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Picks, Shovels, and the AI Gold Rush (Thinks Out Loud Episode 414)

Dall-E generated image of miners in a modern AI gold rush setting.

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I’ve been relatively bearish lately on Google’s articulated vision — or lack thereof — for artificial intelligence. I’ve been much more bullish about Microsoft and Amazon and OpenAI. But here’s the thing. We’re in the early days of generative AI in practice. Yes, it’s getting used every day. At the same time, I’d challenge most people to name 10 great products that depend solely on generative AI, let alone 10 great companies that that do.

Yes, we’re seeing gen AI features incorporated into existing great products. We’re also seeing great technology that might someday morph into a great product. It’s just that great technology isn’t the same thing as a great product. Google achieved its dominant position not only because they offered terrific search results that worked well for searchers. It’s also because they had a great way to monetize those results that worked well for searchers, advertisers, and everyone else in the value chain. That’s what a great product does. It works. And it pays. For itself.

What we’re seeing instead at the moment is a gold rush. And, as you know, the winners in a gold rush aren’t the people mining for gold. It’s the people selling picks and shovels. Who are those people today? Big Tech companies like Google and Microsoft and Amazon. And aspiring members of Big Tech like OpenAI and Adobe and Salesforce.

The trick for you is to ensure you’re able to connect with your customers whether or not AI helps you find gold. And that’s what this episode of Thinks Out Loud is all about.

Picks, Shovels, and the AI Gold Rush (Thinks Out Loud Episode 414) Headlines and Show Notes

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You might also enjoy this webinar I recently participated in with Miles Partnership that looked at "The Power of Generative AI and ChatGPT: What It Means for Tourism & Hospitality" here:

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Transcript: Picks, Shovels, and the AI Gold Rush

 Well, hello again, Big Thinkers, and welcome back to Thinks Out Loud, your source for all the digital expertise your business needs. My name is Tim Peter. This is Episode 414 of the Big Show. And thank you so much for tuning in. I really, really appreciate it. I think we’ve got a cool show for you today. I want to kick off by highlighting four news stories that tie into a larger point about the AI moment we’re living through in marketing and sales and customer experience and why they’re important and why they’re important for your business.

But I’m going to start with the news stories. The first is that Google launched its Gemini Pro model version 1.5. And I’m going to talk about each of these in a little bit of detail in a second, but I’m just going to give you the headlines first. So Gemini dropped Gemini excuse me, Google dropped Gemini Pro 1.5. OpenAI launched its Sora video from text product. OpenAI might launch a search engine, it was reported the other day. And, ChatGPT, over the last 24 hours or so, has lost its damned mind. It’s been doing some really weird stuff.

So I’m going to do these in order first. First, Google dropped Gemini Pro 1.5. This is a very, very cool tool. It’s their ChatGPT or GPT-4 competitor, it’s very, very cool. It can do things like multimodal analysis, so you can feed it text or images or audio. And its big enhancement relative to something like GPT-4 is that it can input up to 1 million tokens. That’s roughly 70,000 words of text or about an hour of video. Which is pretty extraordinary because you can then do some things with that material in memory that can’t really be done any other way.

The tech under the hood gets a little complex , there’s other ways to accomplish the same thing. But having a larger token set is impressive in its own right and opens up some possibilities that haven’t existed before. For instance, you could have, you could upload an immense amount of data into memory and have it analyze that data rather than doing it a piece at a time so you can get a better sense of the big picture. That’s really, really cool and something that is very hard for people other than Google to do because it requires A, enormous processing power and B, it’s pretty expensive in terms of running the damn thing.

So that’s kind of a big deal and something that a startup like OpenAI may have more problems with. Yes, Microsoft can probably do it. Yes, Amazon can probably do it. But the number of companies that can actually pull this off besides those big three is vanishingly small.

One of the things that I think is important here is Benedict Evans noted in his newsletter he said it’s pretty clear that it’s not going — it, ChatGPT, or it, OpenAI — is not going to be the only company with "the best models."

There’s a very real competition going on here between OpenAI and Google and Microsoft, and probably Amazon and probably Facebook for who is the best AI out there. And that’s something that’s going to play out over time.

Now, of course, OpenAI hasn’t been sitting still the last couple weeks. One, they launched Sora. Sora is so cool. I’ve played with it a little bit. You feed it a line of text, and it can output video, and the videos are remarkable. Also, like we saw with image generation with the early versions of Dall-E or MidJourney, it’s that they can be genuinely weird and disturbing. But when’s the last time you heard people talk about AI-generated images being weird and disturbing? They’re mostly pretty good now. And that’s only taken a few years.

