There’s a concept in business called the first-mover advantage. Basically, it means that if you’re the first company with a successful product in a new market, you have the opportunity to dominate the market and fend off rivals.
But that advantage can be short-lived. Take Netscape, which produced Navigator, the first popular commercial web browser. Then Microsoft entered the field with Internet Explorer, and it wasn’t long before Navigator crashed.
In the world of AI chatbots, two of the first movers are OpenAI and Anthropic. But recently the Chinese company DeepSeek made a splash with an AI chatbot that it reportedly developed for a fraction of what its competitors have spent.
Marketplace’s Stephanie Hughes spoke with historian Margaret O’Mara, author of the book “The Code: Silicon Valley and the Remaking of America,” about whether America’s artificial intelligence industry should be worried about newcomers like DeepSeek.
The following is an edited transcript of their conversation.
Margaret O’Mara: There’s this dimension of foreign competition [that] also brings to mind the late ’70s and early ’80s in the U.S. semiconductor industry that was suddenly freshly challenged by advanced chips coming out of Japan, which was kind of a surprise. Japanese chipmakers were taking some technologies developed in the United States to develop complex chipmaking, and assisted by subsidies from the Japanese government, came to market and were able to rapidly undercut American chipmakers on price and really had Silicon Valley on the ropes for a few years in the early 1980s with this very fierce competition. So the DeepSeek saga brings to mind this earlier geopolitical moment, and I think there are some interesting similarities.
Stephanie Hughes: It’s way too early to make any pronouncements on where companies like OpenAI will land after this, but it does raise the specter of companies like Netscape and [social media pioneer] Friendster, who were sort of first, but certainly didn’t last forever. What factors could determine if American AI companies, you know, go the way of Friendster or if they can enjoy their first-mover advantage?
O’Mara: What I’m watching is, you know, how costly is it going to be to continue to develop these advanced models? And by cost, I don’t just mean cost of the consumer. I mean cost [of] energy, how efficient the hardware is. The capital expenditures of the largest tech platforms are mind-boggling, that kind of massive investment of capital and material is, you know, it’s not sustainable. It’s not sustainable from an environmental and energy-consumption standpoint, and also not kind of sustainable from a capital-expenditure standpoint. So I think that’s the real challenge, that it’s become so expensive to be a player in this. And there has to, what DeepSeek is pointing towards, is there is possibly another way. But this is different than before, than the age of Netscape or Friendster or other first movers, where the first movers in the AI space have, by necessity, had to access the capital of the large platforms. The large tech companies are the only ones that have the money and the resources and the data centers and all that data infrastructure to do these things, and that is something that is different than before.
Hughes: So actually, in preparing for this interview, I read this article from Harvard Business Review about first-mover advantage. It was older. It was from 2005 and one thing that made me really laugh as I was reading it is that it mentioned Apple as a company that had been a first mover and then, you know, had declined. And this was published two years before the first iPhone came out. And so I was wondering, is it possible to be, you know, a first mover and then lose that advantage and then start winning again? Like, is there a trajectory to it?
O’Mara: It is possible, usually by doing something different or the world has changed around you or something. Apple’s a great example of a company that was a superstar and then hit some roadblocks, so much so that by 1985, Steve Jobs is being fired by his board, as you know. “Get out of here! We need to do things differently.” And it’s only with the advent of the iPod and iTunes and then the iPhone that it really becomes the colossus it does. And that’s building something different. Every company has its ups and downs, but there’s this sort of really interesting sort of series of stories. It’s the company that becomes the verb in the beginning of a market doesn’t necessarily get to stay on top, and in some cases, they kind of fade altogether.
Hughes: What lessons can AI companies like OpenAI and Anthropic take from first movers, both the ultimate winners and the ultimate losers?
O’Mara: Well, I guess that maybe the top line is never take success for granted. As former Intel CEO, the legendary Andy Grove, once said, only the paranoid survive. So in a way, it’s reinforcing the hypercompetitive nature of the tech business, which is you got to keep on elbowing everyone out of the way. But also that, you know, the market you define in the beginning may change, and I think there’s a scale question. You know, like what happens when you’re really scaling up from being a startup that’s offering something completely new, helping define a market, and being able to take that to the next level, when the market actually becomes a mass market? What we also see is, you know, who’s going to deliver a product in the least expensive way, the smoothest way, the most frictionless way? Those are often the companies that, that come to dominate, but with the corollary [that] every firm eventually becomes a dinosaur, sometimes [it takes] longer than others, and it’s very difficult to stay, like, the innovator always. There’s a kind of a tension between, you know, being able to scale up and becoming a big market-dominant company and also continuing to be the one that’s developing the next, next big thing.
More on this
One thing about first movers: You can get attached to them or, at least, be nostalgic for what it was like to use them. I was talking with “Marketplace Tech” producer Daniel Shin about early movers we’ve used and loved, and he mentioned the search engine Ask Jeeves, which really brought me back.
Meanwhile, our senior producer, Daisy Palacios, remembers Facebook forerunner Myspace and obsessing over what song to put on her profile, though she doesn’t miss having to list her top eight friends, in order.
And Marketplace’s Meghan McCarty Carino, who had the idea for this segment, says given the alternatives now, she misses the original Friendster.
As for me, I never was on Friendster, but I do have a memory of being in college and my housemate Rob sending me an instant message over AOL Instant Messenger telling me to get on Friendster. You see, he had a classmate on there with more friends than he had, and he needed to catch up. I believe his message said, “She’s winning at life.”
Is there a first mover you wish was still around? Let us know at mptech@marketplace.org.
