The whole elemental pillars and anchors upon which Adam Smith postulated on the “invisible hand“, via the lens of industrial-age economics, cannot necessarily work optimally in modern digital economics. Yes, the old factors of production and comparative advantages of nations remain, but their impacts are not as catalytic as before; knowledge has since emerged as the most powerful factor of production, and a man or a woman with knowledge is a FACTOR. 

Industrial age business is about controlling supply to shape prices. Manufacturers work to provide supply, but dominance actually comes by owning supply through distribution. Dangote Group’s most important competitive weapon is that it controls more than 40% of all active trucks in Nigeria, in a nation, where goods are shipped via roads, with inadequate air, rail and waterways for distribution.

The implication is clear in industrial age business: winning in markets becomes managing and controlling distribution as most businesses are bounded and constrained by geography, creating advantages which are largely localized.

But today, the game has shifted from control of supply to control of demand for web-anchored consumer firms. And only companies with capabilities to control demand are going to win big. If you check, most of the greatest internet companies are simply controlling demand, and that means controlling how supplies reach users and consumers. 

It comes down to aggregation: if the suppliers of local news are many, the challenge moves from the scarcity of the news to sorting out the supplier that adds value, since no person can technically visit all the individual websites before arriving at the most valuable one. Welcome Google which now becomes a gatekeeper, helping to make sense of the whole thing by guiding users to the right contents once they search. This is an evolution, shifting power from the old suppliers to a new set of entities which control access to demand.

Yes, the old companies which used to control distribution lose power [Google decides what content it shows users based on its algorithm]. Magically within the relationships, aggregators like Google and Facebook which make the unbounded supply manageable become the kingmakers. In the process, Google becomes more important to users than the newspapers (the suppliers of news) since Google helps to discover the papers. Because advertisers were all interested in access to demand (the users), the papers are cut-off (yes, disintermediated) as advertisers now spend more money advertising in Google.

If you plan to run an internet business, think about how you can control demand. You have already lost the power and capacity to control supply. Yes, the quantity you bring will not have material impact in the total pool in the market.

Nonetheless, you still need to find ways to create a separation. That could be by creating perception demand or simply by building massive data ecosystems which will give you access to be the digital kingmaker in a specialized sector since the ICT utilities like Google and Facebook, as I noted in a recent Harvard Business Review piece, have control of the broad internet.

ChatGPT, Microsoft As A feature

That brings me to OpenAI’s decision to use Microsoft as a distribution partner for its product by structuring a way to bake the AI into Microsoft products like Microsoft 365, Bing search and others. That distribution is going to become the main element of success for ChatGPT. Yes, while the creation of AI is an amazing engineering breakthrough in the consumer technology space, the ability to influence demand via the large Microsoft ecosystem is what will deliver economic value for OpenAI, the creator of ChatGPT.

Indeed, because of Microsoft, ChatGPT has a promise. If not, it has no chance. ChatGPT would have been a mere supply product in a digital that wins on influencing and controlling Demand. But with Microsoft, it has supply and an avenue to influence demand. When you combine both, you #transform markets.

For the past two decades, search engines have answered most users’ queries in the same way: with a ranked list of webpages. But Microsoft’s unveiling of its AI-powered Bing search engine this week suggests this period of stasis is over, tech critic Kevin Roose writes. Using natural language, a user can ask Bing to do tasks as diverse as planning a dinner party — it’ll serve up a menu with links to sources — to drafting a social media post or summarizing a financial report. “It’s an entirely new way of interacting with information on the internet,” Roose writes. (LinkedIn News)

Alibaba has jumped on the AI-powered chatbot trend, currently being led by OpenAI’s ChatGPT – rattling the tech industry.

ChatGPT has riled up development of chatbot in China where it is currently unavailable. Alibaba is joining other Chinese companies such as web search giant Baidu to develop AI-powered chatbots that will be included in their tech services, in response to ChatGPT.

Alibaba said it is testing its chatbot internally in the company’s research institute Damo Academy, without providing further details.

“Frontier innovations such as large language models and generative AI have been our [focus] areas since the formation of DAMO in 2017,” an Alibaba spokesperson told CNN in a Thursday statement.

“As a technology leader, we will continue to invest in turning cutting-edge innovations into value-added applications for our customers as well as their end-users.”

Previously, Baidu had said it expects to complete testing of its chatbot dubbed “Wenxin Yiyan” in Chinese or “ERNIE Bot” its ChatGPT-like service, in March. But outside China, Google is also accelerating Bard, its chatbot that it announced days ago following the frenzy of ChatGPT.

Alibaba’s shares jumped 1.4% on Thursday morning in Hong Kong, following the news.

OpenAI’s ChatGPT has set the public and industries on a frenzy since it was launched late last year. With a record 100 million users in just over two months, companies around the world are racing to develop and release their own AI-powered chatbot.

ChatGPT won hearts across all sectors with its ability to automatically develop human-like answers to queries, giving authentic answers to questions unlike search engines. The chatbot also writes essays, poems and codes, providing an automatic alternative to critical thinking.

With its ability, built on a large language model, ChatGPT has seen growing interest from investors and the public. But experts have warned that it cannot be trusted at this time, as it has the potential to spread misinformation.

However, its unprecedented growth poses a threat to web search giants like Google and Baidu. For Google, which dominates the online search industry, there is concern that the sudden rise of ChatGPT may significantly deplete its ad revenue in a few years. For Baidu, ChatGPT has prompted the Chinese web search giant to push its AI language model forward, creating the experience for millions of its Chinese users who don’t have access to ChatGPT.

Alibaba jumping the bandwagon underscores the influence of ChatGPT around the world. The ChatGPT Index, compiled by Shanghai-based data service provider Wind based on nearly 30 AI companies listed in mainland China, jumped over 16 percent in the past five trading days, according to SCMP.

Google’s Bard, expected to be rolled out in coming days in response to the swift rise of ChatGPT, flopped this week after it provided inaccurate information to a query during a public demonstration. The company lost as much as $100 billion on Wednesday as a result.

With the tense competition ChatGPT has created in incorporating chatbot into services, Microsoft has positioned itself to occupy a dominant position in the game. The tech giant has betted billions of dollars on OpenAI, with an aim to incorporate ChatGPT into Bing, its search engine. It has also incorporated ChatGPT into its Teams Premium.