Marvin Liao’s Post

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Global Macro Investor with a Speciality in Startups. Operator-Investor. Portfolio Entrepreneur.

"At the application layer, economies of scale aren’t a viable mechanism for defensibility either — because computational costs are an order of magnitude lower compared to the model layer. Your ability to pay for an OpenAI’s API or compute for your app isn’t a sustainable advantage over a future competitor. Some applications like Character.ai have attempted to avoid this problem by vertically integrating, i.e. building their own customized models. Here again, the efficacy of economies of scale is questionable for the same reasons I mentioned earlier. This leaves network effects and switching costs as the only realistic modes of defensibility for most applications. So how do you create real, meaningful network effects with an AI application? Based on what we’ve talked about so far, the app needs to have an AI-enabled multiplayer interaction which involves a lot more than AI-generated output created by another user. These applications use AI to enable a (higher friction) multiplayer interaction that was previously impossible." https://lnkd.in/gW4zPGGp

AI 2.0: Introducing Network Effects to the AI Era

AI 2.0: Introducing Network Effects to the AI Era

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