With all the hype around AI, I’ve seen the media and investors get a little bit sloppy with the definition of AI and have been calling things AI that aren’t AI. When there’s a big trend like this one, there’s a temptation to attach things to the trend that shouldn’t be attached to the trend. I’ve heard it’s hard to get meetings these days with top VCs if you’re not talking about AI in some form so founders are certainly incentivized to stretch. It’s worth defining what it actually means and what things are software versus AI.

Software that is not AI is running off of mid-20th-century technology. It effectively acts like a digital calculator. A programmer codes the software to do something, and the software behaves accordingly. The software is not thinking. It can’t do anything it wasn’t coded to do. If the software makes a mistake, that is the fault of the programmer who coded it.

Ai is much different. Ai mimics human intelligence. It can do more than what it was coded to do. ChatGPT describes itself this way:

The ability to learn, adapt, and generate contextually relevant responses based on patterns in data is what elevates it from traditional software to the realm of artificial intelligence. It's a software that, to some extent, can exhibit intelligent behavior and respond dynamically to various inputs.

One way to think about this is that software makes the human mind more efficient while AI mimics the human mind. From an investing perspective, this difference is really, really important. As this technology develops, given the massive productivity gains from a technology that can do the job of a human infinitely more quickly, 24 hours a day with no breaks could cause us to totally rethink how to value companies that create and/or leverage this technology.