As we enter 2024, the capital markets have discovered their footing and are transferring increased. The Fed has taken rates of interest so far as they need at the moment and inflation has come down. Plainly a “mushy touchdown” is probably going. That’s excellent news for the innovation financial system as a result of wholesome capital markets are a crucial assist system.
Nevertheless, optimistic capital markets are crucial however not adequate for a wholesome innovation financial system. We additionally want innovation. The excellent news is we’ve a whole lot of that and extra is coming in 2024. I’ve by no means seen an atmosphere with extra innovation within the forty years I’ve been within the tech sector. It’s breathtaking to see.
Let’s begin with Synthetic intelligence (AI) which was the massive occasion in 2023. The AI “stack” has emerged with Giant Language Fashions and different vital fashions (like audio, imagery, video, and so forth) working within the cloud with well-documented and supported APIs which might be accessible to builders to construct on. And probably much more vital is the emergence of superb open-source AI fashions that in lots of circumstances can outperform the closed-source fashions. With the AI stack effectively developed and supported, we’re transferring into the applying period of AI, very similar to the browser introduced us the applying period of the net and the iPhone introduced us the applying period of the cellular system. It is a huge deal. Whereas in 2023, everybody was rightly centered on the massive language fashions like OpenAI, Anthropic, Gemini, Llama, and so forth, we are going to see new AI-first purposes emerge in 2024 that may begin to transfer the main focus and the dialog up the stack. And we are going to see legacy purposes embrace AI to make their merchandise higher and to stay aggressive with the AI-first disrupters.
However like web3 earlier than it and the web earlier than that, this new know-how will convey litigation and regulatory scrutiny that may increase, and finally resolve many vital points. Let’s begin with litigation. Ought to I, because the writer of over 9,000 weblog posts which were used to coach these massive language fashions, be entitled to a number of the income they may make? OpenAI generated over $1.5bn in income in 2023. Ought to I get a few of that? And do I want to affix The New York Instances and different publishers in suing to get a few of it? That is only one of many points that these AI fashions have raised and they’ll should be resolved. I consider it would take years of litigation and regulation earlier than we perceive what the suitable enterprise mannequin and norms are for the AI financial system. However luckily, like web3 and the Web earlier than it, the tech sector won’t look forward to these points to be resolved. Trillions of {dollars} are being invested within the AI sector and that may proceed for so far as this eye can see. Innovation by no means waits for guidelines and laws. However it will definitely will get them.
That’s a superb segue to web3, which has seen a full frontal assault from regulators and lawmakers within the US and elsewhere. 2023 was the yr that web3 held its floor and 2024 would be the yr that regulators and lawmakers come to phrases with web3. We’ll lastly begin to see regulatory readability emerge within the US like has occurred within the EU and elsewhere.
However as vital as regulatory readability is to web3, it pales in significance with the necessity for a “ChatGPT second” for blockchain-based applied sciences. AI developed for over forty years earlier than its popping out get together. I believe it would take web3 lower than half that point. Satoshi gave us the playbook to construct a decentralized web stack again in 2008 and I really feel fairly assured that we are going to have large mainstream purposes working on this decentralized stack effectively earlier than 2028. I believe we are going to see mainstream decentralized purposes emerge in 2024 as we now have cheap and quick transactions and less complicated consumer interfaces. Vitalik wrote a pleasant piece about this a couple of days in the past.
AI and Web3 are two sides of the identical coin. AI will assist make web3 usable for mainstream purposes and web3 will assist us belief AI. Collectively they may result in a extra highly effective, extra resilient, extra trusted, and extra equitable Web.
However none of that may matter if we don’t speed up our give attention to our warming planet. Earth continues to heat at a sooner fee than has been predicted, inflicting growing ache and struggling throughout the globe. It’s laborious for people to react to one thing that’s thirty years out. It’s a lot simpler for people to react to one thing that’s occurring to them proper now. So this ache and struggling will power an acceleration of the power transition from carbon to scrub power.
The power transition is being powered by innovation in power technology (renewables, nuclear, and so forth), power storage (batteries, storage networks, and so forth), and smarter power distribution. Within the means of rebuilding the infrastructure and techniques by which we energy this planet, we’re additionally modernizing the power stack and making it decentralized, modular, and programmable. If you happen to assume you’ve seen this film earlier than, you may have. And the excellent news is that there may even be a contented ending if we transfer quick sufficient to make this transition occur within the subsequent twenty years.
The brand new power stack has been coming collectively for the final decade however slowly and really a lot underneath the radar. I consider that 2024 might be a popping out get together for the brand new power stack and I’m excited to be investing on this space and serving to to make it occur.
So if we’ve more healthy capital markets and extra innovation than ever, what’s up with the enterprise capital ecosystem? Effectively, that’s not such a contented story. Restricted Companions, the oldsters that present the capital to the enterprise capital funds, have taken a beating over the previous couple of years and are cautious proper now. As well as, we’re seeing many massive companies cut back and even shut down. And new companies are struggling to boost funds. It is a rationalization of a sector that acquired very huge very quick within the final decade and can want time to discover a new regular. As a result of enterprise funds have a ten-year life however usually take for much longer to totally liquidate, the enterprise capital enterprise adjustments extra slowly than the companies it funds. I believe we’re a pair years right into a transition that may take a minimum of the primary half of this decade to play out.
So whereas the capital markets will possible be strong in 2024, I don’t anticipate that enterprise capital investing and enterprise capital fund formation to develop that a lot yr over yr in 2024. I believe each will develop however not practically as quick because the sectors that encompass VC.
To sum all of it up, we’re in a golden period of innovation with AI and Web3 resulting in a brand new extra clever, resilient and decentralized Web and the emergence of a brand new power stack which is able to energy our lives new methods that won’t proceed to heat our planet. There are alternatives each which means I look to again founders and founding groups constructing these new applied sciences. I believe 2024 goes to be a terrific yr for tech.
