The current environment for entrepreneurs is one of the riskiest in recent memory, primarily due to the massive hype and uncertainty surrounding AI. While tech layoffs create fear and many influencers (with vested financial interests) promise an imminent AGI revolution, conflicting reports suggest current AI lacks true critical thinking. This creates a confusing landscape where founders risk building businesses on unstable ground.

Four Risky Business Models to Avoid

The speaker identifies four types of businesses that are particularly dangerous to pursue in the current climate:

1. Hustle Businesses: These are built on temporary market glitches or loopholes. While they can offer quick cash, they lack long-term viability and downside protection, making them a poor investment of your time and energy.
2. Task Outsourced Services: These are obvious AI applications for low-cost tasks (e.g., an “AI-powered live chat”). Such markets will quickly become saturated with copycats, leading to a price war that crushes profit margins for everyone.
3. Businesses with Market Size Limitations: Avoid building in a small or shrinking market. The effort required to build a $1 million business is comparable to building a $100 million one, so you should always operate in a large (over $1 billion), growing market to ensure you have room to scale.
4. AI API Wrappers: These are products whose value is entirely dependent on a third-party AI API (like OpenAI’s). This model is incredibly risky, as your business’s improvements, costs, and very existence are controlled by another company.

What You Should Build Instead

To build a sustainable venture, focus on businesses with a strong, independent foundation. The ideal business solves a massive problem within a massive market, addressing a critical need that impacts a customer’s core revenue or expenses. Crucially, your solution must be flexible. It should function as a valuable business even if AI development stalls, but also be positioned to improve and take advantage of new AI breakthroughs as they occur. The key is to use AI as a tool, not as the entire foundation.

Key Takeaways and Warnings for Founders

Finally, the video offers practical advice for anyone currently running a business:

• Avoid long-term contracts with fixed minimums. These can drain cash and reduce the agility needed to navigate an uncertain market.
• Don’t get distracted by the AI hype. Recognize that much of the narrative is driven by a pyramid-like structure of investors and founders who benefit financially from rising valuations, not necessarily proven results.
• Use AI for rapid learning. The best application of AI for a founder today is to accelerate iteration—building prototypes, testing go-to-market strategies, and gathering customer feedback faster than ever before.

Mentoring question

Evaluate your current business idea against the ‘flexible solution’ principle: If the AI hype died down tomorrow and the technology didn’t improve for three years, would you still have a viable and valuable business?

Source: https://youtube.com/watch?v=Jf_ZCSjJzck&si=LGoKG1d1IAzNjYG5