All the frothy talk about how ChatGPT changes everything and about how we all need to be part of a land grab in the metaverse suggests that it's worth taking a look back at how the changes-everything/land-grab adherents fared during the early days of the internet in the late 1990s.
It wasn't pretty.
While there were a few monster successes, notably Amazon, there were far more face plants like those by Webvan and Pets.com. The companies that reliably prospered, such as Sun Microsystems and Cisco, were what those of us in the financial media referred to at the time as "arms merchants" -- they supplied the combatants in the internet wars rather than forming "armies" themselves.
I'd suggest that being a metaphorical "arms supplier" is the best way for companies, including insurers, to play on ChatGPT and the metaverse.
In many ways, I'm repeating myself here, but, as a veteran reporter told me when I was a young pup at the Wall Street Journal, "If you have a good story, you ought to write it every once in a while."
Let me provide a bit of context, then I'll get into what I think the "arms merchant" concept means for ChatGPT and the metaverse. I'll start in August 2017, when I wrote about the early internet days:
"There was a class of 'arms merchants,' including Sun Microsystems and Cisco, that made gobs of money by outfitting the pioneers—in fact, more than almost all the pioneers.
"The analogy was: If you try to name a miner who won big in the Gold Rush of 1849, good luck. But you know many of the outfitters, including Levi Strauss, who supplied blue jeans to miners, and Leland Stanford, who made his fortune mostly on the railroad that connected the miners to the rest of the country, before founding his eponymous university."
Turning to the lessons for the insurtech movement, then in its infancy, I added:
"Lemonade, Trov, Slice and some other truly new business models stretch our thinking and throw shade on those merely looking for 'faster, better, cheaper'.... The Lemonades of the world will be the most important and will transform insurance. In time. If they work. (Some will, but, if history is any guide, many others will fall by the wayside.)
"In the meantime, there is an awful lot to be gained through incremental improvement. Insurance is such a paper-heavy, process-based, inefficient industry that the potential efficiencies from digital improvement exceed those in perhaps any other industry."
Many of the big ideas that flopped in the early 2000s weren't bad ideas. They were just ahead of their time. Customer behavior hadn't yet adjusted to the new possibilities, and, in particular, the technology infrastructure couldn't yet provide the sorts of robust, vivid, fast interactions and delivery capabilities that e-business models required. While Pets.com filed for bankruptcy in 1999, for instance, Chewy carries a market valuation north of $14 billion, operating the same sort of e-commerce pet supply business.
Venture capitalist Marc Andreessen was once asked how he determined which nascent technologies would work and replied that they all will work -- the multibillion-dollar question was WHEN they would work. That uncertainty is why so many big ideas fail. In Silicon Valley terms, the founders and backers confuse a clear view with a short distance. That uncertainty is also why it's much safer to be an arms supplier rather than lead the charge on something like ChatGPT.
It's not that I worry about insurers running off and trying to establish whole new business models based on ChatGPT or the metaverse. But I do see suggestions about ChatGPT, in particular, that strike me as being much too ambitious for now.
A newsletter from a venture capital firm -- Andreessen's, in fact -- suggested in the past week that ChatGPT could answer questions for customer service at financial services firms because it could pull together information from all the firm's internal documents. Others have suggested ChatGPT could soon be used to make underwriting decisions automatically or handle claims with almost no human interaction.
But if you look into "large language models" like ChatGPT and see, among other problems, their tendency to make things up -- to "hallucinate," as the scientists euphemistically put it -- you see that they won't be ready for prime time any time soon. Yes, there's a clear view to utility in all sorts of applications, but not a short distance.
It's better to take the view that ChatGPT and its kin can supply information for now, but not to yet fight the war. That perspective will not only help insurers with their own implementations but should inform their interactions with clients, who need to understand the risks associated with their own buildouts and to see what sorts of coverage they should purchase.
As I wrote back in February:
"The issue with large language models like those used for generative AIs like ChatGPT and Bard is that they don't know much about the real world. They've just been fed unimaginable amounts of text and learned to imitate it. You give one a prompt, and it figures out what word is most likely to go next and then next after that and after that... and on and on and on. The results are scarily impressive but have a tenuous relationship with reality, which is why Bard claimed that the James Webb telescope discovered exoplanets, why ChatGPT has claimed that the most-cited medical journal article of all time is a piece that doesn't actually exist, why ChatGPT told a friend that he was married to a number of women he'd never met, had children he'd never had and wrote books that didn't exist....
"It's important to see the results from these generative AIs as what they are: a very rough draft. Now, as someone who has spent decades doing his thinking with his fingers on a keyboard, I can tell you that even a very rough draft can be extremely valuable," but it still requires human insight to become the finished product.
What about the metaverse? I don't think you need to worry about that any time soon. As I wrote in late 2021 (to quote myself one final time):
"The vision of a metaverse laid out by Mark Zuckerberg last week is bonkers. Nutso on steroids. It won't be realized in my lifetime, yours or his, even if some of the wildest claims about longevity come true and we all live to be 150.
"The vision is essentially a fever dream for gamers who'd love to immerse themselves in their online worlds and not have to worry about the messy details of physical existence."
Some day, I'll tell you what I really think. :) Yikes. I stand by what I said about how insurers should avoid involvement with the metaverse, unless a client drags you there, but I must have been in some kind of cranky mood when I wrote that.
Cheers,
Paul