GM Readers! ☀️

Welcome to the 17th issue of Evolving Internet Insights.

Idea we’ve been thinking about: “Beyond Open Source is Open Innovation”

Thanks for reading!

Liang and Dan 🙌

🌰 In a Nutshell

• The Biden administration issues an executive order on “safe, secure, and trustworthy AI” 

• Quora’s AI platform, Poe, wants to become the app store for AI chatbots

• Google to invest $2B in Anthropic, Open AI’s leading competitor

• Web3 Startups Find Product Market Fit a Greater Challenge Than Funding

💾 Byte-sized Stories

This week’s top stories with our insights on top.

1. Biden Administration Issues Executive Order on AI ⚖️

⚡️ TL;DR: The Biden Administration released its AI executive order detailing rules and guidelines on improving the safety, security, and trustworthiness of the technology. Most notably, the executive order declares:

• Developers, who develop models of a certain size, need to share safety test results for new AI models with the government if the technology could pose a risk to national security.

• The Department of Commerce will develop guidance for labeling and watermarking AI generated content.

• The National Institute of Standards and Safety (NIST) will develop standards on AI safety before AI models are released to the public.

⚡️ So What: The Executive Order has been met with mixed reactions. On the one hand, it is great that the US is putting AI safety, security, and trustworthiness front and center, highlighting the power of the technology and the need to advance the technology responsibly.

On the other hand, it is unclear if the Executive Order will be able to influence the relevant stakeholders enough to combat and mitigate the problems brought forth by generative (gen) AI. For example, watermarking is still an evolving research space and current solutions have proven to be unreliable in determining whether a piece of content was AI generated.

⚡️ Zoom Out: While what the US says in regards to AI regulation carries weight, it is unlikely every country will follow the same approach. In fact, now that the US has “shared its hand,” countries might take the opposite, “hands off” approach to regulation in an attempt to welcome startups to their jurisdictions. We saw this happen in the crypto and blockchain industry with the US vs. Europe.

Read More Here, Here, Here

2. Poe Introduces the Chatbot Creator Economy 🐦‍⬛

⚡️ TL;DR: Quora’s Poe introduced an “app store for AI” that provides chatbot creators a way to monetize the chatbots they build. Poe allows users to answer questions and get answers back from a variety of different chatbots all in one interface. Poe is incentivizing creators in two ways:

• Referral Fee: if a creator’s chatbot leads a user to subscribe to Poe, the company will share a percentage of the revenue with the chatbot’s creator.

• Pay-per-Use: chatbot creators can set a per-message fee within their chatbots.

With this program, Quora wants to enable small companies, hobbyists, and AI research programs to create chatbots that reach the public – giving users more choice as the gen AI space evolves.

⚡️ So What: As of October, Poe’s mobile app has 18M+ installs with ~1.2M MAUs (monthly active users). Poe is hoping that this creator monetization program creates a virtuous flywheel that gives users more reasons to use and pay for Poe as the number of chatbots grow on its platform. This is effectively the “app store” strategy – in which Quora provides the platform for others to create, and users decide which applications they find the most valuable. If successful, this could entice Quora’s 400M users to jump into Poe, which would further entice creators to create chatbots on Poe.

⚡️ Zoom Out: In a world of AI model proliferation, owning the consumer “front end” can prove to be very valuable. The average user in consumer apps does not care about the technology or how it works. Users care about a seamless and convenient user experience.

Rather than “fighting the battle with other competitors further down the stack” (i.e. model development with OpenAI and developing specific applications on top of models with a litany of agile startups), Quora is instead taking the app store approach with Poe – creating an economy that benefits the supply side (chatbot developers) and the demand side (users).

In a competitive industry, owning the marketplace ends up being a wildly profitable position (à la Apple).

Read More Here, Here, Here

P.S. Our next Brainfood Issue will cover how the role of intelligence evolves in the age of gen AI.

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3. Google Is Investing $2B in Anthropic 💰

⚡️ TL;DR: Google is investing $2B in Anthropic, one of the leading large language model (LLM) companies and main competitors to Open AI. Anthropic’s flagship LLM is Claude, which can summarize and process up to ~75K words (the approximate length of a book) in under a minute, compared to ChatGPT’s ability to handle up to ~3K words. 

⚡️ So What: A few months ago, Amazon invested $4B in Anthropic (you can get our take on that investment in our past issue, ⚡ Insights 12).

For Big Tech, there are two paths to winning the AI race: 

• Developing a LLM in-house

• Investing and partnering with external LLM providers.

Since gen AI technologies are evolving quickly, and with startups and large companies on a level playing field, the stakes are high. For example, Google has developed Bard and is developing Gemini, it’s next-gen LLM, but is also actively investing in AI-first, industry giants. Of course, Microsoft was ahead of the curve here with its multiple investments in Open AI, collectively amounting to $13B.

⚡️ Zoom Out: Unlike traditional venture capital where the focus of an investment is for financial returns, Big Tech investments are often more strategic in nature. Big Tech companies have the funds to not have to worry about generating a return on their investments (especially if investments in emerging technologies are justified to their shareholders). Instead, corporate venture capital arms often feel like extended R&D, where investing in a leading startup gives the executive suite a front row seat into innovation.

Read More Here, Here

📊 Let’s Get Graphic

One visual we couldn’t stop thinking about.

Web3 Startups Find Product Market Fit a Greater Challenge Than Funding

⚡️ Takeaway: Many may consider the insights in the headline and chart to be counterintuitive. Especially, when you consider the macroeconomic cycle we are in and its impact on venture funding being deployed (read: VC dollars are way down historically and for the period).

You may be asking yourself, “how can product market fit (PMF) overtake funding as the biggest threat? Traditionally, PMF is needed to secure funding, right?”

The crypto “hype cycle” of the last 3-4 years drove investors to invest out of fear of missing out (FOMO), propelling startups into Series B rounds and beyond even if they had not achieved PMF.

Remember securing a funding round does necessarily mean there is market validation.

🐇 Down the Rabbit Hole

Some deeper dives to help you get smarter on emerging tech.

1. Unbundling AI: essay musing on the unbundling of the AI stack with examples from previous product paradigms like Excel.

2. AI Modi Singing Remixes: a piece highlighting how AI may be used in politics, both positively and negatively.

3. RUIN, Documentary Film on FTX: a Bloomberg Original documentary on the rise and fall of Sam Bankman-Fried and his crypto exchange, FTX.

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