Keeping in mind that even though as recently as three years ago Marc Andreessen was quite enthusiastic about Web3 (never mind) and all that, it actually is good to know what Sand Hill Road is pitching.
From the Wall Street Journal, October 27:
A Venture Capitalist on Where the AI Opportunities Are for Investors
Andreesen partner Martin Casado says there are three uses of artificial intelligence that are working for companies right now
Heaps of money have been invested in artificial intelligence. Valuations are soaring.What does it mean for companies—and investors—looking to get a piece of it all? Where are the opportunities?
To get some answers, The Wall Street Journal’s global technology editor, Jason Dean, spoke with venture capitalist Martin Casado, a general partner at Andreessen Horowitz, at the annual WSJ Tech Live conference. Here are edited excerpts of their conversation.
The start of a supercycle
WSJ: What type of AI startups are interesting now, and not too expensive or too late?
MARTIN CASADO: It’s good to draw a comparison to the internet. Periodically in the history of the industry, we’ve seen the marginal cost of things go to zero. With compute, the marginal cost of computation went to zero. We had people calculating logarithm tables by hand, then we had a computer do it. That created the compute revolution. Then the internet, the marginal cost of distribution went to zero. When it comes to AI, it really feels like the marginal cost of language, reasoning and creation are going to zero. And if that’s the case, this is a supercycle. And if that’s the case, we’ve got decades. So there’s no “too late.” In that sense, we’re still very, very early.
Right now, these models that you hear about from Google and OpenAI and Anthropic, they’re backed by these massive companies that are not going to crash. Clearly this is strategic value to them, the beginning of something great.
There are these very large models that everybody’s heard about, like Gemini and OpenAI. But there are a bunch of smaller models that do things like speech or music or images. And if you look at that cohort of companies as an investor, they’re actually very successful.
WSJ:There are already huge valuations for some. The barrier to entry there seems like it might be getting more difficult. What is most interesting now?
CASADO: There are three use cases that are working right now, and maybe many more will work in the future.
Probably the use case working the most is creative composition. That thing could be an image, music. A number of companies in this space are growing as quickly as we’ve seen anything growing.
Imagine a AAA videogame. How much does it cost to create? Say $500 million to $1 billion. There’s not one aspect of that game that a model today could not create. You can create the 3-D meshes, the stories, the videos, the textures—and the actual compute inference cost to create all of that is like $10.
The No. 2 use case, it’s kind of a funny one. It’s companionship. We’ve never, as technologists, solved the emotion problem with computers. They’ve very clearly not been able to emote. But I’ll give you an example. My daughter is a Covid kid. She’s 14 years old right now and spends a lot of time on Character.AI. And not only does she spend time on Character.AI, when she talks to her friends she will bring her characters along. It has kind of entered the social fabric. We’re seeing great use of these kind of companionships.
The third space definitely working is code. For example, with Cursor, an AI code editor, you can program very sophisticated programmers, whether you’re an expert programmer or a novice programmer, using models, and they’re working very well....
....MUCH MORE
