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Invited essay
By Mark Lemley and Matt Wansley
Mr. Lemley is a professor at Stanford Law School. Wansley is an associate professor at Cardozo School of Law.
Silicon Valley is proud of its revolution: Startups are creating new technologies, disrupting existing markets and surpassing traditional ones. This cycle of artistic destruction brought us the private computer, the Internet, and the smartphone. But in recent years, a handful of established tech corporations have maintained their dominance. For what? We’ve learned how to co-opt potentially disruptive startups before they become competitive threats.
Just take a look at what they mean for the leading corporations in generative synthetic intelligence.
DeepMind, one of the first leading AI developers. OpenAI, founded as a nonprofit and a counterweight to Google’s dominance, has raised $13 billion from Microsoft. Anthropic, a startup founded through OpenAI engineers who are influenced by Microsoft, has raised $4 billion from Amazon and $2 billion from Google.
Last week, news broke that the Federal Trade Commission was investigating Microsoft’s relationships with Inflection AI, a startup founded by DeepMind engineers who worked for Google. The government is wondering if Microsoft’s agreement to pay Inflection $650 million as part of a licensing agreement. even when he destroyed the startup by hiring as much of his engineering team as possible, a way to circumvent antitrust laws.
Microsoft has defended its partnership with Inflection. But is the government right to get involved in those deals?We think so. In the short term, partnerships between AI startups and big tech companies give startups the huge sums of cash and hard-to-find chips they need. But in the long term, it is festivals, not consolidation, that enable technological progress. .
Today’s tech giants were once small start-ups. They’ve built their businesses on how to bring new technologies to market: Apple’s private computer, Microsoft’s operating system, Amazon’s online marketplace, Google’s search engine and Facebook’s social network. Technologies have competed with both traditional and overlooked ones, providing new tactics for doing things that have shaken market expectations.
But this trend of start-ups innovating, developing, and outperforming traditional ones seems to have stopped. Tech giants are old. Each of them was founded more than 20 years ago: Apple and Microsoft in the 1970s, Amazon and Google in the 1990s, and Facebook in 2004. Why hasn’t new competition emerged to disrupt the market?
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