Transcript
A (0:01)
When the holidays start to feel a bit repetitive, reach for a Sprite Winter Spiced Cranberry and put your twist on tradition. A bold cranberry and winter spice Flavor Fusion Sprite Winter Spice Cranberry is a refreshing way to shake things up this sipping season and only for a limited time. Sprite obey your thirst.
B (0:26)
Ford Bluecruise Hands Free highway driving takes the work out of being behind the wheel, allowing you to relax and reconnect while also staying in control. Enjoy the drive in blue cruise enabled vehicles like the F150 Explorer and Mustang Mach E available feature on equipped vehicles. Terms apply. Does not replace safe driving. See Ford.com BlueCruise for more details.
A (0:54)
This episode is brought to you by State Farm. Listening to this podcast Smart move Being financially savvy Smart move. Another smart move having State Farm help you create a competitive price when you choose to bundle home and auto bundling. Just another way to save with the personal price plan. Like a good neighbor, State Farm is there. Prices are based on rating plans that vary by state. Coverage options are selected by the customer, availability, amount of discounts and savings and eligibility vary by state.
C (1:24)
Alright, so Deepseek R1 just came out and it looks like it has pretty much entirely caught up to OpenAI's 01 at least. So kind of one of the mantras that we've been saying out on the Internet is there is no moat. So what do I mean when I say there is no moat and what does that mean for us? So no moat in artificial intelligence basically means that there is no barrier of entry, or there is very little barrier of entry. So for instance, intellectual property or IP law doesn't really seem to be slowing any other companies down. Microsoft, Google, Meta, Anthropic, Deep Seek, all these other companies. Sorry, I got something in my eye. All these other companies are catching up to OpenAI. And that means that there is no real secret sauce, there's no barrier to replication of what it is that they're working on. There's also there are capital requirements. So for instance, it does take money, it does take data centers and compute. But as we've been seeing with the Chinese companies is they're often duplicating what OpenAI and others are doing and they're doing it much more cheaply. And part of the reason is just because they don't have the resources that we have. And by we I mean Americans. They don't have as many data centers, they don't have as much compute. And so that is actually forcing them to actually be even more clever and even more creative. And we actually have a historical precedent for this. The Soviet Union often had to duplicate what America was doing on a shoestring budget, which forced them to be even more clever. Now ultimately it still didn't help because they just did not have the capacity to keep up with us. I think the same will be true of China. But anyways, my point is, is that the capital requirements are not necessarily a, an insurmountable barrier considering how many startups are getting funded. We haven't even seen anything come out of Ilya's SSI Inc. But he got $1 billion of funding or something like that. And then the technical know how you might sometimes think like, oh well, you know, only, only, you know, 10 people in the world know how this works that has demonstrate been proven false. We have people around the world and across many companies even here in America and Europe that clearly have the technical know how to advance this down the field. And so yeah, you end up with basically the long story short is there's no barrier of entry, there's a little bit of friction, but there's nothing intrinsically keeping it from going. Also if you hear my dogs trotting around, we got two new dogs. So I apologize, there's nothing I can do about that. Okay. Now with that being said, you might say, okay, well Dave, if there is no moat, then why is OpenAI still out in the lead? And that is because of first movers advantage. So first movers advantage basically is they're the first out of the gate chat. GPT was the first shot around the herd, around the world back at the end of 2022. Here we are a full two years later. Three, no two years later. What is time? Because we had 2023, that was like the year that everything took off. Then 2024 was last year. Okay, so we're just over two years after that initial shot. And even just two years after that initial shot, a lot of people have caught up. So that's why OpenAI is experiencing a diminishing lead. So initially their lead was 12 to 24 months, but now it's down to one to two months before other shops replicate whatever it is that they have achieved. We have seen this with Google which is about to release their reasoning model and so on and so forth. And of course the Chinese deep. Now one thing that I will say is a big huge caveat, A giant asterisk around anything that the Chinese do. It's entirely likely that what they have done is literally just stolen this is one of the primary concerns that I've heard echoed again and again, which is that the Chinese just exfiltrate all the data and the research. Why do it yourself when you can just steal it from someone