Generative AI Is Having Its Herbalife Moment
The article argues that generative AI is currently experiencing a speculative frenzy similar to multilevel marketing schemes like Herbalife, with companies prioritizing hype and fundraising over building sustainable, genuinely useful products. It suggests that many AI startups are selling visions of future value rather than delivering real utility today, creating a precarious bubble.
Background
- "Herbalife moment" refers to Herbalife, a multi-level marketing (MLM) company that was investigated by the FTC and became synonymous with a business model where most participants lose money while top-level promoters get rich. The phrase means a technology is being sold more as a get-rich-quick scheme than a real product with sustainable value.
- Generative AI (e.g., ChatGPT, Midjourney, GitHub Copilot) refers to AI models that produce text, images, or code. After the 2022 launch of ChatGPT, venture capitalists and startups poured billions into the space.
- The article argues that much of the current generative AI hype resembles Herbalife: the primary way to make money so far is to sell courses, consulting, tools, and "AI prompt engineering" services to people hoping to cash in — rather than from the technology actually delivering transformative business results. The actual adoption and ROI for most companies remains unclear.
- Key players mentioned include OpenAI (creator of ChatGPT), which is spending enormous sums on compute but still searching for a sustainable profit model.