Why VCs and Startups can help drive human progress [in the long term] with the current pace of investment in AI.
It’s easy to criticize VCs for their AI zeal and for creating a new bubble. Let’s take a historic view and dive into the evolution of storage costs and microprocessors from the 1990s to the 2000s and its implications for the future of GPUs and AI compute, with a keen eye on what this means for venture capital investments.
Storage Costs: A Digital Revolution
In the 1990s and early 2000s, we witnessed a remarkable transformation in digital storage. Much like swapping out a cramped studio apartment for a sprawling mansion, the storage space on our devices expanded enormously, while the cost did the exact opposite.
It’s a classic tale of getting more for less — something consumers and businesses alike never tire of. This was the era where hard disk drives started resembling tiny miracle boxes, capable of holding vast libraries of data at a fraction of the cost and size of their predecessors.
The Microprocessor Saga
Meanwhile, microprocessors, the brains of our computers, were undergoing their own dramatic evolution. It was as if they were on a constant diet, becoming leaner (in terms of cost) yet more muscular (in performance) with each passing year. This period was a textbook example of Moore’s Law in action — a principle that, put simply, predicts a steady increase in computing power over time. The result? Computers that were once bulky and expensive became accessible to the masses, reshaping society in ways that were once the stuff of science fiction.
Drawing Parallels with GPUs and AI
Fast forward to today, and we’re seeing a similar story unfold with GPUs — those graphic processing units that gamers love, but which, as it turns out, are also pivotal for powering AI. Much like their older cousins in the computing world, GPUs are getting faster, cheaper, and more efficient. They’re the workhorses behind the scenes of the AI boom, and as they become more affordable, AI becomes more ubiquitous. It’s a virtuous cycle that’s democratizing access to technologies that were once the exclusive domain of a few technologists.
Venture Capital and the AI Horizon
So, what does this all mean for the world of venture capital? In the short term (think the next 2–3 years), it’s as if we’re in a gold rush era of AI and computing. Venture capitalists, those modern-day prospectors, are on the hunt for the next big thing in AI. Lower costs and improved accessibility of AI technologies mean that VCs are not just betting on the big players but are also increasingly turning their gaze towards smaller startups that are nimble and innovative. They’re looking for companies that can harness these advancements in GPU and AI technologies to disrupt industries, create new markets, and offer solutions to complex problems. The question is what happens to these companies as the cost of compute drops and [if] open source LLMs and other AI grows. We don’t know the precise answer today, but (for some successful companies) products often turn into services and sell enough of those services and you get platforms.
The Broader Picture
The ripple effects of these technological advancements can’t be overstated. They’re set to reshape industries, redefine jobs, and potentially even alter global economic landscapes. As we’ve learned from the past, when the barriers to entry lower in the tech world, innovation flourishes. We’re standing at the precipice of a new era, where AI’s potential is limited only by our imagination and the ethical boundaries we set as a society.
The Internet democratized tools and the it allowed us to build a web site without a designer, book travel without a travel agent, or trade stocks without a stock broker. The future of the Internet is when that changes the human experience from DIY to DIFM (Do it for me). That’s where AI comes in.
In summary, drawing from the lessons of the past, we can expect the advancements in GPU technology and AI compute to open up a new frontier in technology, much like the revolutions in storage and microprocessors did in their time. And in this new frontier, venture capitalists have a crucial role to play if they can be judicious funders, steering the world towards a future that, I believe, holds untold possibilities for founders and for their customers. We create a new cycle of innovation with new applications and productivity for people at dramatically lower cost thanks to technology.
