Unblakeable

For AI startups, here’s how to set yourself up for success:

-Define Your Niche Precisely: Focus with laser-like precision on a specific, painful problem in the market that you can solve.

-Validate Market Demand: Conduct thorough customer research and surveys to confirm that there is a demand for your AI solution.

-Show a Path to Profitability: Investors want to see a clear, realistic plan for making a profit, not just promises of growth over several years.

What do you think about AI company success?

Risk Management Mondays: Technology Disruption Gives No Fair Warning

One of my favorite services is EasyBib - an online citation creator that formats websites and other research sources into proper citations using a multitude of formats (I am partial to MA8).

It's a lifesaver. I love using footnotes but hate formatting them. Always have since the third grade. Then I discovered EasyBib over 10 years ago, and it changed my professional life.

A couple of years ago they were bought by Chegg, which is basically a homework assistance service that I guess somehow isn't cheating when students use it. I dunno. I just use the bibliography tool.

But now it's in trouble because ChatGPT can do for free what Chegg took years and thousands of hours of manpower to create. Although Chegg hasn't lost that many subscribers, their stock price has, well... glub glub. (Source: Wall Street Journal)

Chegg rode high during the pandemic, and then, like so many companies, the worst news ever was life returning to normal. But then they got hit by ChatGPT...

The second ChatGPT broke onto the stage a few years ago, Chegg should have seen the disruption and responded. Whether they saw it or not, I don't know, but they haven't made an obvious response.

How would you respond? I'm glad you asked!

Chegg should have been developing its own large language model from Day 1, using the vast amount of data it has created and collected, thereby creating a proprietary AI platform that can beat ChatGPT at its own game. Maybe it already is, but if not, it's probably too late for them to catch up.

What's going to happen - what HAS to happen is that for companies to compete, they are going to hoard data, hoard machine learning talent, and develop specialty LLMs that are really, really good in their field of expertise. In effect, the ChatGPTs and Claudes of the world will be general practitioners, and everyone else needs to become specialists.

So, if you're afraid of ChatGPT wiping you out, the response is not unlike any field of expertise. Specialize and niche. Develop an LLM that is hyper-focused in a narrow field of knowledge but will be the deepest in that field - or create some other form of differentiation (creativity?).

In technology, you have to be proactive because technology is like Liam Neeson in Taken. If you try to hide from it, it will find you, and it will kill you.

Risk Management Mondays: Risk and Value Start at the Top

Mineral Resources Founder and Managing Director Chris Ellison will be stepping down in 12-18 months, creating one of the slowest car crashes in corporate history.

As a result of this announcement and the "major actions" that the Mineral Resources' board of directors has vowed to take, shares in the company fell 7%.

Ellison is being shown the door (kinda at his convenience) because of two key revelations.

First - he failed to disclose the fact that the Australian Tax Office assessed Ellison for millions of Australian dollars in unpaid taxes and millions more in fines. It's embarrassing, but you can continue to be the CEO of a public company if it doesn't happen again.

But the second is unsurvivable - Ellison was found to be self-dealing. To wit: He directed company supply contracts to entities that he owned and didn't disclose this.

The board of directors faced crushing legal exposure if they failed to act. While it seems that many investors would prefer Ellison stay, all you need is one ticked-off shareholder with a legal budget, and those board members would be putting their own financial security at risk.

Keeping Ellison on would be short-sighted. Fraud (and that's what self-dealing is) is usually a sock with a stray thread. When you start pulling on it, a lot of sock unravels. The company may not disclose it, but they will find something else.

And when the CEO has no problem defrauding investors, what are the chances that his direct reports might think and act similarly? And what is the culture at that company? If you believe that a CEO (especially a founder CEO) sets company culture, then "if you ain't cheatin', you ain't tryin'" may be the prevailing decision algorithm.

It also means that either a) too much power was in Ellison's hands that he could get away with self-dealing (for a time), and/or b) there were one or more accomplices that helped him effectuate and conceal the transactions. This is why the company needs to keep him on - the risk of showing him the door on day one was too great.

Why did the shares only drop 7%? Because Mineral Resources has a lot of attractive assets on the accounting and economic balance sheet. They have iron mining rights, lithium mining rights, and supply contracts that are likely multi-year deals. In the short term, they won't be impacted, regardless of the CEO.

I feel bad for the CFO, Mark Wilson, assuming he wasn't in cahoots. The auditors (E&Y) are going to come loaded for bear in the next fiscal year.

My name is Mike (Stage Name - Unblakeable)
- Helping you win your best business decisions at your most critical moments.

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