Google – Headless chicken pt. II

Google needs to calm down and do what it is best at.

• Microsoft has finally managed to get under Google’s skin and the level of panic that has ensued could see Google rush a product to market that damages the quality and performance of its core services.
• Google appears to be in full panic mode with Sundar Pichai calling in long-absent founders Larry Page and Sergei Brin to help to decide what they are going to do about the new upstart technology called generative AI.
• At a fundamental level, the only thing that has changed is that ChatGPT has become wildly popular amassing 100m+ users at a rate never seen before which has stoked massive media and public interest.
• The underlying technology has not suddenly taken a huge step forward and in fact, OpenAI’s generative AI chatbot ChatGPT is based on a technology that Google itself invented and presented to the market in 2017.
• This technology is called transformers which is a technique where the AI looks at sentences individually rather than words and calculates which other words or sentences most often occur around it and uses that as the basis for generating the output.
• There is no doubt that for language, it is pretty good as it is this that allowed Google Translate to take a big step forward in its accuracy when it was updated in 2018.
• OpenAI has adopted this technique and combined it with massive data sets and a lot of compute power from Microsoft to produce GPT-3 which sits underneath the ChatGPT service.
• Google didn’t panic when ChatGPT was launched (as it should have done if some glaring technological shortcoming had been exposed) but only when it became massively popular implying that Google has panicked for the wrong reason.
• Now Google is running around like a headless chicken working out how to include its generative AI chatbot Bard into all of its products without first considering whether it should.
• The last time this happened was when Google was spooked by the rise of Facebook which culminated in the launch of the social network Google+ which was a weak product that never gained any traction.
• The stakes here are much higher because if Google contaminates its core revenue-generating services with a half-baked product then its revenue, profits and share price are at risk.
• Given the shortcomings of ChatGPT, I am not convinced that the panic is warranted as Google has been an AI-first company for a long time and it has successfully included this capacity into its products like Search, Gmail and Maps for years.
• Consequently, I am far from convinced that Google is a sleeping giant that has been caught with its pants down but has merely failed to judge the erratic nature of what becomes popular and trendy.
• I don’t think that this is Google’s Nokia moment because RFM research indicates that Google has the technology and the know-how to create better generative AI products than any of its peers but these need to be brought to market when they are ready.
• The flip side of this argument is the example of Xerox which arguably laid the foundation for the computing age but failed to capitalize on it due to a lack of its management’s ability to execute on its innovation.
• Google’s history in this department is pretty good although there have been plenty of mistakes, but on balance, I think Google has the ability to see this threat off but only if it does so with a calm and clear head.
• Google’s rushed event in Paris demonstrated that Bard is not yet ready for prime time and gave a clear sense of the panic ensuing inside Google.
• ChatGPT and Bing Chat are very far from being able to replace search yet but Bing Chat hints at how it may evolve over time.
• Google is the master of understanding the long tail of search as well as knowing what the user is looking for even if he or she does not say so explicitly.
• This is what has made Google the best and this advantage has not gone away whatever fancy tricks OpenAI and Microsoft have come up with.
• Hence, as long as it executes rationally and calmly, I think its position as the best AI company in the world will remain secure meaning that if the share price carries on falling, an interesting opportunity could arise.
• I do not have a position in Google as the valuation is not yet compelling but that may change as this hype and mayhem continue.