As regulators continue discussing artificial intelligence and the competitive dynamics in the AI space, one thing is clear: competition is thriving up and down the AI stack. This point shone through during a workshop hosted last week by the FTC, even though the panel lacked balance and entirely omitted industry voices.

Here are the facts:

– Competition is “intense” in AI, said Jonathan Frankle of Databricks at the FTC event: “Speaking from my personal experience… because I have to interface with all of [the AI companies] in my day-to-day work, competition is intense.”

– The data bears this point out, evidenced by VC data from YCombinator (chart from Benedict Evans).

– The winners in the AI space so far are “not the old guard,” says Kristian Stout of the International Center for Law and Economics. “OpenAI, Anthropic, Midjourney, Hugging Face, Adobe … some of them may be very well-resourced, but they are not part of the old guard; these are up-and-comers.”

– Incumbent tech firms are lagging behind their newer, smaller rivals, points out Dirk Auer of ICLE. “If anything, it looks like generative AI firms could eat big tech’s lunch–not the other way around.”

– Auer continues by pointing out three reasons for new entrants’ success”

– Diminishing marginal returns of data: “With @geoffmanne we survey the empirical literature on the marginal benefits of data. The big takeaway is that data rapidly reaches a point of diminishing returns. So it is very unlikely a firm could use data to run away with the market.”

– Ubiquity of training data: “A lot of the best data (and the data firms like OpenAI are using) is publicly available. For instance, OpenAI is using datasets like GSM8K & MATH to train its model for algebra.”

– Newer firms have better training methods: “Training methods, AI architecture, algorithmic efficiency & other innovations are far more important than raw data. E.g., the launch of OpenAI’s GPT store may be far more meaningful than its data. Big tech firms don’t seem to have a competitive advantage on these fronts.”