The traditional model of company formation involved assembling a large team of 40 or 50 people and raising tens or hundreds of millions of dollars in venture capital. However, the fast pace of AI recursion has made it possible to achieve the same goals with just three or four people and very little capital. Companies like Mid Journey are scaling to enormous sizes with minimal investment and can even be bootstrapped.
This new reality has profound implications for investors and venture capitalists. The traditional capital allocation models that relied on writing large checks into businesses that absorbed tons of money are no longer viable. Instead, the focus must be on identifying promising entrepreneurs who can achieve significant growth with minimal investment.
In recent years, the speed of technological innovation has accelerated rapidly, particularly in the field of artificial intelligence (AI). With the advent of powerful language models like GPT-3, the pace of AI recursion has increased exponentially. This has significant implications for company formation and capital allocation, which were traditionally measured in years, but are now measured in days and weeks.
Furthermore, AI recursion has made it possible to disrupt existing businesses using tools that eliminate the need for sales and marketing. For example, Stripe disrupted the payments industry with an equivalent product that required only a fraction of the employees and costs of traditional payment processors. Now, with GPT-3, it is possible for young, industrious entrepreneurs to string together a bunch of agents that will autoconstruct everything they need to build a much cheaper product that can be deployed for other agents to consume. This eliminates the need for a sales team and can significantly reduce costs.
However, this new reality also raises concerns about regulation. As AI becomes more powerful and ubiquitous, it is essential to have a conversation about how to regulate it effectively. Without proper regulation, there is a risk that AI could cause significant harm, leading to a "shit show." It is essential to strike a balance between innovation and responsible use of technology to ensure that AI benefits everyone.
The fast pace of AI recursion has profound implications for company formation and capital allocation. The traditional models are no longer viable, and entrepreneurs must adapt to the new reality to achieve success. Investors and venture capitalists must also change their approach and focus on identifying promising entrepreneurs who can achieve significant growth with minimal investment. However, this new reality also raises concerns about regulation, and it is essential to have a conversation about how to regulate AI effectively to ensure that it benefits everyone.