11min chapter

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Bill Gurley and Sunny Madra talk open-source vs. proprietary AI | E1825

This Week in Startups

CHAPTER

Rise of Open Source and its Impact on Startups

Discusses the rise of open source technology and its disruptive impact on startups, with a focus on the trend of startups opposing open source at an early stage. Highlights the importance of open source for spreading innovation across borders and discusses the behavior of Google and Microsoft in relation to open source and proprietary technology.

00:00
Speaker 3
And to your point, Google was behind in cloud services and led a movement to open source Kubernetes. So there's a company that has played both sides of the aisle depending on where they are.
Speaker 1
When you when you look at this field, open AI and anthropic, these are startups. Have you ever seen startups be asked for regulation this early and this often and be so opposed to open source? Is this a new trend? And what do you attribute it to?
Speaker 2
I mean, Bill, like there's more your area. You answer that one and then I can tell.
Speaker 3
Well, it's funny because I've certainly never seen it, Jason. I've never seen this early. And maybe it just speaks to the wild success of open source. I mean, the number of venture backed open source companies today versus 30 years ago is just amazing. It is a very disruptive way to get your technology out there quick and fast. And and it's, you know, one of the other things that Stigler talked about a phrase I mentioned several times, he said, when you have this type of blocking regulation, you end up with a net loss to society. And I'm one that firmly believes the open source is amazing for society because when you have technology locked up with patents, it's harder for ideas to spread. It's harder for ideas to spread across borders and to other countries among all these different smart people that can get out and innovate. And so I have never seen something this early. Obviously, there's a ton at stake. There's a ton like I mentioned, these companies have raised money at an unprecedented level. So yeah, you could call them early state startups, but you could also, I mean, they've raised billions of dollars each, you know, and only maybe in the ride sharing market, did you have that happen so quickly? And so there's a lot at stake. There's clearly a lot of stake, but I've never seen startups proactively pitch governments and not just ours, but several governments around the world have never seen that. I also find it really suspect that there aren't like technology lead, like academicians out there leading this charge, the people that are leading the charge calling for the regulation and calling. And some of them raising this question of whether open source should be allowed are the incumbents. They are the one either the incumbents are their backers. And some of them, you know, Mustafa from inflection or podcasts said, I know it looks odd me being the one that's asking. And yeah,
Speaker 1
it does. It is. It is odd. And it would it reeks of protectionism. Pulling up the ladder behind you. And with Microsoft and Google, they seem to be maybe trying to dance along the line here, Bill. They want to have cloud computing. Sir, they both have major cloud computing services, Azure, Google Cloud. They want to offer these things, but they also have, you know, a proprietary use for this. Obviously Google search and Bard and the chat interface are going to overlap Microsoft trying to get Bing to break out using AI in the office suite. So they see that as a competitive advantage. Which are how would you handicap Google and Microsoft's behavior? Yeah.
Speaker 3
Well, I mean, I think to a certain extent is interesting on the chart that I don't know who produced the chart that Sonny put up, but it had Microsoft neutral. I could find myself believing that. I mean, they had to do a rather convoluted deal to get access to the technology that they're using with open AI. And I wouldn't be shocked if they're comfortable with a hedge on that. Primarily because they already control these creative products that they now believe will be enhanced with AI. And I don't know that whether it's open source AI or someone else's AI that it really impacts them because it's the lock in they have on the product. So I wouldn't be surprised by that. And like I mentioned, Google's played this both ways. So you know, they pseudo open source Android because within open source, there's different dimensions on how open it is and whether you've really committed to a third party like the Linux Foundation that runs the regulatory aspect of it or not regulatory because I don't want to confuse it with the government. That runs how it's had the many the most open projects have a third party that that keeps the open source foundation. Yeah, there's others other than the open source foundation, but that's the largest one that manage the process and enjoy. It's not like that. So anyway, I had to do that quick aside, but Google's done. Whereas Kubernetes wide open, uh, the next foundation manages it. And so they've been all over the map. And as you mentioned, they once posted paper, we love open source, but it's
Speaker 1
not right for search. You know, yeah. Well, once you get that lock in, that's when you don't want to open source it because people can then build competitive products. And as we've seen in search, that space has not seen any changes in 20 years. Like that has been a locked, you know, box where nobody's innovated for 20 years. A number of people have tried. I tried myself. It's very hard to get any kind of a foothold in search. But I don't think, you know, those two aren't at the forefront of this. As you mentioned, it seems to be a
Speaker 3
