The original "We Have No Moat, And Neither Does OpenAI" leaked memo from Google that memefied the term focuses explicitly on the increasing ease of competitors (especially open-source) entering the ecosystem: https://www.semianalysis.com/p/google-we-have-no-moat-and-ne...
Second: Massive capital expenditure, specifically in this case the huge cost of building or leasing enormous GPU clusters, is *exactly* what he means by this.
> What we're trying to find is a business that, for one reason or another -- it can be because it's the low-cost producer in some area, it can be because it has a natural franchise because of surface capabilities, it could be because of its position in the consumers' mind, it can be because of a technological advantage, or any kind of reason at all, that it has this moat around it.
He didn't seem to have specific definition at all really.
I think most people attribute it to a "secret sauce technology" in the case of OpenAI, I'm not sure if "finances to lease a huge cluster of GPUs" makes sense here because the main competitors (Google, AWS, Apple, etc) also have access to insane compute as well yet have struggled to get close to GPT4's performance in practice.
That said I do agree that it's a moat for the startups like stability/mistral, etc. They also have access to $/compute, albiet a lot less. And you can see this in their research, as they've been focused on methods to lower the training/inference costs.
I believe that Google actually has more AI compute at their disposal than OpenAI. They have been building out their TPU infrastructure for a while now. OpenAI is reliant on Azure obtaining nvidia GPUs.
So at least in the battle between OpenAI and Google, their moat right now are their models.
I disagree mainly because google, aws, apple, etc. All have similar, or even more access to GPU compute and funding for it, and in google's case also has been one of the main research contributers, yet they still struggle to touch GPT4's performance in practice.
If it was as simple as dropping 10's millions on compute they could do that, yet google's bard/gemini have been a year behind GPT4's performance.
That said I do agree that it's a moat for the startups like stability/mistral, etc. They also have access to $/compute, albiet a lot less. And you can see this in their research, as they've been focused on methods to lower the training/inference costs.
*I'm measuring performance by the chatbot arena's elo system and r/locallama
I agree it isn't a moat in the business sense - that would be some kind of lock in network effect.
e.g. If ChatGPT being popular gives OpenAI enough extra training data, they're locked in forever having the best model, and it is impossible for anyone - even with unlimited money, and the same technology - to beat them. Because they don't have that critical data.
Yes, Google had the best search product, and got a huge market share simply by being better. Their moat however is that their search rankings are based off the click data of which search results people use and cause them to stop their search because they've found a solution.
They also have a moat to do with advertising pricing, based on volume of advertising customers.
Bing spend a lot of capital, and had the tech ability, but those two moats blocked them gaining more than a tiny market share.
In this case, maybe OpenAI will have a video business moat, maybe they don't...
Google, Microsoft and Facebook have capital and compute. That is not an OpenAI moat.
Facebook has Moat because of their social network. It is very hard to switch to another network. Google with search has no moat because it is easy to switch to a new search engine. OpenAI has no moat because it is easy to switch to a new AI chat once a better product becomes available. AWS has moat because it is hard to switch cloud providers. Apple has moat because people want to buy apple products. etc.
A moat can be seen where even if you have a worse product than the competition, or users hate you, they still use your products because the cost to switch is immense.
