Rabbits, LAMs, and Black Swans

Cute becomes chic and lucrative

TL;DR

Happy New Year! A few things have already got me truly excited as we kick off 2024 and I’m excited to share them with you. I appreciate there’s a bit of a read here, so my advice is: if you do one thing, watch the Rabbit R1 Keynote and maybe ponder my musings. I’d originally written it off as “another dumb AI device,” but after watching the keynote, I’m sold. Spoiler Alert - it’s the software stupid.

If you’re craving more, want to understand how 10 million people decided to buy a previously unheard of video game this week, and why it might be a sign of things to come in entertainment, then check out my thoughts on Palworld.

My dance card is open for consulting on Emerging Tech Vision, Strategy, and Execution, especially in AI & Spatial Computing. You can get in touch here.

Bridging the Gap - How the Rabbit R1 Could Change the Internet

There have been a number of new AI-centric devices emerging in recent months. Examples include the Humane Ai Pin ($699 - Mostly greeted with a “meh” and “why?”), and the Ray-Ban Meta Smart Glasses ($329 - The ultimate new parent device for capturing moments—we love it).

A couple of months ago, I wrote about, “The beginning of the end of applications as we know them.”

The beginning of the end of applications as we know them.

For some years, I’ve strongly held the belief that the future of human-computer interaction is very different from the dominant paradigm of fumbling around a touch screen with our monkey fingers in an attempt to recite the right incantation to get the result you desire.

The future is what I call Intent-Based Computing. I express intent through whatever modality is most convenient for the context I’m in. This could be natural speech, a subtle gesture to a camera, or through some non-intrusive Brain-Computer Interface (BCI). From that input, an intelligent, hyper-personalized agent manifests the optimum outcome and expresses it back to me in the most optimum modality. Again, this could be visual on my smart glasses, a whisper in my earbud, or a notification on my desktop. What will be certain is that I won’t have to wade through a myriad of disparate Apps, Websites, and User Interfaces to get stuff done.

The problem is that getting to this new techno-utopia is going to require new infrastructure, business models, attribution, and security. Ultimately, I think a lot of this will be what Web3 evolves into. But it’s not something that will happen overnight and, in many ways, will likely be driven by Big Tech, who will be the Big Winners in this game. They will offer both the Personalized Intelligent Agent that will be your trusted proxy (for a subscription fee) on the consumer side as well as be the provider of cloud services such as massive compute and storage. No one else has the resources to own this space.

In hops the Rabbit. . .

What is it?

The Rabbit R1 is a standalone gadget about half the size of an iPhone, featuring a 2.88-inch touchscreen, a rotating camera, a scroll wheel/button for navigation, and a built-in ultra-fast AI assistant. All housed in a gorgeous, rounded body designed in collaboration with the incredibly talented industrial design firm Teenage Engineering.

This intent-based, minimalist interface is a significant departure from the app-centric approach of most current devices. You click a button like a walkie-talkie, tell or show it what you want to do, and, “like magic,” the Rabbit goes off to interact with a number of common service providers to achieve the outcome you asked for.

How they’ve achieved this is a BRILLIANT cheat.

They agree that the mobile / web-centric application model is going the way of the Dodo. And they have a solution that will provide much of the value of Intent-Based Computing today.

The Rabbit R1 is not just a device; it's a new way of interacting with our digital world. In some ways, I actually think the device is the least interesting thing about Rabbit (even though I love the form factor).

Powered by ChatGPT for speech input connected to their proprietary Large Action Model (LAM), the device mimics the click streams of a user navigating through apps and websites to complete tasks. Essentially, it spawns a “headless browser” in the background and performs your interactions for you.

From their “Rabbit Hole” portal, you securely sign in to common services like Uber, AirBnB, DoorDash, Spotify, etc., and connect your accounts to allow the Rabbit to use the services on your behalf. If a service is not initially supported, the Rabbit R1 can be trained to interact with it by watching your interactions, touches, and clicks on your phone or browser, expanding its range of capabilities.

