Below is the ‘Tip of the Week’ from Ep78: Artificial Intelligence Investing, Part 2 (Nathan Benaich)
In the last few interviews the concept of a platform has come up while discussing very different types of technologies. With Jonathon Triest and Brett Demarais, we discussed Slack and how it is transitioning from a standalone SaaS product to a platform w/ apps, plug-ins and additional capabilities being built upon it. With Adam Draper we discussed VR as a new platform and drew a parallel to the emergence of the iPhone, allowing an entirely new ecosystem to emerge. And today we discussed many different areas that AI will touch, one of which was transportation and technology for driverless cars. And I think it’s timely with the recent Tesla 3 unveiling to discuss the implications of AI on hardware value and how the hardware value equation may be changing.
A decade ago with shelf software, it was quite normal to buy new versions of operating systems and common applications. I would walk into best buy and purchase a box w/ a CD in it for Microsoft Windows or Office. Today, most products have moved to a SaaS model and many operating systems update automatically, free of charge. And Nathan pointed out that w/ a cloud-based model, there are now data signatures and data exhaust that is captured in the cloud from those SaaS products. The data set continues to expand over time and now with AI systems that get smarter and smarter, the SaaS product increases in value over time. So an asset, that once lost significant value immediately after I exited the Best Buy checkout line, now begins appreciating after clicking the “Buy Now” button.
One of the most common and expensive assets that loses the majority of its value after purchase is the car. Right? You drive it off the lot and immediately there is a significant gap between the price paid and the resale value. But what if the majority of the car’s value was now centralized in the cloud, instead of decentralized at the vehicle. What if the capability, features and experience continued getting better everyday. What if the law of accelerating returns allows the promise of driverless technology to become a reality within a year after purchasing a car and you immediately receive that benefit without having to purchase new hardware. What if your car was a platform itself with apps, features and technologies being built upon it by thousands of companies everyday.
The asset value equation has clearly changed, and software and SaaS have enabled the appreciation of many, formerly depreciating assets. And I am beginning to see this phenomena in more and more hardware products. Things like Nest, Amazon Echo and even my iPhone are all hardware assets that continue to provide more value to me, over time. Platform-based technology and SaaS have opened the gates to allow continuous product improvement. And AI may accelerate that improvement beyond what we can imagine.