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The changing construct of MOAT in AI-powered businesses

A leaked memo from Google ignited many discussions on the existence of a true moat for AI-powered businesses. It said:

“We do not have a moat. Neither does OpenAI!”

This is completely a contradiction to the popular belief that LLMs are built with unbeatable technology and dataset powers and it would be impossible to match the powers of the big ones.

Here’s what I think.

In the age of AI-powered products, true ‘technology MOAT’ will be a myth. 3 reasons.

1. The LLMs have democratized building mind-blowing applications 100x easier than before. Anything you build, 100 others are building the same thing, and probably out there already.

2. Open-source movements are already proving to be much more powerful than the walled gardens, making it tough for even the current LLMs to keep their moat. (No, I don’t believe that 100s of millions of dollars would be needed to build an LLM and I don’t believe that it is going to be one or two winners ruling the market. Still in doubt? Checkout Vicuna from Huggingface)

What can be the real moat?

  1. Deep specialization — Build for a space that you understand, go deep!

2. Personalization — This is something that is hard to come by. But can definitely bring about a difference.

3. GTM — The smarter your distribution is, the better. Includes your community

4. The UX — How seamless your UX is with the journey of the user? AI calls for blending in, not changing behavior.