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- OpenAI’s Bob McGrew on how AI startups should think about moats
OpenAI’s Bob McGrew on how AI startups should think about moats
Startups building agents today tend to look at the cost of human labor when they think about pricing. For example, some startups building AI lawyers think they’ll be able to charge tens of thousands of dollars per month because human lawyers really expensive.
Bob McGrew, former Head of Research at OpenAI, disagrees:
“The reason lawyers are expensive is because their time is scarce — there’s only so many people who have undergone that training. But by the time you’ve made an AI model out of it, there will effectively be an infinite number of lawyers.”
He continues:
“Maybe you with your AI lawyer startup will be able to have a lead over other people, but it’s the same frontier model underneath. Some other startup can come in and compete that away. So we should expect to see it priced at some opportunity cost over the cost of compute.”
Where will value accrue in AI?
Bob believes it will be at the application layer — so much so that frontier model investment from companies like OpenAI should be viewed as “an option on the valuable places in the application layer.” ChatGPT is one valuable application. Coding is another.
He offers startups the following advice:
“I think you can compete with frontier labs, but you want to do something more than just a personal productivity task on your computer — something that involves other people or an enterprise. The moats that you have for your business are going to be the same moats they always were: network effects, brand, economies of scale.”