But there is another paranoia that’s real as well, amongst managers of companies in not just tech but almost every industry. As the world is convinced that AI is BIG and REAL, everyone is anxious not to get left behind. So incumbents large and small are racing to do ‘AI Add-ons’. Or investing lots of resources in ‘AI Native’ versions of their current product or services. Besides all the ‘gnawing uncertainties’.
“The technology has sparked enormous excitement among CEOs, founders and investors—and tremendous fear that they could very quickly get left behind in an upended landscape.”
It starts with some vivid anecdotal stories:
“Last fall, Howie Liu, CEO and co-founder of Airtable, arrived at a board meeting with an urgent realization: If Airtable, a maker of collaboration software, wanted to stay relevant, it needed to significantly rethink itself. “We started to feel like the incumbent instead of the disruptor and risked becoming one of the dinosaurs,” Liu said.
“The board agreed, and Liu sprinted to put a plan into place. In June, Airtable launched its new product: an AI-powered software for making apps. He describes the motivating force behind his decision to alter his company’s direction as a profound sense of paranoia. “Maybe it’s not the most psychologically healthy way to live,” he conceded. Liu then offered a justification: He thinks he’s in wonderful company. “The founders I admire—even Zuck at the very top—are constantly paranoid.”
“Almost no one in tech land seems to feel very at ease these days. Brexton Pham, CEO and co-founder of Ohara, has shifted the focus of his Kleiner Perkins–backed startup from HR and finance operations for startups to AI agents with a mindset that he sums up as “fast, ruthless and experimental.”
The questions are universally the same, despite the fears over the rising ‘Table Stakes’:
“Everybody around me is genuinely guessing: ‘Where do we think the future is going?’” Pham said. “It’s not just, ‘Where is the world going to be in five years?’ I don’t even know what the costs are going to be in six months.”
“Even the old hands find themselves blinking in surprise. “The rules of these business models are just so different now,” said Box CEO Aaron Levie. “The speed at which companies are scaling—I’ve never seen anything like this.”
Even August, a relatively slow month isn’t enough to push back the dread of September, when everything rushes again in tech to the end of the year and beyond:
“As summer comes to a close, and Silicon Valley prepares to hurtle through the final months of the third year in the great AI boom, the industry has arrived at a moment of strange reckoning, one defined by two emotions often impossible to separate: a sense of enormous excitement—and a feeling of immense anxiety, one that was fueled this week by a market selloff over a viral MIT study that purported to show that nearly all AI projects at U.S. businesses have flopped.”
“Fear is a familiar state in Silicon Valley. In the 1980s, Andy Grove, the former Intel CEO, expressed his philosophy that business leaders ought to be constantly dangling from tenterhooks in his best-selling book, “Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company.” In the book, Grove described the existential moments that businesses face, which he dubbed strategic inflection points.”
“Right now, tech is acting like AI could be the mother of all strategic inflection points. It’s a peculiar attitude considering that in some ways, times have never been better.”
“The tech-heavy Nasdaq sits at an all-time high. The IPO market is finally showing signs of life for the first time since 2022. Eight of the top 10 most valuable companies in the world are from tech, led by Nvidia, a once unremarkable designer of graphics chips.”
“Meanwhile, OpenAI, which was a little-known research outfit less than five years ago, could quite shortly become the world’s most valuable private company. And these sorts of massive valuations allow the best minds in AI to command salaries that would inspire envy among the most highly compensated film stars.”
Success seems to abound everywhere, anecdotally. Yet, no one has a moment to bask in that success:
“Yet many of the industry’s leaders seem like they’re on the verge of throwing up in the garbage cans at their desks. Founders and investors are concerned they won’t be able to keep pace with existing competitors who figure out their place in AI—and any newcomers who might unexpectedly materialize. “You’re seeing almost every founder sit there and shiver in their boots that the next ChatGPT model is just gonna do what their entire company and app has done,” investor Adrian Aoun said in an appearance on The Information’s TITV.
Everyone’s adjusting for the ‘gold rush’, mostly because so many are yelling ‘gold’!
“The AI anxiety has spread beyond corner offices to the rank and file, too. Tech employers have laid off tens of thousands of staffers as their leaders look for savings to pay for massive spending on AI—or attempt to show customers how efficient AI can make their own businesses. At the same time, the giant paydays for AI researchers are establishing a new caste system that drastically favors anyone with experience in the field—and that is upending the daily rhythms of corporate life.”
And it’s not just at the top, but flowing down as well:
“At Google, for instance, product managers are starting to be asked to vibe-code a prototype rather than just write a document outlining product requirements, according to a Google Cloud employee now in that situation.”
“At some companies, managers are breathing down the necks of employees to use AI to produce more, even though in practice the technology isn’t quite good enough yet. With the addition of AI coding tools, executives expect product development to be moving far faster—but much of the AI-written code is too buggy to deploy, and many other bottlenecks related to product reviews or other procedural elements can’t just be AI-generated away, according to a current LinkedIn employee.”
Then there are the metrics of AI success, elusive and slow going for now:
“While AI has become everyone’s preoccupation, it’s how many businesses are generating substantial, durable revenue from the technology—a paradox undoubtedly fueling additional worries: With so much capital invested in pursuit of commercializing the technology, companies will soon need to show those investors they can actually do so.”
“That’s been a more elusive goal than the surface-level excitement suggests. On that note, here’s an example of a number that sounds great but isn’t: Annualized revenue for “AI native” firms selling models or apps surpassed $15 billion in June, according to The Information’s Generative AI Database. The figure has surely increased since, but the reality undoubtedly remains that more than 85% of that sum flowed to just two companies: OpenAI and Anthropic.”
“Over at Airtable, Liu thinks the company’s altered focus on AI will lead to a more explosive level of growth than if the business had continued to concentrate on collaboration software. The move into AI is important enough that Liu is willing to trade some of the roughly 90% gross margins on his collaboration software in favor of an AI product he acknowledges will be far costlier to sell. “It could hurt our margins as we get more AI usage,” he said. “That’s a trade-off.”
All of this is to highlight the distinctly different mood and anxieities in this AI Tech Wave vs others over decades now. Up and down companies, large and small. And not just in tech.
As I’ve discussed in earlier posts, the race to lock up ever more ambitious power source for AI Data centers, at this stage of the AI Tech Wave, is on. As...
Good Morning OpTrackers, We’re back with another short idea – today it’s Fisker (FSR). For The Uninitiated While there are dozens of tools available...
