Why Google Missed ChatGPT

Hi everyone, and regards from somewhere over the Caribbean. I’m flying back to New York after a brief vacation and lucked into some good wifi. So it’s newsletter time.

This wasn’t a SBF reporting trip, alas. But somewhat fun nonetheless. I planned this one for last December, but got Covid right before my flight. So instead of the beach, I spent the holiday season in bed. This year’s off to a better start. I used the credits, finally took the trip, and am feeling pretty good after bobbing around in the waves for a few days.

So, let’s talk about ChatGPT, shall we? Since its release earlier this month, I haven’t been able to stop thinking about why this marvel of a chatbot is coming from OpenAI — a relatively small shop — and not Google. The bot answers questions, putting it into competition with search. And it’s not like it caught Google by surprise: the company’s been preaching about ‘conversational search’ for years now.?

So, what happened?

In this week’s Big Story, I cover why Google missed ChatGPT in more depth. But I’d urge you to listen to the first few minutes of my conversation with Box CEO Aaron Levie on Big Technology Podcast to really get into Google’s mindset. Levie breaks it down beautifully, and I think you’ll really enjoy his analysis.?

You can listen on Apple Podcasts, Spotify, or your podcast app of choice.?

This definitely won’t be the last time we cover ChatGPT here. If you think your friends or colleagues would be interested in the topic, please forward this email, or share it on LinkedIn. Thanks!

The Big Story

Why Google Missed ChatGPT

The tech giant believes the future of search is conversational. How did it let OpenAI’s ChatGPT take the lead?

Google’s had an awkward week. After years of preaching that conversational search was its future, it’s stood by as the world discovered ChatGPT.?

The powerful chatbot from OpenAI takes queries — some meant for the search bar — and answers with astonishing conversational replies. It’s shared recipes, reviewed code and argued politics so adeptly that screenshots of its answers now fill social media. This was the future Google promised. But not with someone else fulfilling it.

How Google missed this moment is not a simple matter of a blind spot. It’s a case of an incumbent being so careful about its business, reputation and customer relationships that it refused to release similar, more powerful tech. And it’s far from the end of the story.

“Google thinks a lot about how something can damage its reputation,” said Gaurav Nemade, an ex-Google product manager who was first to helm its LaMDA chatbot. “They lean on the side of conservatism.”

Google’s LaMDA — made famous when engineer Blake Lemoine called it sentient — is a more capable bot than ChatGPT, yet the company’s been hesitant to make it public. For Google, the problem with chatbots is they’re wrong a lot, yet present their answers with undeserved confidence. Leading people astray — with assuredness — is less than ideal for a company built on helping you find the right answers. So LaMDA remains in research mode.

Even if chatbots were to fix their accuracy issues, Google would still have a business model problem to contend with. The company makes money when people click ads next to search results, and it’s awkward to fit ads into conversational replies. Imagine receiving a response and then immediately getting pitched to go somewhere else — it feels slimy, and unhelpful. Google thus has little incentive to move us beyond traditional search, at least not in a paradigm-shifting way, until it figures out how to make the money aspect work. In the meantime, it’ll stick with the less impressive Google Assistant.

“There’s a reason why Clayton Christensen wrote The Innovator’s Dilemma. It’s a real dilemma,” said Box CEO Aaron Levie on Big Technology Podcast this week. “Google doesn’t inherently want you, at an inherent level, to just get the answer to every problem. Because that might reduce the need to go click around the web, which would then reduce the need for us to go to Google.”

But Google’s reasons to keep LaMDA private fade a bit with a competitor emerging. A sophisticated, public chatbot like ChatGPT makes waiting for the perfect business model risky. Delay long enough, and you could cede the market. ChatGPT will also take criticism as it gains adoption, sustaining hits that otherwise would’ve been Google’s. And ChatGPT’s shortcomings will teach people to view its certainty with skepticism, clearing the way for a risk-averse Google to release its own version.

For now, ChatGPT’s threat to Google remains somewhat limited. The bot doesn’t access the internet, knows nothing beyond 2021 (or at least, it says so), and has no ads. So while it may take some traditional queries away from Google, it won’t push the $1.2 trillion company to the brink. At least as presently constituted.

But things could change in a hurry. Should OpenAI connect ChatGPT to the internet, it could push Google to bring its own product to market, and its vision for the future along with it. And once Google gets involved, those who’ve seen its chatbot technology expect it to win.

“If ChatGPT or some other product ever became a real threat,” said Lemoine, “they'd just bite the bullet and release LaMDA, which would smoke ChatGPT.”