The Generalist - What to Watch in AI

Friends,

Look at this beautiful picture:

Given its subject matter, it may not surprise you to learn that this was created by AI, specifically DALLE-2.

I typed in the phrase “Daft Punk in the style of Van Gogh,” and this is one of the outputs I got.

Though perhaps not perfect, it does show the power of AI. With the right data set, the software can generate images that would have been impossible to create by hand. (As a note, DALLE is open source, so you can experiment with it yourself. It’s also worth noting that this isn’t the only AI art tool around. GANBreeder and Artbreeder are two other examples, and there are others.)

Another good indication of AI’s potential is the fact that part of this opening paragraph was written by AI, specifically GPT-3. I suspect long-time readers will sniff out which parts may sound a little less like me, but perhaps I am being overly optimistic.

All of this is to say that AI is at a fascinating spot at the moment, often unpolished but full of promise. To better grasp what is happening in the space, I asked ten thoughtful AI investors what trends and companies they’re keeping an eye on. To learn about AI for lawyers, improving clinical trials with digital twins, and using robot welders, jump in:

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What to Watch in AI

Actionable insights

If you only have a few minutes to spare, here's what investors, operators, and founders should know about the most exciting AI trends.

• Copilot for everything. AI is already streamlining illustration, writing, and coding. It may soon become an assistant for all knowledge workers. In the future, we may have versions of GitHub’s “Copilot” feature for lawyers, financial analysts, architects, and beyond.
• Tracking value accrual. As AI startups often rely on publicly available models like GPT-3 or Codex, some question their defensibility. The fundamental question centers around value accrual. Will applications that leverage GPT-3 successfully capture value? Or will it accrue to the infrastructural layer?
• Beyond words and images. GPT-3 and DALLE-2 have attracted deserved attention for their ability to automate text and image creation. The most impactful uses of AI may come from the life sciences, though. AI can be used to design better pharmaceuticals or run more efficient clinical trials.
• Improving interfaces. Interactions with AI typically take the form of a basic text box in which a user enters a “prompt.” While simple to use, greater control may be needed to unlock the technology’s power. The challenge will be to enable this potential without introducing needless complexity. Applications will need smooth, creative interfaces to thrive.
• Addressing the labor shortage. Skilled laborers are in short supply as society’s need increases. For example, while demand for skilled welders increases by 4% per year, supply declines by 7%. AI-powered robots may be part of the solution, automating welding, construction, and other manual tasks.

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“This time is different.”

Sir John Templeton, the man named “stockpicker of the century” by Money magazine in 1999, referred to those as the “four most dangerous words in investing.”

It’s a good quip and a fair point. Markets are full of mirages, and circumstances that appear exceptional may show themselves to be mundane – one movement in a familiar, repetitive cycle.

Sometimes, though, things really are different. Sometimes, a tiny, promising glimmer produces a lasting flame. Sometimes, the world is genuinely changed.

The sentiment in venture capital is that we may be in the midst of such a moment when it comes to artificial intelligence (AI). The past year has seen a blossoming of new models and startups, along with increased public interest. While venture investing in the sector has slowed in line with the broader market pull-back, talk to VCs today about what they’re most excited by, and generative AI is often mentioned.

As ever, there’s a chance we look back on this period as a false dawn – the result of capital searching for heat amidst a cooldown. But that feels unlikely. My first venture job was in 2016 when every other pitch deck purported to have some AI advantage, and chatbots were seen as a UX evolution. Playing with DALLE-2, GPT-3, and Stable Diffusion feels decidedly different than that era, the equivalent of jumping from a pull-to-speak doll to a precocious toddler. AI is unlocking real creativity and real commercial value, producing novel images, plausible writing, and usable code. The sheer volume of innovation and experimentation often feels difficult to follow as improved models supersede predecessors, and startups identify new ways of leveraging them. The horizon of possibility looks distant one day, then jarringly close a few weeks later.

To better understand the state of the industry, I’ve asked ten thoughtful AI investors to share the company, technology, or trend they believe is worth watching. My hope is that it helps us (myself included) better identify areas of opportunity and topics worthy of further research.

A note on how these collaborations come together.

While investors know what other contributors are writing about and are encouraged to pick different subjects, I’ve found that some degree of overlap is often interesting. Two investors might analyze a similar topic very differently, and I’ve found there is value in their distinctions.

Additionally, I intentionally do not preclude investors from mentioning companies in which they have invested. Everything is a matter of trade-offs, and I believe the benefits outweigh the perceived costs. The downside of this approach is that investors may be seen as “talking their book.” Firstly, we select contributors that I consider thoughtful and reliable. Secondly, it’s more interesting to allow investors to pick the companies they know best and have studied most deeply. It also requires them to choose among favorites. Lastly, it demonstrates they have skin in the game, capitalizing their convictions.

With that outlined, let’s tumble down the AI rabbit hole together and learn how new technologies are impacting our minds, bodies, and machines. ​
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In a meme

​​​​This week, I asked DALLE-2 to make a meme for us. Here’s what it suggests when prompted with “what to watch in AI meme.” I think you’ll agree that it’s brilliant. Ake natacte NTI?

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Puzzler

​​​All guesses are welcome and clues are given to anyone that would like one. Just respond to this email for a hint.

The answer? A fish. I like this one. For those that enjoy a bit of Tolkein trivia, allow me to direct you to the excellent, very extra invite he once sent for a party hosted to celebrate his son’s coming of age. “Hearses at daybreak!”

See you soon and wishing you a lovely day,

Mario