Creating value, capturing value and searching with artificial intelligence

On 25 July, OpenAi announced SearchGPT: 'a prototype with new search capabilities designed to combine the power of our artificial intelligence models with information from the web to provide quick and timely answers with clear and relevant sources'. familyandtrends, short for Family Capitalism and Strategic Trends, cannot therefore avoid reasoning about AI, for the second time after the recent article. As much as artificial intelligence is something extremely innovative, it does not escape the rules of management theory and with these we will try to analyse it.

Sam Altman has done for artificial intelligence what Frances Getery did for the diamond in 1947 when she invented 'the diamond is forever', raising the number of diamond-accompanied marriage requests from 10% to 80%. Until then, the diamond was a stone used mostly for niche industrial applications, but as it became necessary to ask for the hand of the beloved, it saw the customer's willingness to pay increase dramatically. Management theory defines value creation as the difference between the customer's willingness to pay and the price actually paid, the former having to be greater than or equal to the latter otherwise the purchase does not happen. De Beers, as a monopolist, had an interest in increasing the willingness to pay for diamonds in general, it would then be the various Tiffany, Cartier etc who would differentiate the offer with different rings, for De Beers it only mattered that his stones were used on those rings.

Altman, CEO of OpenAI, recently said: 'Companies should bet on the fact that the next model (of Chat GPT) will be better and they will benefit. Companies need to find ways to use AI as a technology rather than building an AI-based business. It is about leveraging AI to create a defensible business in the long run'. In essence: OpenAI will make better and better diamonds and companies down the value chain will compete on who makes the link with the most willingness to pay.

In management theory, to be successful, one must not only create value, i.e. willingness to pay above/equal to the price, but also capture value, i.e. be able to keep part of the price paid by the customer. Capturing value requires strategic intelligence at least as much as creating it. Intel and Microsoft have captured a large part of the price of PCs, Apple and Google capture about 30% of the price of apps on their stores, footballers about 85% of the price fans and spectators pay to see a game. How will OpenAi capture the value created? To date, it seems in three ways.

First: the agreement with Microsoft. For an investment of around 13 billion dollars, capital plus access to computing capacity, it granted Microsoft 49% of the profits and the possibility of incorporating artificial intelligence into its office automation products. In essence, money and shovels to dig mines in exchange for the first diamonds. This allowed Microsoft to be the first to make engagement rings, as seen using word or powerpoint (although the real results are expected on excel...).