3 Ways Generative AI Amplifies Entrepreneurs: Beware Of Averages!

Entrepreneurs and using AI and Generative AI to make their businesses better. At the same time, it is important to remember generative AI, like all technologies, is an amplifier – making the good great and the mediocre, worse. A rigorous 2024 study of 640 entrepreneurs in Kenya, by academics from University of California Berkley and Harvard Business School showed that using an AI assistant improved the better entrepreneurs by 19% and the less successful entrepreneurs decreased their performance by 9%! See the graph below.

The technology provided by the researchers helped these entrepreneurs with a range of topics from financial management to agricultural advice, and changed their economic return. Likewise as I’ve written in my Forbes column 3 Reasons to Consider AI Agents for Your Organization that generative AI can help lower the cost of innovation. I quote Chip Hazard a founding partner at Flybridge Ventures, an early stage VC saying that entrepreneurs are asking for significantly less capital to start their firms, and they are filling in the needed capacity using capital efficient AI.

More broadly, Andrej Karpathi, one of the founders of OpenAI and a one time Direct of AI at Tesla, notes how large language models (LLM) have “flipped the script” on technology diffusion. He says that large and important technologies usually move from established organizations and governments to smaller firms, slowly. With LLMs he says the opposite is true. It’s the startups that are benefiting and the larger firms (presumably except for the technology firms) lagging in adoption. So, how are these upstarts using AI? They are combining software as a service, that is things like Slack, Google Office, etc., and service as software, that is software-enabled expertise. Here’s three ways folks are using AI to power their startups.

AI Market Research And Competitive Analysis

The deep research capability now available from any of the major providers such as OpenAI, Google, Deep Seek or others, easily gathers and analyzes the basics of any industry, market or persona. At my firm GAI Insights we have been calling clients and asking them to give us a question they would like an answer to. One was from Northeast Ohio and was curious about some of the permitting process for commercial real estate in a particular region, along with trend for commercial property in that area. The deep research robot came back with an in depth analysis. We then asked that individual to grade the report. He gave it an A-. When asked what would you have done to get the same information if you did not have this analysis – he said, he would have put a team of 2-3 analysts on it for 2-3 days. We have repeated this with a number of customers and no-one has graded the report lower than a B.

This type of analysis which is critical both to the entrepreneur and to the investors can be expensive if one uses high quality talent or can take a long time to specify and get accomplished if one uses lower quality analysts. The LLMs provide a great first draft – as deep or deeper than many first drafts by a team.

AI Lowers Indirect Costs

Anyone who analyzes a legal contract today without the help of a large language model is wasting money. Of course, no one with a ounce of common sense would just use the output of a model for their final legal documents. But, if you do use these tools they make your interactions with attorneys much more productive – and a $1,000 conversation turns into a $200 one because you know what the document is about, and exactly what to ask the attorney. In other services, Truwind.ai has AI assisted accounting that provides more accurate, audited fast turn around accounting service. If you need to talk with a human accountant, that can be arranged too through their platform.

AI Can Help In Getting Your Message Out

73% of consumers looking for a product prefer short form videos. Short form videos are one of the fastest, if not the fastest form of media consumption. The recent announcement by Google of Vertex AI environment has tools for speech, video, music and text – all together. Amazon announced an amazing new voice tool called Nova Sonic that is amazingly lifelike for any conversation. There are tools to ensure consistent brand representation across the different scenes and images. For $400 one can create a video that might have cost $400,000. This new visual language is being used inside and outside innovative firms today.

Conclusion: Learn From The Grateful Dead

In short, a larger amplifier will not make you a better guitar player. The great artists will garner a larger audience (as the Grateful Dead did when audio engineer and chemist Owsley Stanley created the famous “ wall of sound”), but a bad guitarist will simply annoy the neighbors. Generative AI and AI are amplifiers of entrepreneurial talent, and a great leg up for the small firms of the world to compete with the big ones. It is like the special forces competing against the regular army. The regular army scales by giant pyramids of talent, and overwhelming mass. Special forces depend on highly trained individuals with great technology, cross trained in different tasks with a motto of best in front, on any task or issue. Likewise, smart startups of today are a hybrid meld of human and digital workers to get the job done faster, better, cheaper and with much more efficient use of capital and time.

Source for the Berkley/HBS Research Otis, Nicholas and Clarke, Rowan and Delecourt, Solène and Holtz, David and Koning, Rembrand, The Uneven Impact of Generative AI on Entrepreneurial Performance (February 27, 2024). Available at SSRN: https://ssrn.com/abstract=4671369

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