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It took 72 years for the number of US households with a phone to grow from 10% to 90%; it took 19 years for TV penetration to follow the same trajectory. But the speed of adoption of modern technologies like generative AI is astounding: within 15 months of its launch, 23% of American adults had used OpenAI's ChatGPT chatbot.
The reason for this acceleration is not hard to understand: generative AI is not a separate and relatively expensive physical object like a phone or a TV, but rather a (mostly) free piece of software that augments existing services.
A massive global digital platform can deliver this technology almost instantly and at scale: this week Apple announced it was rolling out “Apple Intelligence” to more than 2 billion device users.
But just because a new technology is available does not mean that it will be immediately put to productive use: general-purpose technologies can take years, if not decades, to transform an economy.
International donors have long argued that the benefits of foreign aid are limited by the recipient country's “absorptive capacity” — in other words, whether the country has the institutions and know-how to invest the money wisely. The same could be said about generative AI.
If we listen to the preachers, AI will upend everything, everywhere, all at once. The clear winners, according to stock market investors, are the seven biggest U.S. technology companies, led by Microsoft, Nvidia, Apple, Alphabet and Amazon, which account for about half of the $30 trillion market capitalization of the world's 960 publicly traded technology stocks. These companies provide the models, cloud computing infrastructure and silicon chips that run AI.
Speaking at the Founders Forum event in London this week, one major institutional investor said he found it “just incredible” to hear leaders of these AI companies talk about the speed of development.
“This has dramatic implications. The top seven companies in 2018 are: [US] “Market index. It's at 30 percent now. Concentration risk is higher than it's ever been,” the investor said.
The Magnificent Seven are all ambitious and eager to use AI to boil the ocean. Many other companies want to use AI to turn on the kettle. For incumbents, AI has two primary uses: to make things more efficient and to do things that couldn't be done before.
What's even more interesting is that a handful of startups are exploring the possibility of leveraging this technology to invent entirely new business models, but the key will be to focus on specific enough use cases to build sustainable, defensible companies.
Leading companies in most industries have proprietary data, solid brands, and deep customer relationships, making them well-positioned to take advantage of generative AI tools offered by leading technology companies. Previously, only the Chief Technology Officer at most companies was able to offer AI services. But with the availability of generative AI models, AI can now be adopted by all other C-suite functions, from finance to operations to marketing.
But one former founder of a West Coast AI startup that has spent years working with public and private sector organizations to implement AI solutions told me that the main constraint to using the technology remains organizational resistance, particularly in the defense and healthcare sectors.
As the saying goes, there are nine pen wielders for every triggerman in the U.S. military. This organizational inertia also applies to many civilian organizations, entrepreneurs say. In other words, they lack absorptive capacity. It will be five to 10 years before we can fully utilize existing AI models, let alone the more powerful ones that are coming.
Therefore, alternative business models may emerge that can accelerate this process.
For the past few decades, private equity firms have followed a somewhat brutal but profitable strategy of buying companies, firing employees, and relocating operations to China. Given geopolitical tensions between the US and China and a new focus on supply chain resilience, this strategy may now be coming to an end. Perhaps AI will be deployed to transform companies' cost structures.
“Can a PE firm buy the fourth largest company in its industry, implement AI and turn it into the number one company?” asks the entrepreneur. It's a good question, and one that fascinates some PE managers as much as it scares many employees.
john.thornhill@ft.com
