The end of the AI revolution?

We should not be surprised by the recent news in the AI market. In case you missed it, a small Chinese company named DeepSeek created an AI tool that performs on par with offerings from OpenAI, Anthropic, and other offered by Big AI in the U.S.

Investments in Big AI companies have totaled tens of billions of dollars so far, while DeepSeek claims to have spent five million dollars to create its just-as-powerful tool.

This is how the world of technology and innovation works – there is always another guy closing fast in the rear-view mirror. If you do not lock up the customer and the ecosystem (think Apple, which I like — or Sonos, which I hate), you will be trampled.

Let’s talk about a one of my favorite examples of a company that believed and acted like it owned the market but was then wiped out. It remains to be seen if Big AI will face a similar fate.

Once upon a time, BlackBerry was the king of mobile. If you weren’t hammering away on a BlackBerry keyboard, furiously BBM-ing like a master of the universe or a high school gossip queen, were you even important? BlackBerry had everything—the business crowd, the security flex, even a cool little scroll ball.

Then, in what felt like a blink, it all crumbled. The company went from owning half the U.S. smartphone market to being about as relevant as a fax machine. What happened? A mix of overconfidence, bad decision-making, and a brutal underestimation of what people actually wanted.

In 2007, Apple rolled out the iPhone, and BlackBerry’s response was basically, “lol, good luck with that.” The company believed people would never give up physical keyboards. Because, obviously, typing on a screen is so impractical, right? Wrong. Within a couple of years, the entire planet was tapping away on touchscreen phones, and BlackBerry was still out there peddling tiny plastic buttons like it was 2003.

Apple and Android quickly figured out that apps and photography were the future and the phone was a convenient delivery platform. BlackBerry? Not so much. Instead of embracing the App Store revolution, they stuck with their old, locked-down system that outside developers had zero interest in while Apple and Android opened their platforms to developers and let millions of enterprising people build cool stuff to use on your phone.

For years, BlackBerry leaned on its unbeatable security as its main selling point. And sure, governments and Wall Street types liked that. But the rest of the world? We wanted cameras, music, and apps, not just encrypted emails. BlackBerry stubbornly refused to pivot.

I remember the day when a colleague told me about a little-known new feature: the ability to integrate Microsoft Outlook email and calendar on the iPhone. We knew right away that iPhone (and Android) would own the market since the one device could be used for work and play.

Is Big AI is in a similar position as Blackberry was years ago. Big AI owns (owned?) the market and had the world convinced that what they did was so special (and expensive) that it would be impossible to compete with them.

Big AI touted the massive computing power and associated energy needs to generate such capacity as impenetrable barriers for new market entrants. Just last week, OpenAI started talks to raise an additional $40 billion — really?

Microsoft recently executed a deal to restart the Three Mile Island nuclear power plant and purchase all its energy output for the next 20 years. (Yes, the same Three Mile Island plant that had a legit nuclear meltdown in 1979 and has been shuttered ever since.)

Just like Blackberry went down swinging while claiming its physical keyboard and cybersecurity features would win consumers, Big AI will likely start touting a bunch of features that nobody cares about as their competitive differentiation. Will anybody want an answer from Big AI that is 99.8% correct if you can get 97% accuracy for free?

If Big AI can make the pivot to a better business model, consumers like you and me will benefit. If they cannot make the pivot, Big AI will go the way of the Blackberry.

 Key Takeaways

• Technology monopolies generally do not last. Yes, there are exceptions, but if you have a technology or innovation lead in your market, think of it as a head start and figure out how to lengthen your lead.

• Any market that has value will be unstable. New participants and substitute products will be constantly crashing the party. Take all of them seriously.

• Back to one of my favorite points: Just because you raised a lot of money, it does not make you smarter than anybody else. Use the capital to give yourself a chance to outthink and stay ahead of that competitive tsunami coming at you.

Things I think about

Billionaire hedge fund managers are correct on just over 50% their trades.

Recommended Reading

Losing the Signal
The untold story of the rise and fall of Blackberry.

The Rot Economy
Blog post from technology contrarian Ed Zitron on how big tech only cares about profits, not innovation.

Thinking in Bets
Poker champ turned consultant teaches us how to evaluate risk.

Zero Fail: The Rise and Fall of the Secret Service
Definitive account of the failures of the Secret Service.