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As AI Costs Decline, Anthropic Is Upgrading Its Language Model, And More...
ARK • Disrupt
It's Your weekly innovation newsletter
It's Monday, July 17, 2023. Please enjoy ARK's weekly newsletter curated by our thematic research team and designed to keep you engaged with disruptive innovation.
As AI Costs Decline, Anthropic Is Upgrading Its Language Model
By Brett Winton | @wintonARK Chief Futurist & ARK Venture Investment Committee Member
Last Tuesday, OpenAI competitor Anthropic upgraded its language model, Claude 2, surpassing OpenAI’s GPT-4 in analytic writing and coding. While somewhat weaker than GPT-4 in performing reasoning tasks, Claude 2 has three times the context window of GPT-4, which allows it to analyze documents and engage in dialogues up to 75,000 words. Importantly, Claude 2’s training data are current—up to early 2023—whereas GPT-4’s training predates September 2021.1
Anthropic has not changed the pricing for the upgraded model, because its performance has improved so much, a win for AI users.2 Relative to OpenAI’s services, Anthropic’s were priced efficiently even before Claude 2 dropped costs per token to roughly one quarter those of GPT-4. Thanks to Anthropic’s upgrade, the cost of an AI writing model scoring in the 90+ percentile on the written and verbal portions of the GRE dropped four-fold in just one week.
Measured over several years, the cost decline for generating written material is even more provocative. A professional human writer sufficiently talented to score in the 90th percentile on the GRE might charge $0.40 per word to produce copy. Similarly performative language models offered by OpenAI and Anthropic can “write” at a cost of $.16 and $.04, respectively, per thousand words, as shown below. In other words, the cost to produce well-reasoned, coherent written material has fallen ~4-fold over the past week and ~10,000-fold during the past year.
Source: ARK Investment Management LLC, 2023, based on data from Cummings 2023, OpenAI, and Anthropic as of Jul 15, 2023. See Cummings, A. 2023. “Freelance Writing Rates: How Much Should Freelance Writers Charge?” https://www.ashleyrcummings.com/news/how-much-should-freelance-writers-charge. Forecasts are inherently limited and cannot be relied upon. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Past performance is not indicative of future results.
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The Summary Judgment In SEC v. Ripple Labs Brings Welcome Clarity To Crypto
By Frank Downing | @downingARK Director of Research, Next Generation Internet
Last week, the outcome of a significant legal case inched the crypto community closer to regulatory clarity. District Judge Analisa Torres issued a summary judgment3 in the U.S. Security and Exchange Commission’s (SEC) case4 that accused Ripple of selling $1.3 billion worth of unregistered securities through several methods. Judge Torres’ judgment elucidated which of Ripple’s XRP sales constituted unregistered securities offerings.
Torres did agree with the SEC that Ripple’s early private token sales to institutional investors constituted an unregistered securities offering because they passed the Howey test.5 They involved “an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others."
That said, Torres sided with Ripple in an important way: Ripple’s other token transactions—programmatic sales on public exchanges and for employee compensation—did not meet the Howey test. In other words, in the open market, XRP purchasers did not know they were buying the tokens from Ripple and, therefore, could not have believed they were involved in an investment contract. As for the use of XRP as compensation, Judge Torres ruled that employees were not making an investment.
The judgment clarified further that “XRP, as a digital token, is not in and of itself a contract, transaction, or scheme that embodies the Howey requirements of an investment contract.” In other words, the circumstances in and around the asset offering—not the characteristics of the asset—are the relevant variables.
Torres’ judgment could have significant ramifications for digital asset issuers and exchanges, clarifying how they can and cannot sell or facilitate the sale of digital assets. Major exchanges like Coinbase, Kraken, and Crypto.com already have re-listed the XRP token on their trading platforms.
Importantly, the court’s decision does not set a precedent that other courts must follow. In fact, both the SEC and Ripple are likely to appeal District Judge Torres’ judgement to higher courts.
That said, we believe the judgment will have a positive impact: the judicial system is likely to focus on the facts and circumstances around existing SEC suits, calling into question Chairman Gensler’s views6 that the “vast majority” of digital assets are securities.
Roku And Shopify Expand Their Partnership To Enhance Both The Consumer Experience And Product Sales
In an expanded partnership announced7 last Tuesday, Roku will offer Action Ads to Shopify merchants who now will be able to advertise and sell products to Roku’s viewers. Because Roku Pay will power the merchant checkout process, viewers can purchase products on Roku’s remote control with just a few clicks. Today, both Walmart and DoorDash use Roku Action Ads.
In 2021, Roku and Shopify partnered8 to give merchants the ability to build, purchase, and measure connected TV (CTV) ad campaigns. Now, Shopify merchants will have access9 to additional data focused on customer purchasing trends.
Of course, TV shopping is not new. In 2001 and 2006, respectively, QVC and The Home Shopping Network (HSN) launched10 “shop-by-remote” services.
Today, however, TV shopping is a completely different experience. Thanks to improved advertising technology and a larger e-commerce ecosystem, connected TV supports more granular targeting methods,11 freeing advertisers from the wasteful ad campaigns that have clogged linear TV channels. While QVC and HSN focused on individuals who sought out TV shopping channels, CTV advertising is extending TV shopping’s potential to all advertising video-on-demand (AVOD) viewers.
Now, TV shopping has the potential to operate at a scale not possible for QCV and HSN. In 2007, for example, HSN’s gross merchandise value (GMV) totaled $3 billion,12 a fraction of Shopify’s trailing twelve-month $204 billion.13 While QVC’s and HSN’s internal buyer and merchandise teams sourced products manually, Shopify’s merchant base determines its product offerings.
On CTV, product diversity and advertising should increase over time as Shopify lowers sellers’ barriers to entry. With more mature technology, now TV could be ready to scale the shopping experience.
This Newsletter is for informational purposes only and does not constitute, either explicitly or implicitly, any provision of services or products by ARK Investment Management LLC (“ARK”). Investors should determine for themselves whether a particular service or product is suitable for their investment needs or should seek such professional advice for their particular situation. All content is original and has been researched and produced by ARK unless otherwise stated therein. No part of the content may be reproduced in any form, or referred to in any other publication, without the express written permission of ARK. All statements made regarding companies, securities or other financial information contained in the content or articles relating to ARK are strictly beliefs and points of view held by ARK and are not endorsements of any company or security or recommendations to buy or sell any security. By visiting and/or otherwise using the ARK website in any way, you indicate that you understand and accept the terms of use as set forth on the website and agree to be bound by them. If you do not agree to the terms of use of the website, please do no access the website or any pages thereof. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with ARK with respect to any linked site or its sponsor, unless expressly stated by ARK. Any such information, products or sites have not necessarily been reviewed by ARK and are provided or maintained by third parties over whom ARK exercises no control. ARK expressly disclaims any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites. For full disclosures, click here.
