Platformonomics TGIF is a weekly roll-up of links, comments on those links, and perhaps a little too much tugging on my favorite threads.
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We’re back and Happy New Year! We’ll start the year with some predictions about what will (and will not) happen in 2024 (at least as it will be chronicled here).
We Will Talk About AI
Incessantly.
We will fixate on the trajectory of generative AI. Will frontier models continue to improve or plateau? Almost every question of how the industry unfolds is downstream of that dynamic.
Companies that don’t lead in AI but feel like it is their birthright to lead based on good work decades ago will beg to differ (often using early-in-the-race metaphors or blah-blah-blah “enterprise” blah-blah-blah).
More than a few investors still see AI as a revolutionary new technology cycle rebooting everything that lets them invest like its 2021 (due diligence, schmoo diligence). We will question their judgment, especially those who securitize GPUs
The megalomaniacally self-important, Luddities and the media (but then I repeat myself) will continue to frame generative AI as a scary existential issue, while the self-appointed hall monitor industrial complex continues their power grab.
AI discourse will continue to be framed through the lens of dystopian science fiction movies (which is an odd choice for “guess the next word” technology).
Whatever the hype, you can’t spell CAPEX without AI AI is a CAPEX-driven phenomenon, so following the CAPEX means following the GPUs.
Cleanup on the SaaS Aisle Will Continue
We still have too many SaaS companies on the shelves. The reduction in inventory will continue. We just have to hope there are more cleanup participants than private equity.
Private Equity Will Buy and Ruin More Software Companies
As Larry Ellison (perhaps apocryphally) says, every ecosystem needs a scavenger. After years of excess, the software industry is in dire need of a thorough scavenging. In theory this is what private equity says they do: fix broken and/or overcapitalized businesses. And private equity loves software.
The model is straightforward: buy a software company using a lot of debt, slash expenses (engineers are expensive!), jack up prices and then hope to flip it before customers can migrate.
The problem is there is an ocean of private equity money (~$5 trillion) chasing too few relevant deals, and, more problematically, private equity doesn’t actually know how to fix businesses, especially software businesses. The list of software that got better when private equity got involved is a very, very short list (let me know if you can think of any). Private equity will no doubt get the money, but customers end up holding the bag.
Hence our slogan “when private equity comes amalgamating, it is time to start migrating” (rhyming remains difficult).
VMware is quickly becoming the poster child for private equity buyouts. Layoffs. Price increases. And more private equity software deals are coming. Alteryx. DocuSign. We’ll be issuing software migration alerts as private equity deals happen.
The EU Will Continue to Fiddle While Rome Burns
Even as the complete bankruptcy of their economic, energy and security strategies has been revealed to all over the last two years. the EU still dreams of being a “regulatory superpower”. Infused with cookie consent banner confidence, the EU has turned its attention to AI.
Despite prioritizing speed over comprehension, the EU have failed in their stated goal to “move fast and regulate things”. China, the UK and US all beat the EU across the regulatory finish line and now even the French (pause and let that sink in) think they’ve gone too far.
Her defence of the AI Act comes after Macron argued the legislation risks leaving European tech companies lagging behind those based in the US and China.
“We can decide to regulate much faster and much stronger than our major competitors,” the French leader said earlier this month. “But we will regulate things that we will no longer produce or invent. This is never a good idea.”
Those comments were seen as potentially setting up a new fight over the EU’s new regulatory regime for AI which is considered among the strictest to be proposed anywhere in the world.
Though the AI Act was agreed this month, the law still needs to be ratified by member states in the coming weeks. France, alongside Germany and Italy, are in early discussions about seeking alterations or preventing the law from being passed.
(Remember, it is only dirigisme if you’re in France. Anywhere else it is just sparkling industrial policy).
Meanwhile, the EU’s economic model is collapsing. The German auto industry, the engine of the EU economy, is in dire trouble. Everybody loves mercantilism until you run into a bigger mercantalist (hello China!). Deindustrialization is deeply corrosive. Populism just getting started in Europe. Brexit may turn out to be the geopolitical analogue of the Accenture partners who got kicked out of Anderson Consulting just before Anderson got the death penalty for enabling Enron.
A continent can’t live solely on fines of American tech companies.
Copyright Holders Will Advance Self-Serving Theories
The New York Times wants to replace Disney as the face of copyright maximalism. So we’ll learn about fair use, the copyright clause of the Constitution (and why the EU is yet again irrelevant in setting technology norms), the underlying social contract behind copyright, rent-seeking, try to find any actual and material damages, why we all stand on the shoulders of giants, and how a few sands of grain on a beach tend to overstate their importance.
The 6600 tokens I’ve contributed to the LLM training corpus are my infinitesimal contribution to an immeasurably valuable canon of human thought and expression (and my best shot at immortality).
Debt, Deglobalization, Demographics and Despotism Will Dominate
Technology has had a great run on center stage, but there are other forces at play. I’m thinking of calling them the Four Dorsemen, but obviously am open to other suggestions given that is a terrible term.
Things That Will Not Be
Some things won’t change: cloud repatriation, “supercloud” and metaverse real estate still won’t be things in 2024.
With Twitter engagement circling the drain, please comment here!
