TL;DR - Recent advancements with LLMs are awesome, but also overhyped. I think too much money is after too few novel ideas. We’re fueled by “irrational exuberance” (thanks Alan Greenspan) again - and normal people will somehow get stuck with the bag. Though if you can get past the hype, maybe there are “this tech isn’t currently trendy” discounts to be had.
Disclaimer: I’ve been wrong before
Still - I am aware that this could prove to be the most wrong thing I’ve ever posted. I’m cool with that. I’m not an investor. So let’s see if it ages like wine or like milk.
I don’t get it
I just don’t see what is going on with YC and all the VCs funding OpenAI wrapper after OpenAI wrapper. If you see what my blind spot might be, I’d love to hear about it. To me, it looks like the .com bubble all over again, except it’s not super charged by low interest rates / cheap money.
LLMs are super valuable
I’m not anti-LLM, I use them all the time - they’ve almost entirely replaced search and Stack Overflow usage for me (I do miss the hostility there though). They crank out boilerplate code and scaffold tedious things in seconds / minutes that would take much more time to manually write. They’re great for figuring out the “average answer” to a question and finding new threads to pull. Claude even helped my by critiquing the draft of this post. Of course they’re valuable and applicable to many areas.
We’ve been here before
Still - in the 90’s / early 2000’s, the internet revolutionized basically everything and yet, VCs and a wave of general excitement and hype blew up valuations. Investors were spraying money at anything mildly internet related and a bunch of undifferentiated, way overvalued companies went bust when the internet became the internet and products had to actually add value to make money (or so I’ve read - I was ~10). Current conditions would probably be even crazier if interest rates were not so high right now…
I realize some unicorns came out of that era - so maybe it’s just a “place as many bets as possible and huge wins compensate the losses” strategy.
Is there alpha?
I bet that there are great opportunities for other startup investors to invest in teams doing novel work outside of AI/LLMs. Those companies that would have normally been scooped up by the big VCs or acquired by larger companies may be overlooked and / or undervalued just because their marketing team isn’t adding (or telling LLMs to add, let’s be real) “powered by AI” into all their copy. Maybe this will trickle over to normal equities and lowly retail investors like myself can put our $0.02 into established, boring companies with good fundamentals at a “this tech isn’t currently trendy” discount.
Refs:
- https://ideas.ted.com/an-eye-opening-look-at-the-dot-com-bubble-of-2000-and-how-it-shapes-our-lives-today/
- https://www.britannica.com/money/dot-com-bubble
- https://en.wikipedia.org/wiki/Dot-com_bubble
- And thanks to Anthropic’s Claude for critiquing the drafts of this post.