A CEO of AI Applications Marks a New Era of AI Competition
With models rapidly commoditizing in performance, we are seeing different strategies for keeping users on the same models.1
- MidJourney is asking users to personalize their models
- OpenAI has developed a memory
- Google is offering free-fine tuning as a way of winning share & locking in demand
- OpenAI has hired Fidji Simo as CEO of Applications
Ultimately, personalization & applications are likely to be the two vectors by which foundational model companies compete.
A model remembering your name, optimized to your codebase, having a knowledge of your previous work & refashioning itself to the way you work : those are reasons for loyalty, even if the model isn’t state of the art. Like airplane reward programs, personalization & memory introduce switching costs that may outweigh the benefits of state-of-the-art models.
Fidji’s hiring & role suggest Applications for OpenAI are of paramount importance.
The title CEO of Applications implies Fidji will be the head of a substantial & strategic business unit & OpenAI will evolve to a holding company structure - like Sundar’s Alphabet with a CEO of Waymo (actually co-CEOS!) & YouTube (Neal Mohan) for example.
The personalization of the model within an application & workflow will be the ultimate moat. OpenAI’s recent leadership hire makes plain how large the opportunity is.
1 A recent paper on AI competition suggests that newer models are rapidly adopted by customers. Sometimes newer models sap share from competitors, other times replace previous versions (Claude 3.5 users upgraded to 3.7), last new models expand usage (Gemini Flash & 2.5).