battle between these extremely well funded startups and really more of a community. I'd say the people that are on the other side of this based on what I saw going around this weekend. It's more of a community. I mean, it involves, you know, like Jim Zemlin, who runs the Linux Foundation who's been out talking with your conference. I spoke to Stephen Wolfram who told me he thought it was ridiculous that someone would try and ban open source here on a safety reason. And so that's what I say when if I might be more open to listening, if I thought it were, you know, some broad group of technologists and big thinkers that were making this argument, but all of the arguments are coming from the people with the most to lose. Yeah.
Speaker 2
And that seems crazy. Sunny, you want to just give us an idea of how? Well, yeah. I mean, you know, we're going to lose Bill in a couple of minutes here. But like one thing I'd love to get his thoughts on because I think it really reinforces the point here is that. So, you know, last week we saw big funding announced around a Mistral. It's like a European based group that raised $100 plus million to Bill's point, a lot of money. And, you know, they released their model open source, open for commercial use as well. And you can see a couple of key points here. One, you can see that there's seven billion parameter model uses again, half the amount of memory. And down here, even just against other open source models, right? There are seven billion parameter model is outperforming, you know, LAMA to 13 billion. Again, this is just against open source. But like the rate of innovation is moving so quickly here that if some of that regulation were to come into play and these folks couldn't put this out there and they had to do it, you know, through the end of the day. And then we can do it, you know, through some kind of regulator, which has been, you know, like the FDA or some of that. Those are the ideas that we've heard put out there. I think we just wouldn't see that. And I'll just add one more thing. Like last week, Jacob, you know, we even demoed GPTV. And, you know, a week later we get LAMA and LAMA is an open source implementation of like a vision model. And the same example that we did there, you know, we have it. And I think, you know, to Bill's point, I can't get my head around, you know, what it is around open source. That's bothering people. We've seen open source in operating systems. We've seen it in databases, right? We've seen it in mobile phone operating systems. You know, things get patched quicker when the code is open. You can find vulnerabilities. And so the arguments that around safety, no one is providing the sort of the background as to, you know, what is it that is not safe here? It is fairly
Speaker 1
obvious what's happening here, Bill. The people who have the lead are using job destruction and the fear of AI from science fiction. And this, you know, could get out of control. The demon could be unleashed. They're using that in order to maintain their lead because they know full well that large numbers of startups or mid-sized companies embracing an open source project would lead to the demise and would absolutely evaporate the lead of open AI. And this really is about open AI and Sam Altman. Let's call it what it is. Sam is the one who's leading the charge. Although, although,
Speaker 3
Mustafa and Reid Hoffman have been perhaps even more vocal, or at least openly vocal on podcast and whatnot. So it's not just that, but once again, hundreds of millions of billions of state. Yeah, I mean, I agree with Sonny. I mean, it's ironic, but Linux is the most stable, most secure operating system that's ever existed. And I think, you know, I go back to the, some of the original thesis of why open source would work and more eyes the better, the more transparency the better and the notion that the people that it's just so ridiculous for someone to say this stuff super scary, like, you should be really afraid. But let me do it. Right. I'm, I'm, you should trust me, but it's super scary, but it can do really good things, but it's scary. Let me take care of, you know, help me be the only one that gets to take care of it. And yeah, that's sad. I hope there's quite a few people stepping up. I hope this doesn't happen. One last thing I'd mentioned before I have to go. I think the cats out of the bag. So you're not going to stop there from being open source in parts of the globe. So if you've shut it down in a particular region, that region is going to fail to innovate relative to the other regions that are out there. There's a, there's a really cool piece of open source of technology called RIS-5, which you guys have talked about a couple of times in the semiconductor space. And I believe they intentionally moved the, the governing body outside the US because they were afraid of the restrictions the US was putting on semiconductor technology. And I think it was smart that they did that. And RIS-5 is going to be wildly successful, you know, regardless of what happens to US regulation. And so I think governments need to be particularly careful that if they take a first step move here, they're going to put their own society in a worse place in their own entrepreneur as a minute, worse place than others around the globe. I
Speaker 1
mean, and we've seen this play itself out with social networks and the impact they have on society at large. The fact that so much power was consolidated in meta and oh, trust us, we'll, we'll, we'll protect you. It doesn't work. The person who's making a profit and has a profit mode of the incentive is too great to act in the public's interest. Whereas a group of people working on the project together, they keep each other in check. Yeah, that's like, it's a governance thing, right, Bill? Undoubtedly.

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