The idea isn’t completely unique. Robotic Process Automation (RPA) has been gaining traction in Enterprises in recent years to observe and replicate monotonous application interactions like data entry across legacy systems where it’s not worth the investment in building out new APIs and capabilities. However, it hasn’t been done in the consumer space with anywhere near this level of ambition.

Why is it relevant?

If everything works as described (and to be fair, who knows how well it’ll actually deliver), the Rabbit could be a massive catalyst for a transition from apps to Intent-Based Computing. The tax you currently pay to get stuff done through your computer or phone is having to learn the user interface, functionality, and interactions to build a mental model of what you’re trying to achieve. Then, you have to go do those interactions every time you need that service.

Humans love saving time, and the Rabbit shows a path forward to create a meta user interface that sits on top of and obfuscates the user interface of the service provider(s). Providing the minimum information and interaction to fulfill the intent.

What’s more, they’ll do this for just $199, with the first 100K users getting a year's worth of Perplexity Pro subscription (Perplexity’s AI-driven search has replaced 90% of my Google Search usage, by the way. I’ll save that for another day).

For me, that’s essentially free, as I’d have paid $200 for Perplexity and its ChatGPT capability alone.

Yes, there will be issues.

• Will the service providers embrace or block Rabbit from interacting with their sites?

• What about complex UI interactions that aren’t well-suited for keyboardless data entry, voice, or camera?

• Do I want another device in my pocket?

• What if it screws up and gets something wrong?

There is also a valid argument: “Why can’t I just have something like Rabbit on my phone?”

In truth, I think you will in the future. The problem is that Apple and Google have a vested interest in maintaining the 30% cut of sales for the existing app paradigm for now. They’re not going to shift that overnight. AI has been a wake-up call, and it takes some time to change the course of an oil tanker. It’s likely going to take a while, and they will be constrained by protecting their own walled gardens.

I have no illusions that this thing will be perfect. But I’m willing to take a bet that the pros will outweigh the cons.

If successful (and the fact that they’ve sold 50K units in pre-orders sounds promising), we may remember this launch as an inflection point in Human-Computer Interaction and the start of Intent-Based Computing at scale.

I think if you watch one tech video this month, make it the Rabbit R1 Keynote. Not only is it Apple-esque and engaging, but also easy to understand and a great example of how to market a technology product in 2024. It does a fantastic job of explaining why I’m so excited in much richer detail.

Now From LAMs to Lamballs. . .

Palworld

A Black Swan: A $10,000 indie game that spawned a potential billion-dollar franchise in less than a week.

As a connoisseur of high-quality media and a lifelong gamer, I love to be a part of a new phenomenon. Exactly one week ago, a small Japanese studio named Pocket Pair, with less than 10 people and an original seed budget of $10,000, launched Palworld to an unsuspecting global audience.

7 days later, amassing over $100 million in revenue with over 8 million copies in less than six days, it has become the second game in Steam history to reach over 2 million concurrent players, with an all-time peak of 2,033,118 players. It is second only to PUBG: Battlegrounds, which holds the record with 3.2 million concurrent players.

The game took 3 years to develop and by all accounts was made with a relatively novice team of engineers and designers, and a relatively low total budget of $6.75M.

This kind of success does not come often in the huge gaming business and is shaking the foundations of the industry as they try to figure out HOW and WHY?

What is it?

So, first of all, what is Palworld? You may have already heard your teen kid (or middle-aged friend) mention it this week. The trite response, which may turn many people off and is a far too superficial description, is: “Pokemon meets Fortnite meets ARK: Survival Evolved.”

In reality, it is a unique blend of open-world survival, crafting, and monster-collecting elements.

One of the game's most compelling features is its “Pals,” creatures that players can capture, fight, and somewhat dubiously press gang into building their base. Each Pal offers unique abilities and has their own work suitability levels for your base.

Some of Palworld's success can be attributed to its unique blend of familiar and innovative features. It has learned from and built upon the core game loops, visual style, and the success of popular game franchises like Pokemon and Fortnite, and frankly, made them more fun.

