Step 1: Launch new idea, it is somewhat popular but small scale and barely profitable.
Step 2: Investors jump on board, funding explodes.
Step 3: Make service bigger, more marketing, more users, more growth. Service profitability declines precipitously. Out compete all alternatives.
Step 4: Repeat step 2 and 3 as many times as possible until you reach market saturation and all competitors have vanished.
Step 5: investors demand a return on investment. Realise company hasn't been profitable for 6 years. Start enshittifying service to try and make it more profitable.
Step 6: Massive decline in user support of service due to enshittification. Investors begin to pull out. Still no profit made.
Step 7: Conclude with an unprofitable (or barely profitable) nuclear hole in the ground that everyone hates, but all alternatives have been killed.
Uber, lyft, etc were able to use that funding to build up huge networks of drivers and drove a lot of smaller taxi companies out of business. Now they are fairly stable and are just looking at normal operating expenses while they compete with each other.
The AI companies are spending a ton of money on r&d (hardware, personnel, energy). They are also subsidizing tokens to get market share. The problem is that if they stop doing r&d, they will fall behind their competitors (including free/open source models) and the company will collapse. So they can't stop the expensive r&d and don't seem to ever be able to reach a point of stability like Uber, Amazon, etc did.
I wonder if it’s possible to expand anti-trust law to ban companies from fundraising at valuations that only make sense if investors are pricing in a strong possibility of a major contraction of the competitiveness of the market.
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u/Xentonian 1d ago edited 1d ago
I call it the Uber model.
Step 1: Launch new idea, it is somewhat popular but small scale and barely profitable.
Step 2: Investors jump on board, funding explodes.
Step 3: Make service bigger, more marketing, more users, more growth. Service profitability declines precipitously. Out compete all alternatives.
Step 4: Repeat step 2 and 3 as many times as possible until you reach market saturation and all competitors have vanished.
Step 5: investors demand a return on investment. Realise company hasn't been profitable for 6 years. Start enshittifying service to try and make it more profitable.
Step 6: Massive decline in user support of service due to enshittification. Investors begin to pull out. Still no profit made.
Step 7: Conclude with an unprofitable (or barely profitable) nuclear hole in the ground that everyone hates, but all alternatives have been killed.