So I’m more interested in what Sora represents over the long term than what it is today. And what it is over the long term is AI-generated video that’s accessible to everybody, to you, relatively inexpensively. More on that in a minute.

The third news story and the one that’s sort of the centerpiece of this whole episode this week is that there’s a news story. The Information reported that OpenAI might launch a search engine. I shared this on LinkedIn and what I said at the time was "this is a major development with broad implications for businesses that get a significant portion of their website traffic from Google. Whether it’s organic search, paid search, meta search, local search, etc., any loss in Google’s market share could impact your revenue. This doesn’t mean Google is going away or that they’ll fail, but the potential market shift could have long term effects."

I mean, when’s the last time we cared about a new competitor to Google? Right? It’s been a minute. So, this could have a lot of effects on you in the longer term, and it’s something I’ve talked about here quite a bit over the last few years, so I’m not going to belabor the point now, but I will come back to it a little bit later.

The last news story I want to talk about is that ChatGPT did some weird stuff over the last 24 hours. I don’t know if it’s still going on. I don’t know if it has been corrected yet. What I do know is that this thing has been doing some weird, wacky stuff. Last night when I heard that this was going on, I asked ChatGPT for its take on how OpenAI’s potential new search engine could affect the market.

And I’m, the first chunk it replied with was perfectly fine, perfectly normal. However, when it got to its fifth point, it started going off the rails in a weird way. And so I’m going to read you a lengthy excerpt. This is a quote from ChatGPT. Starting with:

“Item 5. Caveats to unbridled growth and self correction. The very appeal of every neotech market headliner is its scale and insatiability. First, will there be youth in all Azure titted cubes, or perhaps governance, ethics, and disenfranchised auditoriums could hard stop correctly any singular surf logic, perhaps right sizing to several bookhouse keepers? Six: Future Model Policies and Strategic Legislation. New teleco landscapes or great shadowing lanes of e-clearance and host source munitioning personally might take traffic abreast anchoring light to algorithmic pendants."

I’m sorry, what? I want to be very clear, I, you’re not having a stroke as you’re listening to that. I’m not having a stroke as I’m saying it, but it sure seems like ChatGPT was. What in the world?

I have to give you one more line that said, for those of you who are listening to this while you’re driving in your car or something, I do apologize, I don’t mean to make you drive off the road or whatever, but it’s last line said:

"The seers pipe calls for acceptance of not unusual throw, but swift strategics, genius incrementals, and earth spin grit to not just take, but throw a mill’s engine in case."

What?!? Now, look, we all know that artificial intelligence, that generative AI tools, can experience hallucinations. I’ve not seen any of the text tools hallucinate this badly in a pretty good while. Like, this is nutty, and last I knew as of, oh, 10 o’clock in the morning on Wednesday, February 21st, 2024, this was still going on some of the time.

Which brings me to a smaller point I want to get to here. Now, I have said for some time that ChatGPT faces an uphill climb.

I’ve talked about the threats to Google a lot. But I haven’t always talked as much about the threats to Bing, Microsoft, and ChatGPT. They absolutely could lose. I wrote in an article for HospitalityNet a year ago, this is a quote from the article,

“With no disrespect intended to Microsoft and Bing, they haven’t found a way to bump Google from its throne, despite decades of experience in the search market. Cool technology alone does not equal a successful product. Microsoft and Bing could win, but I’ll believe they’ve succeeded this time when they succeed."

It’s not like Microsoft is new at challenging Google. They just have never managed to beat them. And as we’re just seeing with this nonsense that occurred, that’s kind of a sign of why this is so hard, right? ChatGPT has been doing great up until today or yesterday, and who knows what this is going to do to them.

My very, very good friend Mike Moran and I have been having an email debate/discussion over the last couple of days and he very, very, very intelligently points out that Google is wise to move cautiously here. They are the dominant brand. They have the most to lose if it goes wrong, potentially more than they have to win if it goes right. We certainly know people are motivated as much by fear, if not more so, than they are by upsides. So, it’s understandable that they would be cautious. I have some specific issues when I talk about Google’s lack of vision, that they’re not communicating that caution well, in my view. But, maybe other people feel differently. And this is certainly a sign of why you want to move cautiously, if you’re Google.

By the way, I want to make a quick aside about Microsoft’s position in the space at the moment. Again, some of this comes from my friend Mike Moran, who noted that despite the massive investments that Microsoft has made in OpenAI, they don’t own the company, and they don’t control the company.

Now, I’ve heard arguments from a number of people that suggest this is a benefit for Microsoft. They get all the benefits of OpenAI’s models. They’re only responsible for part of the cost. And they’re very much isolated from brand risk during periods when ChatGPT does something like, I don’t know, losing its damned mind. If their products are isolated from that, that’s no harm to them.