The game also offers a refreshing experience without microtransactions or paywalls, which has been well-received by players. It removes much of the monotony and micromanagement that are complaints of the other franchises, providing a fun, creative playground where players with different styles and interests can hang out and make progress.

Despite its success, Palworld has faced some controversies and criticism. Some accuse the game of being a derivative product, but others argue that it offers a refreshing experience. Pocket Pair has been responsive to feedback, with a detailed roadmap for future updates that includes improvements and new features based on user feedback.

In conclusion, Palworld's success can be attributed to its unique blend of familiar and innovative features, its responsive development team, and its commitment to providing a refreshing gaming experience without microtransactions or paywalls. Essentially, it is the antithesis of some of the more exploitive and anti-player practices that have become more common as the larger franchises seek to maximize profits. Palworld isn’t the only indie game to have seen success by doing right by players first, with the 2023 Game of the Year award going to “Baldurs Gate 3” by Belgium-based Larian Studios. Like Palworld, Baldurs Gate 3 is fantastic game praised for its expansive and immersive world, a faithful adaptation of tabletop RPG mechanics, and its approach to player freedom and choice.

Why is it relevant?

Even if you’re not a gamer, economically, any time you see a Black Swan event, there’s something to learn. My wife recently read Nassim Nicholas Taleb’s book, “The Black Swan,” and has been educating me on the topic in recent weeks.

Source: Wikipedia

1. The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.

2. The non-computability of the probability of consequential rare events using scientific methods (owing to the very nature of small probabilities).

3. The psychological biases that blind people, both individually and collectively, to uncertainty and to the substantial role of rare events in historical affairs.

Taleb's "black swan theory" (which differs from the earlier philosophical versions of the problem) refers only to statistically unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences.

Palworld's success fits this description in several ways:

1. Rarity: The game's rapid ascent to the top of the Steam charts and its achievement of over 2 million concurrent players is an extraordinary feat, especially for an indie studio, which typically has much lower budgets and marketing reach compared to major studio releases.

2. Severe Impact: Palworld's success has had a significant impact on the gaming industry, as it has challenged the norms of what an indie game can achieve in terms of player count and revenue. It has also sparked discussions about game development, the use of AI, and the potential for indie games to compete with major franchises.

3. Hindsight: After the fact, it may seem obvious that a game combining popular elements from different genres could be successful. However, predicting which games will break through in a market saturated with titles is incredibly difficult. The fact that Palworld has reached such heights could lead to retrospective claims that its success should have been expected.

In summary, Palworld's unexpected and significant success, despite the challenges faced by indie games, aligns with Taleb's Black Swan theory. It was an unpredictable event with a major impact, and its success was not widely anticipated before it happened.

More broadly, I wonder whether this might be the start of a trend. Coupled with the use of AI to create and refine new gaming experiences quickly, large and small game studios may experiment with combining game genres. As I often like to remind people, in 2021, the global games market had a whopping $180 billion in revenue, making it bigger than Hollywood and the music industry combined.

While there were initial accusations that Palworld must have used AI to derive assets from Nintendo or Fortnite, this was quickly dispelled.

However, the point is that it very well could have done so! And chances are that some smart studios are going to do exactly that and likely see success.

The next billion-dollar franchise might start by someone prompting ChatGPT with something along the lines of:

“Create a hyper-detailed design document that combines the most successful game mechanics of Minecraft, Fortnite, Call of Duty, and Madden NFL in a format with the broadest possible appeal and revenue potential.”

(If you want to invest in my new billion-dollar franchise, be sure to check out the synopsis that ChatGPT came up with here)

Joking aside, I do think that in the same way we will see AI innovating new products in drugs, materials, and healthcare, we’re going to see the same thing happen in media and entertainment.

Omnichannel marketing, where one reaches a customer through every imaginable channel, has been the industry buzzword of recent years. What we might be about to witness is Omniproducts that are hyper-personalized and mashed up from a variety of formats to your individual media consumption preferences.

So, in conclusion: play Palworld! Currently available for free on XBOX Game Pass or $29.99 on Steam. It’s fun, it’s creative, and it could well be a glimpse at the future of gaming and entertainment :)

Shep Report Notes