"Fortunes are made by entrepreneurs and investors when revolutionary technologies enable waves of innovative, investable companies. Think of the railroad, the Bessemer process, electric power, the internal combustion engine, or the microprocessor-each of which, like a stray spark in a fireworks factory, set off decades of follow-on innovations, permeated every part of society, and catapulted a new set of inventors and investors into power, influence, and wealth."
"Anyone who invests in the new new thing must answer two questions: First, how much value will this innovation create? And second, who will capture it? Information and communication technology (ICT) was a revolution whose value was captured by startups and led to thousands of newly rich founders, employees, and investors. In contrast, shipping containerization was a revolution whose value was spread so thin that in the end, it made only a single founder temporarily rich and only a single investor a little bit richer."
"There are ways to make money investing in the fruits of AI, but they will depend on assuming the latter-that it is once again a less propitious time for inventors and investors, that AI model builders and application companies will eventually compete each other into an oligopoly, and that the gains from AI will accrue not to its builders but to customers."
Revolutionary technologies create waves of investable companies and concentrate wealth for entrepreneurs and investors. Examples include the railroad, Bessemer process, electric power, internal combustion engine, and microprocessor, each enabling decades of follow-on innovation and new economic power. Some transformative innovations, however, generate little new wealth and instead reinforce the status quo. Shipping containerization dramatically changed logistics but spread value so thinly that few inventors or investors profited. Investors must evaluate both how much value an innovation generates and who captures that value. Generative AI could follow either path, determining where future fortunes arise.
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