There are also strong arguments to be made, some of these from my friend Mike, that talk about why this is bad for Microsoft. Yeah, they influence the product, but they don’t control it. In other words, OpenAI probably listens to Microsoft, but they’re going to do what’s best for their business.

It reminds me of a lesson I learned years ago about joint ventures between big companies. The joint venture has to exist for the benefit of the child, the joint venture itself, not the benefit of its parents, the companies that are jointly partnered on this thing. I led a joint venture between a hotel company and a group of outside investors and we often struggled to move forward on things because each owner wanted different things that they felt were best for their businesses, not necessarily what was best for the business they had invested in that I was running. It can be really, really icky and frustrating if you have to deal with it every day. Trust me on this one, I know.

In any case, Microsoft is playing a very different game than Google. And it’s going to be interesting how this shakes out over theintermediate term, right? The benefits might turn out to be benefits, the downsides might turn out to be downsides. Probably a little bit of both. But we’re going to have to see what happens there. We know for sure that it’s going to be a different reality than what Google’s going through.

And just to close the loop on why Google is so tough to beat, as I posted a comment on that LinkedIn thread I referenced earlier,

"I doubt Google loses right away, if at all. Not only do they have as much or more data than anyone else, they’ve got an immense amount of processing horsepower available, a generally great brand, oh, and a war chest of more than 100 billion dollars in cash on hand."

By the way, that’s billion with a B. That’s a lot of money. They’re going to be really tough to unseat.

Okay, so I said that these four news stories all had one common theme. And the common theme, the thing that I think you should be taking away from this is the pace of innovation that we’re seeing, and specifically the pace of technology innovation. I’m putting emphasis on the words "technology innovation" here because we haven’t yet seen any real innovation in business practices or business models.

To me, when I look at what we’re seeing right now, it looks a bit like the dot-com boom all over again. It’s really hard to know where we are in big picture terms because everything is changing so fast. But I’d equate where we are at the moment to the internet maybe in 1997 or 1998:

  • There’s lots of cool technology.
  • There’s some cool products.
  • And there’s really only a handful of businesses, if that, that make any sense yet.

Again, I refer to my point about Bing not yet beating Google. They’ve got good tech, but we’re not sure if it’s a good product yet. ChatGPT is good tech. We’re not sure if it’s a good product yet.

Google is taking a deliberate pace with its product. I don’t know what it’s doing in terms of its tech. When I talk about their lack of vision, part of this is its articulated vision. It’s what are they saying out loud? Maybe the product ideas they have are phenomenal, but they haven’t talked about them yet, they’re still talking about the tech.

Now just to be clear, I said earlier, and I’m going to say this again, good technology does not equal a good product.

That’s the place where many companies have failed, and we saw this a ton during the dot-com boom. There was a company called Pets.com that essentially today is Chewy. But what they hadn’t figured out was how do we actually deliver things like dog food economically? And so they burned through a ton of money and went out of business.

There were companies like Flooz.com, that was digital currency. There were companies like Webvan that did grocery delivery. All of these are things that exist today. But the companies don’t, because they didn’t figure out how to make a business out of what they were offering.

Yes, Google brought in really great search products, but also they brought in a really great business model with their ads and with AdWords because that actually paid for all this and has made them an incredibly successful business. We’ll see whether Microsoft or OpenAI is able to monetize generative AI in the way that Google monetized search and is able to turn it into a business in the same way. Right now, we just don’t know. So that’s something you really want to be clear about.

The other reason that right now it’s tough to predict exactly where we are is things are moving so fast. You know, my analogy that right now we’re in 1997 or 1998 is we don’t know if next year is going to be 1999 or if it’s going to be 2004 or if it’s going to be 2011, right? Things are just changing that fast.

What’s definitely true Is that we are in a gold rush right now. And as you all know, in a gold rush, the big winners are the people who sell picks and shovels. So when we start to think about who’s likely to win in the AI moment or wherever we end up with AI, at least for now, the big winners are the folks who would expect. It is Google. It is OpenAI. It’s Microsoft. It’s Amazon. It’s the people I was talking about over the last couple weeks.

I’ve been slagging Google like crazy. They’re also not exactly collapsing under their own weight. My point has not been that Google will fail. My point is that they don’t have as clearly articulated a vision as the other folks out there. And they, if they fail, that there is a playbook by which that’s going to occur that they appear to be following. We’ll see if that holds true, right?

They’re also still in a very, very, very powerful position. They have long since figured out how to productize cool technology. And it’s very clear that Microsoft has a clear vision of how to do that. And I think it’s pretty clear that OpenAI and Amazon have a pretty clear way of how to do that. So, we’re going to see the dominant players probably remain dominant.

