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Summary.
In business strategy and entrepreneurship, it is necessary to have a protective “moat” to sustain high performance. As gen AI systems advance in capability, they promise to transform and disrupt industries far beyond traditional software, to the point where they will threaten companies’ existing moats and reshape the business landscape. The three pillars driving AI forward — compute power, model development, and training data — are all advancing rapidly, meaning businesses need to quickly adapt to the new paradigm. By lowering moats in many industries, AI will promote new entry. It also will compel incumbents to think strategically and act swiftly to protect their positions. Many companies will face strong competition, often from new entrants that will find it far easier to gain footholds in traditionally difficult-to-enter markets. In fact, many of the new entrants to these spaces will arrive with products and services that are superior to those offered by incumbents. That said, some moats will continue to hold, based on the strength of brand, proprietary data, IP, operational effectiveness, lobbying and government relations, new business models, and personal relationships.In 2011, Marc Andreesen, the eponymous founding partner of venture capital firm Andreesen Horowitz, wrote an editorial famously proclaiming that “software is eating the world.” His argument: four decades after the invention of the microprocessor and two decades since the creation of the internet, the transformational software technologies that had the potential to reshape the industrial landscape were finally ready for full-scale deployment. Boy, history has proved him right.