Gen AI and the speed of wealth creation

One of the key benefits of Gen AI is increased productivity – that’s essentially the key feature of all major technological improvement in the past.

What does it mean from an investment point of view? To answer that question, it is worth examining what productivity really means. The way I understand it: production = wealth, and productivity = the speed of wealth creation. So in the era of Gen AI, productivity will be higher, and the speed of wealth creation will be faster. A higher speed of wealth creation is indeed a logical consequence of the higher productivity induced by Gen AI: imagine an entrepreneur, it used to take a lot more time and human capital / resources to launch a new products, but with the help of Gen AI, a lot of the time-intensive work can be outsourced to Gen AI, thereby reducing the time for product launch and go-to-market. All these will shorten the cycle of product launches, speed up innovations, accelerate revenue growth as well as wealth creation.

What are some of the impacts on the real economy / investment world? For one thing, in the startup / entrepreneurial world, I suspect the time between venture capital round will become shorter (again because of the improved productivity). In some ways, this is already happening. According to Carta, startups in the SAAS are waiting less time between new priced rounds than they are across the startup ecosystem as a whole. For SaaS startups raising a Series A, the median interval in Q4 was 15% shorter, and at Series B, the median was 26% shorter. (To the fair, the same article by Carta also pointed out that the waiting time between new round in other sectors — such as Fintech – are getting longer). Of course, the time wait between successive venture rounds depend on a number of other factors, especially the macro economy among other things, but all else equal, the time between successive venture rounds will likely come down.

Source: Carta.com (LINK)

Another impact I could think of is that those who don’t embrace Gen AI will get left behind. This is again a logical consequence of the increase in productivity / speed of wealth creation associated with Gen AI. If everyone else is invested in Gen AI and you are not, you will likely experience a slower increase in wealth compared to others.