(Preview) All About AI Companions: Personalization Upsides, Dystopian Downsides, AI Therapy, Advertising Tension, and Lots More
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Hello and welcome to a free preview of Sharp Tech. Obviously, the other side of the spectrum is they all just sort of converge and do the same output. Well, they all do sort of converge because they're all trained on the internet. And there's a certain sense where we're stuck with the 2010s for freaking forever because that's like the corpus that built all this.

Yeah, that could be. But the ability to say the unpopular thing or give you the fact that would be verboten in polite conversation is a capability that should distinguish LLMs from other experts today and should be extremely valuable. But if it's being gated today and is going to be gated into the future, then that will be really, really frustrating. So I'm

Again, hopefully there's diversity in the market and people can choose whichever they prefer. Why does Grok get worse? I've seen people complaining about Grok recently.

All models tend to get worse because they get optimized and a lot of it's just like a cost issue. So they get distilled and they get various versions that run more efficiently. And you do tend to lose something along the way. Like the first time you use a model, they're probably running it very expensively and losing a bunch of money on every query. And then they get more efficient over time and they run tests to say, oh, yeah, it's still getting the same sort of answers. Right.

But the universe of answers is effectively infinite. You're never going to be, you know, LMs as they are, are a compression algorithm. It's compressing the internet basically. And you further compress it, you lose bits. It's like an MP3. So they're optimizing for efficiency a couple weeks after the model releases. Yeah, continuously, continuously. Like an MP3, like 512,

kilobytes per second sounds like the real one 256 sounds like the real one 128 my high-end speaker that starts here at 64 okay this sounds like garbage I there's it's a similar dynamic interesting okay well the

The more you know, David says the subject line here was AI companions and advertising. Ben and Andrew, I love the show. And I had some thoughts about your discussion of AIs as personal companions. Specifically, I think that having a high trust tool like that is at odds with advertising as a business model.

On one level, many people get upset with seeing ads that are targeted at their personal troubles, like seeing ads for a divorce lawyer after they ask an AI for marriage advice.

But on an even deeper level, the advertising... I mean, it also could be useful. I don't know if I'd be mad at that. But on an even deeper level, the advertising incentive means that now we have to wonder if the AI actually has our best interests at heart with its answers. Am I seeing divorce lawyer ads or getting divorce advice because that pays better than marriage counselor ads?

And while these examples may be relatively few, once you're thinking about this concern for one question, you'll be thinking about it for every other question, and that erodes the trust you need to be a truly useful companion. I don't really care if Instagram is showing me posts that advance its economic interests, but I will worry a lot if I think my AI tool is tailoring its answers toward an economic incentive.

Ben, what do you think? I agree. This is a massive challenge. And it's part of the reason why it's not super clear what an advertising model should look like for these sorts of things. And the tension here is the reality that you only become a large consumer player via an advertising model because you get this dynamic of you can continually raise prices without having being concerned about price elasticity because the users are going to use it no matter what because it's always the same price for them.

That's just how the economics work here. But pushing against it is exactly this. And, you know, I think to the extent that Sam Altman and OpenAI are authentic about not wanting advertising, this is a big part of the reason. It's not just that it's grubby and nasty. It's that do we lose something ineffable about people's willingness to use this? And it's contrasted by the fact that

I have a friend that has plenty of money and he's like, can you generate the Studio Ghibli picture for me? I'm like, you do it. He's like, that's $20 a month. So it's a very valid concern and point. It will be hard to manage and it's going to run up against this reality of

of advertising there's a reason advertising ends up winning everywhere and someone's going to do advertising and that's going to be who you're competing with and are you are you going to have sufficient agency to say no it's worth it to me to pay because that's trustworthy end of line it kind of ties to the apple discussion right the reason people trust apple i would contend

is not because of their pronouncements about privacy or some commercials they run. It's they sort of implicitly get that Apple's aligned with me and my interests. They sell an expensive device. I get it. It's going to be

It's going to be what I want. And I actually think Apple has been moving against this by virtue of doing things. I don't necessarily want as a user and not investing in having the best possible product, right? Like, like this, this would be an, suppose Chachapie did do advertising and Apple, uh,

training on user data, but provided an AI that came with my phone that did not have advertising, I think they're in a great position in that regard. And it feels more privacy preserving and more respectful of me than an alternative where actually their AI just sucks so I don't use it. And I'm like, what am I paying for when I give you $1,000 for a phone? Yeah. I mean...

as far as open AI, isn't this only a challenge if they're counting on creating like an emotional bond with the users, because it doesn't feel like a betrayal. Yeah, well, that's true. Particularly when you look at how obsequious the new model is. Um, but I really can only imagine myself balking at ads from an AI. If I'm like hopelessly down the rabbit hole, uh,

emotionally bonded with that chat bot. But beyond that, like I'm an adult. You go back to early Google and this was a huge concern there as well. Like people aren't going to trust the search results. And so you start out and it's super clear what's an ad and they're like a different color and they're they're

made like, you know, this is definitely an ad and yeah, we got to make some money. Our users will get it. And users did get it. Then over time, you could barely tell it's an ad anymore. And I think that we think about advertising far for sure. Yeah. Well, we, but we think about advertising as it exists today. And, um,

layer that onto chat GPT. What I'm calling for is like punch the monkey ads. Like, like let's be super clear. Like, yeah, you're a free user. So there's ads there that are next to it. And, uh, and, but all these concerns are real and very valid. And it's going to be a very difficult road to walk. I just think the walking the roads inevitable given the opportunity in front of open AI, but we'll see. I may be, maybe I'll be wrong.

Okay. Well, as far as monetization, I just wanted to read this tweet from a woman named Rachel Cohen on Twitter. We got heavily discounted Ubers in the 2010s. Gen Z is getting massively subsidized AI chatbots. I read that last week and I wondered, all right, are we going to have a situation where all of society becomes dependent on AI chatbots?

And it's going to become really, really expensive early in the next decade. Do you have any take there? It's a good take. What's interesting about that is you could on one hand say, yep, and they still use Uber today, even though they're paying like 5x what they were. That's what I mean. As a millennial who got addicted to Uber and DoorDash and any number of other like VC funded apps in the mid 2010s.

I'm still using all those apps. And so they could pull that playbook again. Right. But the, but the counterpoint is you also still own a car.

Right. The talk of Uber was it's going to actually replace car ownership because, you know, you're just going to use use an Uber all the time and it's going to change cities and all they're organized and all these sorts of things. And now those those dreams have been shifted to self-driving cars. And that's what that's how it's going to actually pull it off and do these. But but there is a cost to cost like it's not used as much as it would be otherwise. Right.

And I think that's just that's the advertising reality. There is price elasticity in everything. If something is more expensive, it is used less. And now it might be so good that you're most people are willing to pay it, but not everyone is. And that's that's why advertising always wins in the end.

Because it's always free for the user. And yet you can still make more. You can increase your average revenue per user over time because you get better at targeting. You're so effective that advertisers are willing to pay. So if ChatGPT wants a billion users or 2 billion users or 3 billion users in the next decade, then...

3 billion people aren't going to pay to be using chat GPT every day. And so you're trying to widen the funnel that way by keeping it. Yeah. Just your, your upside with advertising is just astronomically larger than it is with subscriptions. That's just, that's because of this dynamic. And that's exactly what I was talking about before. You have this real tension between does advertising really make sense with this model versus like,

advertising is the only way to become a 3 billion user company that, that, that is growing revenue continuously over time.

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