AI Is a Services Revolution

🌈 Abstract

The article discusses how large language models (LLMs) are reinventing knowledge work and disrupting various services industries. It explores the shift in the U.S. economy from manufacturing to services, and how AI is poised to automate many desk-based, text-heavy jobs. The article also highlights the slow pace of enterprise AI adoption, the opportunities for AI startups in services industries, and the potential for vertical AI companies to build defensible businesses.

🙋 Q&A

[01] AI Is a Services Revolution

1. What are the key industries that have seen growth in the U.S. economy over the past 50 years?

• The key industries that have seen growth in the U.S. economy over the past 50 years include healthcare, education, financial services, business services, and professional services.

2. What types of jobs are most exposed to automation by AI according to Goldman Sachs research?

• According to Goldman Sachs research, the jobs most exposed to automation by AI are administrative office work, legal work, and architecture & engineering.

3. How is the adoption of AI by enterprises playing out currently?

• The adoption of AI by enterprises is happening slowly, with most enterprises still in the pilot/experimentation phase rather than full deployments. Enterprises are also finding that LLM capabilities vary across different use cases.

4. What is the emerging trend around consultants and AI?

• There is an emerging trend that the biggest winners of the AI boom are consultants, as enterprises are turning to them to help figure out their generative AI strategy.

[02] Revisiting Seurat and Vertical AI

1. What is the Seurat playbook for vertical SaaS and AI companies?

• The Seurat playbook involves:
  • Identifying the most salient pain-point for the customer and solving it
  • Using that wedge to win over customers
  • Layering in more products over time to cross-sell and up-sell, improving customer lifetime value and becoming more defensible

2. How does the Seurat painting analogy relate to vertical SaaS and AI companies?

• Just as a Seurat painting appears as a series of dots up close but reveals a rich, expansive work when zoomed out, a vertical SaaS or AI company may start out looking like a single feature but can expand into a constellation of products with a strong moat over time.

3. What are the key elements of the combined playbook for vertical AI startups?

• Choose a services industry, identify the most salient pain-point that can be automated with AI, and then execute the Seurat playbook by expanding to adjacent products and improving the product with more specialization and better data over time.

[03] Final Thoughts: The Race Isn't Won

1. What is the current state of the AI disruption in services industries?

• The article suggests that the AI disruption in services industries is still in the early stages, with many opportunities remaining for new entrants to catch up and surpass early movers.

2. How does the author view the current hype and valuation around early AI startups like Harvey?

• The author suggests that the hype and high valuations around early AI startups may be premature, and that it will take years before we fully understand how LLMs should best automate workflows and augment workers.

3. What is the broader historical context the author provides for the AI Revolution?

• The author draws parallels to the Industrial Revolution and suggests that the AI Revolution will similarly reinvent services labor, just as the Industrial Revolution reinvented manufacturing labor. The author sees the current phase as the "Irruption Phase" of a 50-year technology cycle.