else? Now, however, that being said, is that this lead has allowed OpenAI to maintain commercial dominance just because they were there and they were doing stuff for years before anyone else was. So just by virtue of the fact that people got used to OpenAI means that OpenAI is still the market leader, even if other companies are taking up or catching up and overtaking them. Sorry, catching up and overtaking them in terms of cost, quality, those sorts of things. Now there's, it's still hotly debated like which model is best. A lot of it, honestly, you know, when people argue about which model is best, honestly seems to come down to personal preference and taste, which is really interesting. The fact that there is room for nuance where it's like it's not just one model to rule them all, it's I like this model because it's better for this, or I like this other product because it's better for that. That actually shows a huge amount of market opportunity for diversification, which is great. It's just like there's not just one car. Like you can have a car, you can have a hatchback, you can have a pickup truck, you can have a van. Right. There's all kinds of form factors that are ideal, which means that there's plenty of room for market diversification. Also, I apologize, it's really dry. The winter is making me itchy. I apologize for all the interruptions. I'm getting back used to this anyways. So the, the existing user base of OpenAI means that there's lots of people that are just going to keep using it just because it's what they're used to. It's, they say, this is what I got used to, this is what I grew up with. I'm going to keep using this. So the market dynamics though mean that even though OpenAI has first mover advantage, it's not going to last forever. Now the other thing is open source and market competition. So one of the longer term impacts of the fact that there is no barrier of entry means that, you know, you might be able to use models completely fungibly. And so a fungible model means that you can use them interchangeably. You can use an open source model, you can use llama, you can use Deep seq, you can use Claude, you can use OpenAI. From a business perspective, you don't care. You just want it to work. If it's completely free and open source, great. If you have to pay another service provider, great. You really don't care. So in the long run, this is really, really, really bad for OpenAI. And the reason is because they are, they're what I call a one trick pony. OpenAI offers literally one product. They offer one product, one service. They have zero diversification. Which means that if some other company or even an open source model comes along and eats their lunch, every company out there that's paying open air right now, they're going to make the rational choice like, well, this other Chinese company can do the same thing, but it's 50 times cheaper and five times faster. Or maybe even this open source model can do exactly what I need and it's completely free. Now what I will say is that OpenAI still has that first movers advantage, but that's literally their only moat is this is the cadence at which they have released. That's their only moat. So then you end up with this, this process of what's called market democratization, which means that there is no possibility for monopoly. The data is out there, the data is basically free, the research is basically free, which means the water's warm, come on in, anyone can join this. And that means that again, no moat. This is really, really good. So there's two reasons that this is good for everyone. So number one is price dynamics. Hey dogs. Number one is price dynamics. Competition drives down price. This is basically going to be like trying to do price control on nuts and bolts and I mean like the literal, like metal things because literally anyone can make nuts and bolts. You just need the right equipment. Likewise in, you know, already today anyone can host models. You just need the right equipment. It's not a big deal. It's going to be commoditized very, very soon and it's just going to be ubiquitous. It's going to be everywhere. This is good for consumers because it means that prices will be down and access will be, will be ubiquitous. And also if someone tries to jack up the price, guess what, you're just going to go to someone else because you just swap out models. You just say, you know what, you're too expensive. I'm going to go over here. So it's a very, very cutthroat market, which is good for us and it's also good for innovation because that means in order to differentiate your product on the market, you need to do something better. You either need to be cheaper, you need to be faster. Or you need to be smarter. And if you're not all, if you're not, ideally you're all three of those. But if you're not at least one or two of those, why is anyone going to use your product right? Like it's just that simple. Now what I want to talk about, because I always do this is I want to, I want to tie this back to historical examples. Because while history doesn't exactly copy itself, it always rhymes. So first and foremost, I Compare this to 3 Prime. Three previous technologies. Sorry, the printing.
