Incumbents Under Threat

Incumbents Under Threat

There are three major actors on the stage of this week's newsletter: Big Tech, or as Kyle Harrison describes them, the incumbents; governments, especially the EU, with its regulatory urges; and finally, startups (not incumbents) like OpenAI, Anthropic, Grok, and others.

The headlines point in many different directions. The EU is fining Apple $2 bn. But it is fighting back and refusing to bow down to Epic, Spotify, and others seeking to freeload on its platform. Google is having a moment contrasting with Kyle's point that we are in 'The Age of Incumbents. '

In speaking to the power of big tech, Kyle says:

The opportunities are out there. But here's some key takeaways: For a long time people wrote off questions like, "why won't Microsoft / Facebook / Google just do this?" But that's not a great thing to ignore anymore. Those are legitimate threats, and they've never been better positioned. It's not enough to say "this is better than XYZ Incumbent because the user experience is better." We're not replacing legacy dinosaurs; the dinosaurs today are much more dynamic.

Alex Kantrowitz writes at length about the collapse of Google's open culture and the consequences of over-bearing control mechanisms internally:

Previously accessible Google executives have disappeared, once acceptable questions can't be asked, and a dispassionate arrogance has taken hold. Unsurprisingly, the company's deficient culture is showing up in the product, most vividly in its recent Gemini debacle. As a user and shareholder, I'm concerned.

New York Times writers @satariano, and @dmccabe speak about the global implications of Big Government:

..people's technology experiences will increasingly differ based on where they live.

As for Startups, and to cap it all, Elon Musk and Sam Altman entered into a public fight triggered by Musk's lawsuit. Giving the impression that the AI revolution is in trouble. Gené Teare reports on declining venture funding for February.

But coming to the rescue, Anthropic launched version three of its AI Claude.ai. Widely praised as being close to or better than Chat GPT in some ways.

Big Tech is strong, Big Tech is weak, Governments are strong, Governments are weak. Startups are strong. Startups are weak.

This confused landscape needs to be analyzed to be understood.

So, what really happens when you look at trends in Big Tech, Governments, and Startups?

First and foremost, Governments are desperately using bureaucratic power to pursue narrow objectives. The EU's support for Spotify against Apple is clearly a partisan attack by an illegitimate body seeking to extract cash. The same body attempting to prevent Adobe from acquiring Sigma or Amazon from acquiring iRobot is similarly motivated. This differs from the SEC seeking fines from Web3 innovators and Lina Khan seeking to block technology companies from making acquisitions.

Governments are the most obvious victims of technology's rapid and accelerating growth. Their borders limit their power, but technology is inherently borderless. The tools we all use are not national at all.

Government attempts to get technology under control cannot succeed because they do not have global reach.

The end result, with many governments all trying to control the new technologies, like the Italians with AI, is inevitable and destructive of the speed of human progress.

The historical parallel that comes to mind is the government of Florence trying to hold back the formation of Italy. Small governments are powerless in the face of larger trends outside their borders but impacting their citizens. They can, at best, slow progress down.

And, of course, they will try.

Read the headlines through that prism, and a lot becomes clearer.

As for Big Tech, it's too early to say whether the incumbents today have more power than those from the late 1990s. Google has challenges due to its reliance on search-related advertising, but Facebook, Amazon, Apple, Netflix, and Nvidia are all prospering. On the face, Kyle seems right.

However, OpenAI, Anthropic, MidJourney, Perplexity.ai, and many open-source AI initiatives provide the antithesis. David Cummings's piece about "The Forever Lean Startup" shows why the trend will only accelerate.

The cost of AI to users will likely trend towards free, and everyone worldwide will have access to it.

That means voice interfaces and new devices will challenge the paradigm of web page or mobile app-based experiences. No incumbent will be left behind. Startups will grow and prosper. Human experiences will become increasingly enhanced by access to technology.

Governments are the biggest threat to the future. As the EU demonstrates, top-down bureaucrats seeking to preserve their power cannot be trusted to think about you and me any more than Big Tech management teams can be trusted. The future is in innovators who challenge the status quo.

I wrote this after listening to Biden's State of the Union. I thought he was great.