The History (and Future) of Disruption
During the 19th century, New Bedford, Massachusetts earned the nickname “the city that lit the world”.
It served as a crucial center for whaling, especially for sperm whales, whose oil burned the cleanest.
Whale oil was highly sought after as a source of light and as a lubricant for machinery.
Throughout that century, nearly 230,000 sperm whales were hunted and processed, mainly for their valuable blubber and related products.
At one point, whaling ranked as the fifth largest industry in the United States. However, artificial lighting using whale oil remained a luxury for many.
As whale populations declined due to overhunting, whalers had to travel further afield. The industry shifted focus toward faster vessels, improved gear, and onboard processing.
The priority became maximizing speed and operational efficiency.
They didn’t anticipate technological innovation disrupting their way of life.
That is, until John D. Rockefeller entered the scene.
Rockefeller – The Whale’s Savior
Kerosene marked the first major product derived from oil. Gasoline would remain a minor byproduct and unused for decades.
Initially, crude oil offered a less expensive and superior substitute for whale oil, revolutionizing illumination.
In 1860, John D. Rockefeller began refining crude oil. By 1870, he had established Standard Oil, which eventually evolved into companies like Chevron and Exxon Mobil.
While Rockefeller didn’t invent kerosene, he refined the production and distribution processes to perfection.
Without kerosene, it’s likely that whales would have been driven to extinction, which would have been a great loss.
Ironically, the emergence of crude oil and kerosene ended up saving whale populations more effectively than any conservation efforts.
Kerosene also made artificial lighting affordable and widely available before the advent of electricity.
Google – Finally Disrupted
Disruption tends to unfold in erratic and unforeseen ways.
Whalers never imagined being driven out by oil seeping from beneath the ground. Despite being foundational, their industry was reshaped forever.
Not long ago, Google was seen as an unstoppable force, immune to political or regulatory restriction worldwide.
But late in 2022, OpenAI introduced ChatGPT, an AI breakthrough that now threatens to upend Google’s dominance.
Companies like OpenAI, Anthropic, DeepSeek, and more are chipping away at Google’s share of the market.
Google countered by creating its own AI models and adding them to its search offerings. Still, with numerous competitors emerging, large language models (LLMs) might become the most transformative technology in a century—potentially eclipsing even the internet.
Interestingly, it was Google that published much of the research fueling today’s AI revolution.
To clarify, I’m not suggesting to sell Google because they resemble the old whaling industry. Yet, the challenges ahead are significant. Luckily, Google remains a powerhouse in cloud computing and digital advertising.
Still, AI has already altered the core search business, casting uncertainty over companies depending on it.
Personally, I now use AI applications far more than traditional search engines, even those enhanced with AI features.
The AI Cage Match
For about 18 months after the launch of ChatGPT, OpenAI had a commanding lead in the AI space.
Then Anthropic introduced Claude, followed by DeepSeek and Google’s Gemini models.
Now, a surge of AI products compete fiercely for users and attention. Rankings of top AI models frequently change alongside shifting consumer preferences.
The stakes couldn’t be higher. The winner in this AI race could emerge as the world’s most influential company.
You might think this means it’s time to invest heavily in AI, but I disagree. The intense rivalry is already driving prices down sharply.
Moreover, numerous Chinese AI models—many freely available as “open source”—add further downward pressure on costs.
The vast majority of AI startups will not succeed. While backing the eventual winners could pay off, investing broadly in the sector is likely to disappoint.
This pattern mirrors past industries like oil, automobiles, and railroads.
All AI competitors understand the enormous potential rewards, so fierce battles are inevitable.
This competition will benefit consumers greatly, though it may prove challenging for the industry players overall.
Given current valuations, I avoid direct investments in major tech or AI stocks. My exposure comes from retirement index funds, which is sufficient without adding concentrated AI risk.
One last point: a major breakthrough will eventually come within AI itself, boosting efficiency and slashing costs by roughly 90%. When that occurs, today’s leading AI hardware providers could be left with significant excess inventory. This echoes what happened during the dotcom fiber buildout.
With tens of thousands of top software engineers focused on similar problems, breakthroughs are almost guaranteed.
We remain in the early stages of this disruption, and much of the journey is yet to unfold. Watching and experiencing this transformation will be truly captivating.
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