July 15, 2024

Advancing Business Excellence

Pioneering Corporate Success

Forget employees. Artificial Intelligence may upend entrepreneurship as we know it

Alex Kruglov is co-founder and CEO of pop.in.

As artificial intelligence (AI) reshapes industry after industry, we will soon witness not just the automation of tasks but also the proliferation of elevated mediocrity—a tidal wave of “good enough” AI-driven outputs that will flood markets with astonishing speed. This relentless pace of disruptive imitation will do more than enhance productivity—it will spawn a cottage industry where constant self-disruption by look-alikes is the norm, and the traditional venture capital model struggles for relevance.

In this brave new world, every revolutionary idea will be instantly met with a legion of fast followers, blurring the lines between breakthrough and baseline, and reshaping the startup ecosystem as we know it.

The steep climb of AI competence

Within less than a decade, AI has transformed from struggling with complex tasks to mastering them with increasing ease. The AI Index Report from Stanford University provides a startling snapshot of AI’s capability explosion over the last decade. AI capabilities show not just gradual improvement but also a significant leap toward and beyond human performance levels in various tasks. These models are approaching the human baseline with such velocity that it underscores the exponential pace at which AI technology is evolving.

Consider the transformation in AI-generated imagery. As recently as 2022, AI’s prompt-driven renderings were unimpressive, muddy approximations at best. Fast forward less than two years, and the images are not only recognizable but strikingly detailed, surpassing the artistic flair of many human illustrators. The output is amazing. What’s more amazing is how fast and easy it is to get it. This new mode of art has immediately reset the baseline for what is expected.

And we are just getting started. Major entities are investing billions into learning models, achieving far more than merely enhancing output capabilities—they are transforming competitors’ entire business models into mere features.

More importantly, these organizations are pioneering a critical development known as ‘AI Agents.’ These agents empower AI to manage not only individual complex tasks but also to orchestrate multiple parallel and sequential tasks simultaneously. As Mustafa Suleyman put it in his landmark book The Coming Wave, “an AI being able to successfully act on the instruction ‘Go make $1 million on Amazon in a few months with just a $100,000 investment.’”

Consider the implications of this development. Suleyman describes tasks that typically require months or even years for teams to accomplish with a low probability of success. We are not there yet, but Suleyman predicts that it is imminent. When and if what he describes as “the modern Turing Test” is passed, Mark Cuban’s reaction to every pitch on Shark Tank will probably be some version of, ‘Why can’t I just have my AI agent handle that while I take a nap? For those reasons, I’m out!’

The traditional venture capital model is about to stop making sense

For decades, venture capital has been the lifeblood of innovation, fueling the fires of startups aiming to disrupt markets and redefine industries. Investors poured money into early-stage companies, hoping to shepherd them through the perilous journey from idea to product-market fit. The road from startup to scale-up was fraught with risk, but the rewards were potentially astronomical.

This model relied heavily on finding, funding, and scaling human ingenuity—a costly and often inefficient process. Startups burned cash to develop products and capture markets, always under the looming shadow of failure. The long-awaited payoff, depicted by the steep rise following the initial dip in the J Curve, was the venture capitalist’s dream: A startup that finally turns the corner to churn out lucrative, ever-growing returns.

Once the modern Turing Test is passed, the advent of AI agents will profoundly reshape the entrepreneurial landscape. Solopreneurs armed with advanced AI capabilities will be able to execute and scale business ideas at an unprecedented pace and with significantly lower overhead costs. This shifts the traditional role of venture capital and challenges its very necessity.

Moreover, as these AI-driven ventures prove successful, their strategies will be quickly analyzed and replicated by competitors, also armed with advanced AI capabilities. This could lead to a hyper-competitive market environment where the first-mover advantage is diminished and business lifecycles are dramatically shortened. The path to becoming cash flow-positive will shorten, but the margins will likely be erased in months if not weeks.

Forget the J curve, cash flows will instead look like a “ribcage curve” where each “rib” is a new project with its distinct J Curve that the solopreneur milks until it stops generating cash flow.

If you are a VC investing in vertical SaaS, consumer packaged goods, content farms, b2b sales, or marketing tech, you will need to pivot or let your Limited Partners know you are closing up shop. If the entrepreneurs are not constrained by capital, why would they take your money and dilute themselves? More importantly, if the longevity of each idea they start is minimal, they can just as easily close shop and start a new venture without you.

The marketplace will be flooded by an abundance of very good mediocrity. For every decent idea, a cottage industry of as-good-or-better imitators will emerge almost immediately.

So who will benefit the most from this seismic shift? Today it’s Nvidia, whose graphics processing units (GPUs) are supply-constrained and used in the creation of learning models. Tomorrow it will be those learning models that, after having spent tens of billions of dollars, will become the backbone of most of the solopreneurs’ agent-driven output. Just as Apple makes a killing from charging each app that generates revenue on its App Store, so will the learning models whose agents do all the work to build these enterprises. Today’s leaders might very well reap massive benefits if they play their cards right.

What about individuals? A decade or two ago, you were told to learn to code. Tomorrow’s solopreneurs who fare best might be those who know how to ask the most interesting, creative questions. We very well might see a massive comeback for the liberal arts. Perhaps reading all that Atwood, Nabokov, and Marx will pay off?

What about the venture capitalists? Is venture capital dead? Not yet—but it must adapt. Venture capitalists will need to take bigger risks, targeting potentially transformative technologies that lie beyond the reach of current AI capabilities, such as cold fusion or room-temperature semiconductors.

The landscape is changing fast, driven by AI’s relentless evolution. As we stand on this brink, the challenge for today’s investors and entrepreneurs is not just to keep up but to anticipate and shape the future. The era of ‘elevated mediocrity’ beckons making it all the more critical to ask: In this new world, what can truly be exceptional?

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