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Intelligence Factories & The Arc of Technology Adoption
Generative AI is a new Computing platform. Intelligence factories are the outcome. However, let's go back 7 decades to figure out how we got here.
The mainframe computer was invented in the early 1950s. It was a major breakthrough in computing that enabled data processing at a scale that humans couldn’t comprehend. IBM commercialized the mainframe soon thereafter. There was one large hurdle to mass adoption. Price. A mainframe cost millions! Governments were the early adopters. Academic institutions soon joined in with hopes of accelerating research. Three decades later, IBM was once again the leader in commercializing the Personal Computer (PC). The PC finally introduced affordable computing to small businesses and consumers. Productivity increased soon thereafter.
Source – Coatue Presentation
Hardware vs Software Adoption
Hardware innovation is introduced at the high end. It’s expensive. The Tesla Roadster was a Sports Car. Then came the Model S. The Model 3 is the mass version. There is likely a Model 2 in the future.
The Apple Vision Pro is prohibitively expensive and only compelling to early adopters. However, if history is a guide, prices will fall and future versions of this device will be household items.
To grow, businesses drive down the costs of their manufacturing processes. As volumes grow and efficiencies kick in - prices drop further – stimulating even more demand. This virtuous cycle leads to mass market adoption.
Seven decades after the invention of the mainframe, we are entering the world of Generative Artificial Intelligence (Gen AI). Gen AI is standing on the shoulders of the internet, mobile, cloud, machine learning, and neural networks.
However, the Arc of Innovation has flipped. The masses had to wait three decades for the PC. Similar Generative AI adoption took three months. There are two simple reasons: 1) Ease of availability, 2) Low costs. Microsoft (Bing AI) and Google (Bard) have made their versions of Gen AI available at no cost.
Software adoption works in the polar opposite direction to hardware adoption. It starts at the grassroots. Consumers adopt it first. Small businesses come in next, and Governments are the laggards.
Consumers and corporations are sitting on a massive inventory of data. Data centers and cloud computing provide industrial-scale processing capability. However, programming was difficult for most and thus a big hurdle in leveraging data in order to unlock business intelligence. With Gen AI, we can build intelligence factories on top of our current infrastructure to unlock trapped intelligence. Instead of programming languages, the inputs are natural language prompts.
Gen AI is disrupting programming language. English, or natural language, is the way forward. Gen AI writes the code for us. This ease of use will pull every consumer and corporate employee to leverage these intelligence factories. It will make all of us more productive. If PCs were a great tool, productivity enhancements from Gen AI over the next decade should be much greater. While every technology has its drawbacks, the positive economic impact over the next decade will be substantial.
Gen AI has turned the Arc of Technology adoption upside down. It is a powerful new computing platform. Intelligence factories are the outcome.
I am an investor and these are my personal thoughts on investing, behavioral finance, markets, and sports viewed through the prism of a Latticework