The Black Swan Approach to Investing and Winning

Microsoft/OpenAI, and Large Language Models (LLMs)

It was reported this morning that The US Federal Trade Commission is investigating a recent Microsoft deal with artificial intelligence startup Inflection, that Microsoft failed to disclose the deal to the government. US antitrust regulators are ramping up scrutiny of the red-hot AI industry.

The investigations focus on whether Microsoft and OpenAI have used their dominant positions in the AI industry to harm competition. Yes of course they have!

In March, Microsoft announced it had hired Inflection’s co-founders and a number of its staff to lead its Copilot program, and Inflection said its AI model would be hosted on Microsoft’s cloud platform. As part of that deal, Microsoft was said to have paid $650 million to Inflection.

At first glance, this looks like these types of deals strengthen Microsoft’s position as a large growth company in the marketplace, however, the Black Swan, what we don’t know…is that these deals are signs of desperation. Microsoft is no longer an innovator, so domination of new technology and rising markets is a matter of self-preservation for them.

For the knowledgeable empirical observer, those who don’t buy into the hype and fascination of AI. Microsoft’s deal is one of survival in a rapidly changing world, they know they can quickly lose market share to innovative upstarts. So they just buy them. And many start-up founders decide to take the money rather than try to change the world.

Nevertheless, the long and short is that Microsoft has invested 10’s of billions in the theoretical Large Language Model construct. Yes, it’s a theory and is having a hard time translating that theory to practical application — i.e., hallucinations.

Therefore, although the evidence is increasingly showing that LLMs don’t work as their promoters say they do, it might be too late for Microsoft to turn back, however. They’ve already bought an LLM farm — purchasing a majority share of OpenAI, essentially getting an LLM Chatbot/ChatGPT.

Their strategy now is to make you believe that ChatGPT/LLMs have significant value and can change your life — feeding you the illusion of LLM to mesmerize you into believing LLMs are the next greatest thing and putting it in every technology is the future. But it’s not, not even close. Don’t believe the hype, think for yourself and do the research.

However, most still won’t see the important Black Swan here, which is the harm Microsoft and others like Google, Amazon, Meta — a few of the usual suspects are doing. Major tech companies are monopolizing entire sectors of the economy.

These big tech companies are abusing their powerful roles in business and society to extend their dominance into the fast-growing field of generative AI. Wielding anticompetitive influences over the entire AI sector. Through investment relationships with acolyte VCs, big tech casts a wide net way upstream through exclusive funding and partnerships with AI startups.

Therefore, the result is that Microsoft and other big tech are taking out potentially game-changing innovations and technology, to protect and expand its market share. Not in the best interest of AI safety and humanity. Exactly what is happening now with OpenAI.

This unregulated behaviour stifles innovation and competition and hurts consumer choice and lower pricing — ultimately harming society from benefiting from human ingenuity.

In the end, LLMs don’t work and market forces will ultimately sort things out. However, if you are an investor, focus on finding out what you don’t know, the objective truth because that’s more important than what you already know. What you don’t know is where the critical value-creating decisions are found.

The objective pursuit of applicable knowledge is your superpower and the applied intelligence process is a methodology for good decision making. So success is a direct function of learning and doing better. Doing better with what you’ve learned and executing it better than your competition. This leads to more winning!

It’s best to adopt intellectual humility because the more you learn the more you find out how little you do know, and how little others around you know. So if you are willing to be persistent and resilient and learn way more than others care to do, you’ll probably win more than them too.