AI and the new California Gold Rush

If you are totally confused by frenzied media reporting on Artificial Intelligence, especially on the ouster and subsequent reinstatement of Sam Altman, the wunderkind CEO of OpenAI, the company that gave us ChatGPT, and since, you shouldn’t be. It has less to do with the altruism and technology attributed to the company or the polarising personality of its CEO but more to do with the enormous amounts of money to be made in what I would characterise as the newest California Gold Rush. The original gold rush which took place in the mid-19th century was followed by a more recent one in the mid-1990s to early 2000s (remember the dot com boom?). Both of these shaped US history and society in myriad ways. The newest gold rush is about to do the same, except it will be at the global level. Eureka! El Dorado has been found.

The first California Gold Rush (1848-1855), precipitated by the discovery of gold in the foothills of Sierra Nevada Mountains in the western United States, resulted in the state of California being born and the concomitant decimation and supplanting of the indigenous Native American populations by white settlers and gold-seekers from the rest of the US. The natives were subject to kidnapping, rape, child separation and forced relocation, acts that were tacitly encouraged, approved or actually carried out by state authorities. Over the next 25 years, a whole host of new towns, banks and railroads came into being, contributing to California becoming one of the richest states in the US. Incidentally, the railroads were built using Chinese labourers. Shortly thereafter, immigrants from China were prohibited from entering the country. Silicon Valley, as we know it today, would not exist but for these connected set of events.

The ‘second’ California Gold Rush (1993-1999), during which the internet became the WWW, created a number of instant millionaires, almost all of them in their 20s and early 30s. The start-up companies founded by these upstarts were either decimated or subsumed by the older, well-established technology (Microsoft, GE, etc) and financial service companies (mostly banks and investment houses) which had been slow to wake up to the commercial potential of the internet. A few companies like Google and Amazon survived the onslaught and themselves became behemoths in the ensuing years.

The newest California Gold Rush (2023-??) has been birthed by OpenAI’s chatbot, ChatGPT4, a large language model based neural network, a precursor to large image and video models that are now being introduced at a frenetic pace. All three models draw upon the enormous amount of data generated through social media postings and web surfing activities of the global community at large. This could result in OpenAI eclipsing companies such as Microsoft, Google (aka Alphabet) and Facebook (now Meta) and extinguishing their fortunes. Why would Microsoft or any of the other IT titans allow this to happen? Hence the drama surrounding Altman.

That Altman’s other company,‘sama’, collaborated with Facebook in exploiting their data annotation workers in East Africa is not that well publicised. The fact that Microsoft, which holds a 49% interest (a $13 billion investment) in OpenAI, has warned other search engine companies not to use OpenAI products in their search algorithms haven’t made the newspaper headlines either.

Based on nothing more than the unique web search algorithm that they developed while they were graduate students, Larry Page and Sergei Brin started Google in 1998. A founding principle of the search engine company was to not accept any ads for continued operation of the company. In just a couple of years, this principle was jettisoned in favour of money. Today, Google generates billions of dollars in revenue by tracking users on the web and selling this information to advertisers.

The corporate history and philosophy of OpenAI is strikingly similar to that of Google’s. Founded as a research-oriented, not-for-profit company focused on harnessing the benefits of AI for the common good, it now has a schizophrenic existence -- one arm of the company is still not-for-profit, the much larger other arm is very much for-profit, if only because the Shylocks backing the company will insist on their pound of flesh.

The quality of mercy has never been so strained.