3. A tale of the lettuce head kingdom. Play in a market niche where you can win (through data).
A few weeks ago, I was at a talk by AI guru Andrew Ng who told a story of how a former group of his students built their company. One day, these students, a group of Stanford engineers, ended up at some farm in Northern California and began taking pictures with their cellphones of heads of lettuce. One head there. Snap! One head here. Snap! Another head over there. Snap! Over time, the students amassed the greatest collection of lettuce-head images in the world. They founded the company, Blue River Technology, which manufactured agricultural robots using high-precision herbicide spray technology trained on their lettuce head images. The robots eliminated 90% of the herbicide use on farms, saving farmers money and fortifying against resistant weed growth. In October 2017, less than a decade later, John Deere bought Blue River for $305 million.
The reason behind Blue River’s success can be distilled into a matter of AI strategy: It built an empire in a specific market niche where it acquired more relevant data than any of its competitors to train its AI systems in the most meaningful way. In this brave new world of AI, data means everything. To train any algorithm to solve a given problem, you need to train it with data, particularly high-quality data and lots of it. The more data you have, the more accurate your AI system can operate. What this means for companies is that data, and naturally, the strategic use of it, can mean all the difference in obtaining an edge over one’s competitors. In this manner, Blue River collected the biggest repository of lettuce-head images to train its robots to recognize the difference between a good and bad lettuce head, which enabled it to optimize its herbicide-spraying robot. With every lettuce head its robot encountered, its algorithms became further refined, more powerful and more accurate. Blue River’s lettuce-head treasure trove, and the AI system on top of which it was built, became its competitive moat. Once the company built out its database of lettuce-head images, it became difficult for any other competitors to catch up — both in terms of data and the efficacy of their AI systems trained on that data.
This strategy — building a data empire in a niche area — is the same reason why you should not expect to see any emerging upstarts topple the empires of AI monoliths like Facebook and Google any time soon. Google, for example, has collected over two decades of data about every click, view, and search of yours to deliver to your screens the most optimized search results in existence today. Such vast empires will endure, gluttonizing on their bacchian feasts of data to the extent no other competitors can catch up.
So remember: Lettuce-head empires pay off. Build your startup empire in a specific market niche that no other player has a data monopoly over. Then sit back and let the lettuce heads roll.
There will always be, I admit, exceptions to these rules. However, these lessons have served me well, and I hope they will serve you well too. Happy startup-ing.