Dean Hamstead

Chamath explains how VC funding circularity is giving AI the diffusion problem Ken Griffin is picking up on “So the cycle here, just to be very precise, is VCs raised from pension funds and LPs and foundations and family offices. They put money into a startup. That startup takes that money and invests in growth. Part of growing is by consuming other people’s AIs. And so that company then starts to show revenue traction. Those folks then say, hey, look how well we’re doing, raises a bunch of money from the same VCs. And it’s just this circularity.” “Why that’s important is what Ken is pointing out is that for AI to really scale as a predictable driver of long term earnings, it has to diffuse out of the startup ecosystem. And so you can’t be in a situation where on the one hand, you’re talking about breathtaking valuations. But we’re 75 cents of every dollar is actually just a startup sending it back and forth so that they can mark themselves up. That’s, I think, a structural problem.” “But the difference there is that AWS was abstracted from Amazon retail, which was already then a roughly breakeven profitable business, at least on a free cash flow basis. So what’s different here is you have a bunch of money losing entities just spinning a bunch of money around and it has to diffuse more broadly.” “They said, we have decreased our spend on AWS and GCP. We now have six completely independent ground up data centers that we’ve built from scratch for ourselves. And I was like, what is going on here?” “AI has a diffusion problem. It is too concentrated and ripping around in a small little ecosystem. We need to diffuse out. But as it diffuses out, people are picking open source is what I would tell you.”