In a recent episode of American Optimist, billion-dollar investor and thought leader Elad Gil shared insights on why he believes artificial intelligence (AI) is “dramatically underhyped.” Despite the impressive revenue and impact AI has already created, he argues that most people still underestimate its full potential. According to Gil, we are on the cusp of a revolution driven by a new concept: units of cognition—essentially, segments of tasks or jobs powered by AI. This transformation will soon impact every sector, from customer service to legal, healthcare, and beyond.
AI’s Underestimated Potential
Gil emphasizes that AI’s current economic impact is remarkable, with companies like Microsoft seeing significant revenue growth in their Azure AI products. He sees AI as a rare innovation still in its infancy, with adoption limited primarily to early-adopting sectors. But he warns that the real power of AI lies in its untapped potential to reshape multiple industries. When Microsoft’s Azure division is gaining billions in quarterly revenue from AI alone, it suggests we’re only scratching the surface of what this technology can achieve.
"People are paying now for something that barely has widespread adoption yet is already delivering outsized returns," he said. This, he believes, signifies that AI is not just another tech trend but a fundamental economic shift.
Units of Cognition: AI’s New Value Proposition
What makes AI so transformative, Gil explains, is its ability to perform “units of cognition.” By this, he means that AI will ultimately offer specific segments of thought, reasoning, and problem-solving that humans are accustomed to doing. Imagine AI programs performing high-level cognitive tasks like legal review or customer service at any hour, in any language, and at a fraction of the cost. As he puts it, “We’re going to eventually see AI providing nearly all types of human services.”
Legal tech, for example, is one area Gil highlights as already seeing this shift. When OpenAI released GPT-4, it unlocked a new level of functionality that allowed AI to make meaningful contributions in the legal field. Startups such as Harvey AI have demonstrated the potential of AI in legal services, allowing firms to drastically reduce their staff without sacrificing quality. These shifts in the service industry indicate AI’s capacity to not only complement but potentially replace human cognition in specific areas.
The Investment Landscape in AI: A Five-Layer Stack
For investors looking to navigate AI, Gil outlines five layers in the AI value stack, where each layer represents an opportunity. The first layer includes the hardware—companies like NVIDIA that build the GPUs necessary for AI. Above that, data centers provide infrastructure for running AI models, followed by the AI models themselves (like OpenAI’s GPT models). The fourth layer comprises tools for deploying AI, such as data infrastructure and tools for integration, and finally, the fifth layer involves businesses that integrate AI into specific workflows. This top layer—owning the workflow—is where Gil is particularly bullish, seeing it as the way to apply AI’s capabilities most directly and effectively.
Gil’s approach reflects a belief that value lies in how AI is applied to real-world tasks rather than in the models themselves. He is investing in companies that own the workflows of key industries, such as healthcare billing and legal services, using AI to create entirely new business models.
The Implications of AI’s Growth: Will It Outgrow Human Oversight?
As Gil sees it, we are currently in the second of three phases of AI development. First, we had humans as the sole source of cognition. Now, we are in a symbiotic phase, where human intelligence and AI work together. Eventually, he anticipates, AI could take on a dominant role in certain fields, especially where units of cognition can be precisely defined and optimized.
When asked about his children’s future in a world with ubiquitous AI, Gil is optimistic yet cautious. He envisions a future where every child has access to a personalized, AI-powered tutor, transforming education into a one-on-one experience available to all. However, he also considers what assets or skills will be valuable in a world driven by AI, citing areas like resilience, critical thinking, and a solid ethical framework as key components of future education.
AI in Society: Inspiration and the Future of Humanity
Gil isn’t just interested in AI’s economic potential; he is passionate about its cultural and philosophical impact. He advocates for large-scale, inspiring monuments and projects that remind society of its achievements and potential, much like the Renaissance did. Just as the Statue of Liberty once symbolized hope for new immigrants, he hopes for modern “monuments” to AI, symbolic structures or institutions that will inspire future generations.
For Gil, AI represents not just a new wave of tech but a fundamental shift in human society. The potential of AI is still dramatically underappreciated, he says, as society has yet to understand how AI will redefine work, productivity, and human achievement.
Conclusion
Elad Gil’s perspective on AI highlights both its economic and societal impacts, emphasizing that while the technology is already generating massive revenue, it remains in its early stages. By investing in the top layers of the AI stack, particularly in companies that integrate AI into specific workflows, Gil believes that the real revolution—units of cognition—will redefine how we work and live. Whether it’s in legal, healthcare, or other services, AI has the potential to handle cognitive tasks that we previously thought required human oversight.
----
About Elad Gil
Elad Gil is a Silicon Valley entrepreneur, investor, and thought leader known for his early insights into AI, biotech, and startup growth. With a career that includes foundational roles at Google, where he worked on mobile and AI products, and as VP at Twitter after selling his first company, Mixerlabs, he has a proven track record of identifying and building transformative technology. As an investor, he has backed numerous high-profile companies, including Airbnb, Stripe, and Instacart, and is recognized for his focus on cutting-edge industries. His High Growth Handbook has become a go-to resource for scaling companies, and he is also passionate about the broader societal impacts of technology, such as inspiring public monuments and promoting AI-driven advancements in health and education.
