AI Is More Than Just the ‘Next Big Thing’ in Tech

By Joel Litman, chief investment strategist, Altimetry

We’ve seen this story before…

An emerging technology comes along, and it changes everything.

Think back to the dot-com boom in the 1990s. Many companies didn’t take the Internet seriously then. They thought it was just a fad… something for tech companies and startups to employ.

They didn’t understand that the Internet would become essential for every business. As telecommunications expert Waring Partridge said in 1995…

Most things that succeed don’t require retraining 250 million people.

Yet, the Internet has had a dramatic impact on many different fields. More than 5 billion people use it around the world today. It’s now essential to our daily lives.

Those who recognized the massive potential of the Internet early on adapted and thrived. Those who didn’t were left behind.

The secret was that the dot-com boom wasn’t just relegated to tech companies. Every company that’s around today had to become a dot-com company.

In a recent conversation on the Soar Financially podcast, I highlighted how this mirrors the current situation with AI.

Let me be clear… Just as was the case with the Internet, falling behind in AI could be the biggest mistake a company makes.

Back in the ’90s, companies questioned the necessity of having a robust online presence…

Many thought, “Why would we need a website when our physical stores are doing so well?”

Borders – one of the largest bookstore chains at the time – was one such company.

It was comfortable with its business model. It had a vast network of stores, and it believed that its customers would remain loyal to the in-store experience.

However, when the dot-com mania started to take off, Borders made a critical mistake…

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Instead of developing its own online presence, it outsourced its e-commerce operations to Amazon (AMZN), which was a relatively smaller online bookstore at the time.

It seemed like the smart move, as it would allow Borders to focus on its physical stores.

In reality, Borders was handing over its digital customer base to a competitor… when it should have been adapting its business to the rapidly changing retail landscape.

The company failed to realize that the Internet wasn’t just a fad or a niche market. It was the future.

Borders’ decision to outsource its online sales operation to Amazon from 2001 to 2008 – during the prime years of the dot-com bubble – marked the beginning of the company’s decline.

It meant that Borders missed out on developing its own e-commerce infrastructure right when digital transformation was vital.

By the time it realized the importance of e-commerce, it was too late.

Borders couldn’t compete. And while Amazon grew into the giant it is today, Borders’ business slowly crumbled and eventually went bankrupt in 2011.

Fast forward to today, and we’re at a similar crossroads with AI…

Some might liken AI to a buzzword – something tech companies or specific industries use to draw folks in.

But just like with the Internet, AI isn’t confined to one sector. It’s a tool that every business needs to leverage… or risk being outpaced by competitors who do.

It will take some time. But just as the Internet became essential for doing business, AI will eventually become the standard.

Those who completely ignore AI, or who actively boast that they’re “anti-AI,” will face the same fate as Borders – a company that once had everything, but lost it all by failing to evolve.

AI is not just the “next big thing” in the tech world… It’s the next big thing when it comes to everything.

We need to lean into companies adopting this new technology. More importantly, we need to be careful of companies who are starting to fall behind.

Regards,

Joel Litman
August 29, 2024