Memo – A.I. Has A Generic White Paper Plate Problem | A CPA’s Perspective

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But then you notice what is just underneath the hype…

A.I. is a white paper plate.

An important note to start. 

A.I. will definitely displace human workers as time goes on. That is not discussed here.

To read my thoughts on worker displacement, CLICK HERE

Afraid that A.I. may easily replace you?

Take my quiz to find out, CLICK HERE

Back to today’s topic.

This memo discusses the A.I. companies’ playing field and those companies’ prospects for profitability and dominance.

Will A.I. Companies Make Billions?

Will their customers’ profits increase after implementing A.I.?

In the short run, perhaps, but in the long run, my gut says no.

We have been barraged with A.I. hype and fear.

The industry itself is not even sure what A.I. is or what it will become.

This industry is in its infancy. I took a look at the fundamentals of this and tried to extrapolate what will happen to the A.I. industry in the next decade.

No one is asking the right questions.

Here are mine.

Would you invest in a product that has no patent or intellectual property protection? 

And is currently not ready for the market?

And that will be generic with an abundance of competition by the time it is ready for market?

I will answer for you. Definitely not.

What most people don’t realize is that A.I. companies will have mostly homogenous offerings in a field of many competitors

Would you invest in Sudafed, Lipitor, The Ball Point Pen, The Light Bulb, or the Airplane, all popular items with long-expired patents?

Most A.I. companies’ offerings will be analogous to white paper plates, 99% generic, no competitive advantage, so there will be a race to the lowest price.

Without exclusivity of A.I. product functionality, there may be no way to make the profits being spoken of and hoped for.

There may be patents for A.I. bots that do all of your regular office, clerical, and simple tasks, but other A.I. companies can also patent different A.I. bots or agents that do the same things, using slightly different code.

So, patents for A.I. will be a waste, except, perhaps, for some very specific science and health applications.

Further reduction in value will come from piracy of the code from the usual suspects.

So basically people are investing in technologies that the patents have already run out on and are all open source now. And they are investing billions this way.

It is confusing. It makes no sense.

Without exclusive use of its A.I. tech, A.I. company profits will disappoint, as well as GDP.

No money for UBI (Universal Basic Income) or to return to investors.

Non-exclusivity makes A.I. companies worth much less than the pundits predict.

My next point.

Answer this question honestly.

When you think of A.I. replacing humans, it is usually one A.I. product to one human, correct?

So, a finance department with 10 CPAs will need to buy 10 CPA A.I. products.

Same for 20 H.R. and 50 call center employees.

So the A.I. company will be selling 80 A.I. products to replace them, correct?

No.

There is one A.I. bot for each department needed.

We won’t need 80.

In terms of A.I. company sales, they will only be selling 3 generic products.

So back to my example. Let’s say that we are replacing $10 million of payroll with A.I. bots. 

Most people would probably assume that the A.I. companies can charge $10 million for replacing the humans, but of course they won’t be able to in the long run.

There’ll be so much price competition that prices will plunge for those three A.I. bots that are going to be purchased. 

What will happen here is similar to when a great product, such as a light bulb, finally loses its patent protection. But no A.I. can ever really have patent protection.

That patented period is imperative to recoup start-up costs.

These start ups, by definition, in their infancy, are already operating in this intensely competitive environment, which seems like a great risk to me. 

Remember, there will be no Kleenex, Vaseline, Band-Aids or Q-Tips among them to ride the goodwill generated during the times they were the only ones legally able to sell their patented products.

Will any A.I. company’s name become synonymous with a product like those I just mentioned above?

Meaning, many years from now will we use Chat-GPT or Perplexity instead of A.I. in sentences? Like we use Kleenex, Vaseline, Band-Aids and Q-Tips.

Doubtful.

This type of non-monopoly environment is usually unfavorable and makes people avoid investing in them.

So the A.I. bots that are replacing humans are going to be akin to the white paper plates or plastic forks in the lunchroom. 

Generic products for a generic use. 

The same will happen on the pricing for robots driven by A.I. and any other ancillary hardware based products that are A.I. driven. 

Whether replacing back-office operations, client facing operations, automating tasks, or doing warehouse work, the result will be the same- generic products for generic use.

I understand there will be military applications, but there will be military and other three letter departments, with their own programmers, etc.

So the A.I. companies will have zero monopoly, even for a short time.

I don’t think that A.I. companies value, like, a white paper plate company, will have the potential values we are being sold.

I think it is important for all of us to consider these possibilities and to temper the blind enthusiasm they try to instill in us.

My advice for Fortune 500 companies CEOs.

Never invest in an unproven technology just to keep up with your competition.

Be wiser and stronger and wait for a decade or so while your competition are the test subjects for the A.I. companies.

Let the A.I. companies fleece your competition, without providing the true promises of A.I.

At that time, you can buy custom A.I. bots, agents, and robots, which work perfectly by the way, from Amazon at pennies on the dollar of what major corporations are paying right now for inferior ones.

One last thing. 

A.I. will not give companies a net profit advantage as each will have access to the same A.I. products and functionality.

The short example would be Starbucks and Dunkin’ Donuts getting the same A.I. based software and hardware products. 

If they both had the same exact robotic baristas, there will be no competitive or financial advantage.

So, I hope that everyone tempers their enthusiasm for this latest hype and invests based on the fundamentals and true future prospects, and not on the PT Barnum-esque marketing we’re all being barraged with.

A.I. being marketed now is a huge mistake similar to how EVs were sold well before the infrastructure was in place (and still isn’t).

There will be A.I. first adopter regret.

Be sure to share this with your financial advisor, as they are under a lot of pressure to not miss the A.I. hype train.

Tell them to slowly back away from the platform with your money.

My last question.

How much do you pay for your internet browser?BLANK