Is AI all Chat and no Turkey?

We should caveat upfront that we are not AI experts but feel this issue is highly topical and one that has the potential to directly impact many businesses (including our own) and, therefore, requires thought and consideration. We are all grappling with the impending “mass redundancy” that AI will supposedly deliver alongside enormous productivity shifts and we are hopeful that some of these changes can be delivered in ways that will generate positive outcomes for society in general.

How our investee companies are being impacted

AI brings both risks and opportunities to our investee companies, and some are seeing an immediate impact. We have successful use cases, two of which are firsthand examples from our investee companies. Automotive Superstore (an automotive ecommerce platform) has increased productivity for website copy (e.g. product information) by between 5-10x but still requires proofing from a subject matter expert once it has been generated. The second example is a portfolio company currently undertaking a significant AI powered project with the potential to significantly change their business by not only opening up additional global opportunities but also by providing a significant margin uplift over the short to medium term. In the long-term, the second example has the potential to become a world leader in their field and could well end up with an unassailable lead in their product area.

However, and here’s the rub for us, we remain sceptical as to whether we will see the advancements we are all expecting in the time we have all become accustomed to (i.e., we expect it to be delivered yesterday). Whilst our team have been using ChatGPT regularly, we have all found it provides incorrect responses at times and non-curated information which ultimately leads us to use it for specific use cases only. AI was topical at our recent investor event in Melbourne where we interviewed several of our investee company founders. Jack Goodman (Founder and Chair of Studiosity – an education platform joining tutors and students) talked us through his view on the current and future impact AI is likely to have in a sector that is rife with plagiarism, only made worse by the recent commercialisation and accessibility of ChatGPT. AI tools have disrupted this sector in ways many could never have forecast. US-based education technology company Chegg is one example of how this has occurred, Chegg’s business has suffered considerably as a result of the adoption by students of ChatGPT as a tool, materially reducing their subscriber growth  over a very short period of time.

Jack’s belief, along with ours, is threefold:

1. Adoption of AI in the tertiary education sector is critical to its success in the future and choosing not to adapt is likely to have serious and long-term ramifications for your business or institution;

2. A comment made recently stuck with us that approximately 50-70% of the available information on the internet is either fake or for marketing purposes and if this is factual, then the source data for AI tools such as ChatGPT are seriously flawed (note that we have not substantiated this but it seemed incredible the number could be so high); and

3. Schools and Universities have an obligation and a requirement to prepare and turn-out good quality students capable of independent thinking and AI (whilst a helpful tool) does not support independent thinking, rather, it diminishes it.

How we think about AI when investing

Whilst generative AI tools will assist with learning, ultimately, if you’re going to be successful in a chosen field, you will need to be able to think independently and continue to learn, and AI tools should be supporting, not leading this. Inevitably there will be a time where AI will have a material turning point but based on what we’ve seen and experienced to date, we think this will be a lot longer than most expect. The early half of the curve for Moore's Law suggests the above should be true, but then we are likely to experience rapid acceleration in AI’s capabilities (and this is when it could get scary!).

When investing, our focus remains on high quality companies, led by successful and passionate founders who address these sorts of issues with the seriousness they deserve and adopt quickly to ensure the longevity of their businesses. We are confident that our portfolio companies will have success rolling out AI tools, and we have seen some early successes supporting this, but as the old saying goes, “the proof is in the pudding” and AI, in our opinion, is still only half-baked.