Comment by phillipcarter
9 months ago
I don't understand the idea that they have no moat. Their moat is not technological. It's sociological. Most AI through APIs uses their models. Most consumer use of AI involves their models, or ChatGPT directly. They're clearly not in the "train your own model on your data in your environment" game, as that's a market for someone else. But make no mistake, they have a moat and it is strong.
> But make no mistake, they have a moat and it is strong.
Given that Mistral, Llama, Claude, and even Gemini are competitive with (if not better than) OpenAI's flagships, I don't really think this is true.
There are countless tools competitive with or better than what I use for email, and yet I still stick with my email client. Same is true for many, many other tools I use. I could perhaps go out of my way to make sure I'm always using the most technically capable and easy-to-use tools for everything, but I don't, because I know how to use what I have.
This is the exact dynamic that gives OpenAI a moat. And it certainly doesn't hurt them that they still produce SOTA models.
That's not a strong moat (arguably, not a moat at all, since as soon as any competitor has any business, they benefit from it with respect to their existing customers), it doesn't effect anyone who is not already invested in OpenAI's products, and because not every customer is like that with products they are currently using.
Now, having a large existing customer base and thus having an advantage in training data that feeds into an advantage in improving their products and acquiring new (and retaining existing customers) could, arguably, be a moat; that's a network effect, not merely inertia, and network effects can be a foundation of strong (though potentially unstable, if there is nothing else shoring them up) moats.
That is not what anyone means when they talk about moats.
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Yeah but the lock-in wrt email is absolutely huge compared to chatting with an LLM. I can (and have) easily ended my subscription to ChatGPT and switched to Claude, because it provides much more value to me at roughly the same cost. Switching email providers will, in general, not provide that much value to me and cause a large headache for me to switch.
Switching LLMs right now can be compared to switching electricity providers or mobile carriers - generally it's pretty low friction and provides immediate benefit (in the case of electricity and mobile, the benefit is cost).
You simply cannot compare it to an email provider.
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Inertia is a hell of a moat.
Everyone building is comfortable with OpenAI's API, and have an account. Competing models can't just be as good, they need to be MUCH better to be worth switching.
Even as competitors build a sort of compatibility layer to be plug an play with OpenAI they will always be a step behind at best every time OpenAI releases a new feature.
Only a small fraction of all future AI projects have even gotten started. So they aren't only fighting over what's out there now, they're fighting over what will emerge.
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Doesn't that make it less of a moat? If the average consumer is only interacting with it through a third party, and that third party has the ability to switch to something better or cheaper and thus switch thousands/millions of customers at once?
Their moat is no stronger than a good UI/API. What they have is first mover advantage and branding.
LiteLLM proxies their API to all other providers and there are dozens of FOSS recreations of their UI, including ones that are more feature-rich, so neither the UI nor the API are a moat.
Branding and first mover is it, and it's not going to keep them ahead forever.