The Market for (AI) Lemons

be radical Briefing | April 25th, 2023


Dear Friend,

It has been 60 days since we launched Disrupt Disruption – How to Decode the Future, Disrupt Your Industry, and Transform Your Business, and it has been a blast. Our community asked about bulk orders – if you want to order 20 or more copies, we can get you the book for an extremely attractive price. Simply hit reply and let us know how many copies you want and where you need them shipped. Should you have bought the print edition and want a signed copy, just hit reply, give us your address, and we’ll send you a custom, signed bookplate on us! And lastly, I am recording the audiobook version right now – soon, you’ll be able to listen to the book narrated by yours truly (inclusive of my weird German accent).

Read on to discover how George Akerlof’s seminal (and Nobel Prize-winning) paper on “The Market for Lemons” translates into today’s AI media landscape.

Decode. Disrupt. Transform.

In 1970 economist George Akerlof published his groundbreaking and highly influential paper “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism.” His work netted him a Nobel Prize in 2001. In a nutshell, Akerlof’s framework explains how information asymmetry between buyers and sellers in a market can lead to a decline in the quality of goods sold, with buyers being unwilling to pay higher prices due to their inability to differentiate between high-quality and low-quality products. This can result in a “market for lemons” where only low-quality goods remain in the market.

We have been talking about Akerlof’s insights in the context of our Hourglass Economies framework, pointing out that due to the Internet, we have lost many of the previously existing information asymmetries (e.g. sites like Yelp give you a decent information edge when you consider which restaurant to dine at). But recently, driven by the cacophony of voices surrounding ChatGPT and its friends (or rivals?), Akerlof’s insight rings true in a different way: With the seemingly breathtaking and never-ending release of news covering the latest advancements in large language model-based AIs, we also get inundated with “experts” proclaiming the rise of AGI (artificial general intelligence) and, essentially, the end of humanity (or maybe just “the singularity”).

It strikes me that when you listen to the people who are actually building most of the systems in question, such as Stanford’s Andrew Ng or Meta’s Chief AI Scientist Yann LeCun, you hear a much more nuanced message: Yes, the advances in AI are stunning — but we are still miles away from AGI, a lot of the hype is just that, and we have a lot of unsolved problems ahead of us.

Meanwhile, the AI circus focuses on its perceived information advantage (typically, our AI gurus just know enough about the underlying technology to sound “smart” to the average business person) that they keep selling lemons to their unsuspecting clientele.

When it comes to any hot technology, we are typically always best served by listening to the people who are building the core technologies – not the ones who are either merely putting the Lego bricks together or, worse, the ones who just talk… (via Pascal)

What We Are Reading

😀 A Crucial Character Trait for Happiness Enthusiasm is a personality trait that appears to drive happiness the most. In fact, to get happier, we can increase our zest for the common objects in our lives. JaneRead

🛀 Why You May Do Your Best Thinking in the Shower Powerful insights can often come when you actually give a break to deliberate thought; doing mindless (very automatic) things like showering, walking, or washing dishes can help you enter a ‘flow’ state and have those ‘aha!’ moments. MafeRead

🪴 Let’s talk about ‘regenerative business’ not sustainability As the climate crisis deepens, expect to hear a LOT more businesses talking — genuinely or opportunistically — about “regenerative” models rather than now outmoded “sustainability.” Here’s a primer on the zeitgeisty term. JeffreyRead

📊 When Scenario Planning Fails “Emergencies are business as usual” perfectly describes how striking a balance between a structured tool and the ambiguous context it should serve seems to be the shared take on scenario planning among the researched firms. JulianRead

🇳🇴 Many Norwegians never found success in Latin America Were these Norwegians that came to Latin America in the 1900s really adventurers, or did they later write this to justify a journey that had turned out to be less profitable than they had expected? PedroRead

👨‍🎤 A.I. Pop Culture Is Already Here In case you are wondering if (and possibly how) AI might affect culture — that train has left the station a while ago. PascalRead

The Thin Wisps of Tomorrow

🤖 We talked about this in previous briefings: Marry a LLM with the capabilities to act and you get autonomous agents. Here’s where we are at.

💾 This is a big deal – Stability AI made it’s LLM open source.

🎶 Liam Gallagher, frontman of Oasis, embraces generative AI – “I sound mega.”

🔋 Major breakthroughs in battery technology are coming.

🧑‍🎨 Still trying to figure out how to get the best results out of Midjourney (and other text-to-image AIs)? Fret not, here is your comprehensive guide.

🎧 Own a pair of Apple AirPods? Did you know that you can tweak them quite a bit to make them sound (even) better?

Internet Finds

Take a ride on the space elevator – this one is not only fun for kids but for adults as well. 🛗

In Other Parts of the Radical Universe

🏴‍☠️ The Heretic: Perfection Sucks, and It’s Boring 🎧 Listen 📺 Watch

🧨 Disrupt Disruption - The Podcast: We brought Christina Nesheva, CEO at Officinae Bio, back to talk about leadership. Listen now.

📕 Disrupt Disruption – The Book: Get your copy of our bestselling book and learn how to decode the future, disrupt your industry, and transform your business here.