Originally posted as a Twitter thread on January 27, 2023
What is the “Finance” and “Financial Opportunity” of AI?
If “Bit Manipulation” is a key part of your COGS or SG&A, there’s a huge opportunity or huge disruption coming your way (or a PE firm that might just buy you).
Two sections follow: “Known Knowns” and “Known Unknowns”
Known Knowns: There are companies already doing X, and thus there are two opportunities:
-sell a tool to turn “bit-manipulation-by-people” costs -> GPU usage (AI base marginal cost)
-create a vertically integrated company that competes with a legacy player…by doing the above
Financial services (unlike, say, Campbell Soup or Boeing or Fedex) are primarily “bit manipulation” — little atom moving needed!
How do you apply for a mortgage? Insurance? Reinsurance?
A lot of the cost is…movement of bits. Move info from here to there, validate X, etc.
Companies, and people within companies, tend to be extraordinarily slow routers of information. Person X emails Y, who’s on vacation…who upon return asks for more info, and then passes it to Z, etc. Do it more quickly, save money and win share.
There’s a tremendous private equity opportunity here, which is the “finance” opp. Any company might see a *dramatic* difference in bottom line once more of these bit-manipulation functions are automated. It’s like going from seamstress -> loom -> textile factory…for bits.
Next: Known Unknowns. What I’m fascinated with are companies that cannot/do not exist today due to a market failure between what companies/consumers will pay and what people will work for…in the realm of bit manipulation.
For example: “Find all counterfeit listings of my product on Reddit/FB/Twitter/forums, for $100K/year” or “Reach out to unhappy customers and get more information, for $100K year”
There’s probably lots of demand at a given price but impossible to provide service at that price
So there are no “market comparables” or set of companies to look to. It’s just an old fashioned supply/demand curve where there’s no quantity demanded at the price where labor is willing to supply…
Working on an essay on this with some data from existing companies — more to come soon.