The threat to Google specifically, and I’m going to repeat something I said the other day, is that every time a customer uses any tool to search, so a developer uses GitHub Copilot, a shopper uses Amazon’s Rufus, a marketer uses Microsoft 365 Copilot, a product manager riffs on an idea in ChatGPT, a writer uses Perplexity or Claude or so on, that’s potentially a lost click for Google and lost revenues for Google.

But notice what I said there. For the most part, I’m talking about Microsoft. I’m talking about Amazon. I’m talking about Microsoft. I’m talking about OpenAI. Yeah, Perplexity and Claude are new and could come out and be big winners in the longer term. But they’re still a lot bigger than folks who are putting AI into their products and services, right? You would expect Adobe’s gonna be fine. You would expect that Salesforce is gonna be fine. The people selling picks and shovels are the ones who are going to win, at least in the near term.

Some of the folks who are out there right now with cool technology are going to end up being tomorrow’s Pets.com or tomorrow’s Webvan. That’s the reality that we’re facing. And until we, until things shake out a little more, I would still bet on the people who hold the picks and shovels.

Which brings me to my largest point, and the one that I talk about all the time, which you’ve heard me say a million times on this show that "gatekeepers gonna gate."

Notice who we’re talking about in this. We’re talking about the Big Tech folks. We’re talking about the folks who are gatekeepers to you. And we’re talking about the folks who get between you and your customer pretty much all the time. And if you’re not thinking about how do I connect with my customer beyond the gatekeepers, beyond Big Tech, You’re setting yourself up for a lot of trouble.

I’ve given a scenario a number of times on various episodes of the show where I talked about Google losing just a handful of points of market share. If you think about it, search that comes in at the top of the funnel, informational search, means that’s 5 percent of site visitors you can’t retarget. It means your email list doesn’t grow as fast. It means your ABM campaigns have less data to build from and learn from.

It means that either you have to spend more to attract awareness and interest in your product or service, or you have to place your product on places like Amazon or Google product search or somewhere else.

In either case, you’re spending money with Big Tech. They win, you lose, at least a little. I think of companies I’ve worked with, that get at least 5 percent of traffic from informational search and that I’m reasonably confident turned into revenue later. Certainly, a lot more than 5 percent of traffic and probably at least a bit more than 5 percent of revenue.

And it doesn’t matter whether you’re a billion dollar company or a 10 million dollar company. 5 percent, at minimum, is still a lot of money. Nobody likes telling their boss that they missed forecasts even by as little as 5%. It’s not a good place to be.

So it comes back to, how are you building connections with your customers independent of Big Tech? How are you building connections with customers so that regardless of whether they’re using search, or they’re using AI, or they’re using whatever else comes down the pike someday, they still are looking for you, they are still connecting with you, they are still engaging with your brand and your business in a way that works for you.

Because the other thing that we know about gold rushes is sometimes they’re busts at the end. And you don’t want to be the one holding a bunch of picks and shovels that you no longer need and having to turn back to the same company store you bought them from trying to find the next thing that will help you dig for gold.

That’s a losing strategy in the long term and one that you absolutely want to avoid no matter what next week’s headlines happen to be.

So, yes, we’ve had a really cool week for big tech, we’ve had a really cool week in AI, there have been lots of amazing news stories. So yeah, cool technology is really cool. Cool products are better. And cool businesses are best of all.

If we’re in a gold rush, try to make sure you’re selling picks and shovels at least to your customers so that they go looking for you — and so that you end up being a cool business no matter what happens with tech or the news around it.

Show Wrap-Up and Credits

Now, looking at the clock on the wall, we are out of time for this week.

And I want to remind you again that you can find the show notes for this episode. As well as an archive of all past episodes by going to timpeter.com/podcast. Again, that’s timpeter.com/podcast. Just look for episode 413.

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Show Outro

Finally, and I know I say this a lot, I want you to know how thrilled I am that you keep listening to what we do here. It means so much to me. You are the reason we do this show.

You’re the reason that Thinks Out Loud happens every single week. So please, keep your messages coming on LinkedIn. Keep hitting me up on Twitter, sending things via email. I love getting a chance to talk with you, to hear what’s going on in your world, and to learn how we can do a better job building on the types of content and community and information and insights that work for you and work for your business.

So with all that said, I hope you have a fantastic rest of your day, I hope you have a wonderful week ahead, and I will look forward to speaking with you here on Thinks Out Loud next time. Until then, please be well, be safe, and as always, take care, everybody.

Tim Peter is the founder and president of Tim Peter & Associates. You can learn more about our company's strategy and digital marketing consulting services here or about Tim here.

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