing in Netscape was a good way to bet on the future Yet Chrome for Google did help create a moat. A moat that’s is so strong the DoJ is investigating if Chrome should be a forced divesture from Google/Aplhabet. Note: I do generally agree with the article, but this also shows why you shouldn’t use analogies to reason.

The moat for Chrome is "it's free because it's subsidized by Google's search monopoly". Before that moat for Explorer was "it's free becaus it's subsidized by Microsoft's OS monopoly", that's what killed Netscape, they couldn't subsidize the Navigator.

OpenAI can't do anything comparable to Google at this point because they have no other product. If anything they're more like Netscape.

Re: OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

#205

Post by lodovic »

noch wrote: post #167
bruce511 wrote: post #136

Earlier quoted context omitted.

There is no technical moat, but that doesn't mean there isn't a moat. Amazon might be a good analogy here. I'm old enough to remember when Amazon absorbed billions of VC money, making losses year over year. Every day there was some new article about how insane it was. There's no technical moat around online sales. And lots of companies sell online. But Amazon is still the biggest (by a long long way) (at least in the…

> There is no technical moat, but that doesn't mean there isn't a moat. Gruber writes: " My take on OpenAI is that both of the following are true: OpenAI currently offers, by far, the best product experience of any AI chatbot assistant. There is no technical moat in this field, and so OpenAI is the epicenter of an investment bubble. " It's amusing to me that he seems to think that OpenAI (or xAI or DeepSeek or DeepMi…

Part of the risk is the possibility that a few key employees find a much more profitable business model and leave OpenAI, while the early investors are left holding the bag. This seems to be a recurring theme in the tech world.

Re: OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

#206

Post by GolfPopper »

neals wrote: post #34
cs702 wrote: post #21

This rings true to my ears: > There is no technical moat in this field, and so OpenAI is the epicenter of an investment bubble. Thus, effectively, OpenAI is to this decade’s generative-AI revolution what Netscape was to the 1990s’ internet revolution. The revolution is real, but it’s ultimately going to be a commodity technology layer, not the foundation of a defensible proprietary moat. In 1995 investors mistakenly…

I get the moat idea. But are there really any moats? What's a good moat these days anyway? Isn't being first and "really good" fine as well?

Here's an idea for a moat: "You know all the ethically extremely questionable grabbing of personal data and creative work we did to build our LLM? Yeah, that's illegal now. For anyone else to do, that is."

Re: OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

#207

Post by jay_kyburz »

swiftcoder wrote: post #201
noch wrote: post #167

Earlier quoted context omitted.

> There is no technical moat, but that doesn't mean there isn't a moat. Gruber writes: " My take on OpenAI is that both of the following are true: OpenAI currently offers, by far, the best product experience of any AI chatbot assistant. There is no technical moat in this field, and so OpenAI is the epicenter of an investment bubble. " It's amusing to me that he seems to think that OpenAI (or xAI or DeepSeek or DeepMi…

> How much would you invest for a given probability that the company you invest in will be able to manufacture intelligence at scale in 10 years? What's the expected return on investment for "intelligence"? This is extremely hard to quantify, and if you listen to the AI-doomer folks, potentially an extremely negative return.

The race to singularity.

Will it bring untold wealth to its masters, or will it slip its leash and seek its own agenda.

Once you have an AI that can actually write code, what will it be able to do with its own source? How much better would open AI be with a super intelligence looking for efficiencies and improvements?

What will the super intelligence (and or its masters) do to build that moat and secure its position?

Re: OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

#208

Post by otherme123 »

brookst wrote: post #91
epolanski wrote: post #13

I think their vision is as it should be ambitious, but I don't believe they can gain any real technical moat. Models are commodities, even in the case Open ai goes through another major breakthrough nothing can stop some of their employees to run to other companies or founding their own and replicating or bettering the OpenAI results. In fairness I realize that I don't use any of OpenAI's models. There are better alt…

Technical moats are the worst ones. The absolute best you can hope for is patents, but those take years to issue and then you have to fight after tbe fact. Trade secrets are nice but hard to defend. The best moats are scale (Walmart), brand (“Google” means search), network effects (Facebook, TikTok). None of those are perfect but all are better than just having better tech.

Facebook and TikTok could collapse in under a year, that has happened before. Network effects seems very brittle: AIM or Fotolog doesn't exist, and they were huge. MySpace is a shadow of what it was.

OTOH, WD40 has a technical moat since 1953, without a patent. There are a number of companies who rely on technical moat mixed with excellent technical image: Makita or Milwaukee Tool come to mind. You can have also a company based on technology moat that theoretically shouldn't exist (patents expired, commodity products), but it does (Loctite, 3M).

Re: OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

#209

Post by umeshunni »

huijzer wrote: post #203
bruce511 wrote: post #136

Earlier quoted context omitted.

There is no technical moat, but that doesn't mean there isn't a moat. Amazon might be a good analogy here. I'm old enough to remember when Amazon absorbed billions of VC money, making losses year over year. Every day there was some new article about how insane it was. There's no technical moat around online sales. And lots of companies sell online. But Amazon is still the biggest (by a long long way) (at least in the…

> Their "moat" is in public minds here. Same for OpenAI. Anytime I talk to young people who are not programmers, they know about ChatGPT and not much else. Never heard of Llama nor what an LLM is.

You could have said the same about Netscape in 1997. Noone knew what IE was (and if they did, thought it was inferior) and no one certainly knew what Chrome was (didn't exist). Yet, the browser market eventually didn't matter, got commoditized and what mattered were the applications built on top of it.

Re: OpenAI’s board, paraphrased: ‘All we need is unimaginable sums of money’

#210

Post by noch »

lodovic wrote: post #205
noch wrote: post #167

Earlier quoted context omitted.

> There is no technical moat, but that doesn't mean there isn't a moat. Gruber writes: " My take on OpenAI is that both of the following are true: OpenAI currently offers, by far, the best product experience of any AI chatbot assistant. There is no technical moat in this field, and so OpenAI is the epicenter of an investment bubble. " It's amusing to me that he seems to think that OpenAI (or xAI or DeepSeek or DeepMi…

Part of the risk is the possibility that a few key employees find a much more profitable business model and leave OpenAI, while the early investors are left holding the bag. This seems to be a recurring theme in the tech world.

> Part of the risk is the possibility that a few key employees find a much more profitable business model and leave OpenAI,

The fact that you can state this risk means that market participants already know this risk and account for it in their investment model. Usually employees are given stock options (or something similar to a vesting instrument) to align them with the company, that is, they lose[^1] significant wealth if they leave the company. In the case of OpenAI: "PPUs vest evenly over 4 years (25% per year). Unlike stock options, employees do not need to purchase PPUs […] PPUs also are restricted by a 2-year lock, meaning that if there’s a liquidation event, a new hire can’t sell their units within their first 2 years."[^0]

--

[0]: https://www.levels.fyi/blog/openai-compensation.html

[1]: Ex-OpenAI employee reported losing 85% of his family's net worth. https://news.ycombinator.com/item?id=40406307

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