The largest tech corporations are not formally purchasing breakthrough AI startups, but they are just snatching up their talent and products in the fight to stay ahead in artificial intelligence.
Currently, three senators from the United States are demanding an inquiry.
The CEO and other key personnel of San Francisco-based Adept will join Amazon, and the e-commerce behemoth will receive a license to use Adept’s AI technologies and datasets, according to an agreement disclosed late last month.
Many refer to it as a “reverse acqui-hire.” Some refer to it as poaching. Whatever name it goes by, some in Washington find it concerning because they perceive it as an attempt to get around US rules that prohibit monopolies.
Oregon Democrat and U.S. Senator Ron Wyden expressed his concerns, saying,
“I’m very concerned about the massive consolidation that’s going on in AI.” The expression ‘up and down the stack’ is technical.
To put it, however, a small number of corporations dominate much of the industry and focus more on trying to acquire the skills of others than on innovation.
The tech industry has long engaged in “acqui-hires,” wherein one company buys another to gain expertise, according to Massachusetts Institute of Technology management professor Michael A. Cusumano. However, things are a little different in the AI sector.
“It’s a new twist to license the technology, leave the business operating but not competing, and acquire only some or the majority of the employees, but not all of them,” Cusumano added.
Similar action was taken in March at the AI startup Inflection when Microsoft appointed Mustafa Suleyman, co-founder and CEO of Inflection, to lead Microsoft’s consumer AI division in addition to the company’s chief scientist and a number of its best engineers and researchers.
Regulators, especially in Europe, have previously expressed some concern about that arrangement.
Wyden also wants an investigation of the Amazon-Adept agreement by US regulators.
In a letter written on Friday, he and fellow Democrats Sens. Elizabeth Warren of Massachusetts and Peter Welch of Vermont urged the Justice Department and Federal Trade Commission’s antitrust enforcement officers to take “sustained, targeted action is necessary to fight undue consolidation across the industry.”
Before mailing the letter, Wyden stated in an interview that “big tech companies are trying a new play instead of buying startups outright.”
They wish to escape antitrust concerns by not formally acquiring the companies. That, in my opinion, will be the strategy until the FTC thoroughly investigates these transactions.
Although they acknowledged receiving the senators’ letter, the DOJ and FTC chose not to comment more.
Better regulation of the tech sector has been advocated by President Joe Biden’s administration and lawmakers of both parties in recent years, which has probably scared off large acquisitions that would have gone through smoothly in previous times.
For instance, U.S. antitrust authorities intend to look into the contributions made by Microsoft, Nvidia, and OpenAI to the artificial intelligence boom.
The Department of Justice is investigating Nvidia, a chipmaker, and the Federal Trade Commission is closely examining Microsoft and OpenAI, two of their closest business partners.
Tech behemoths like Google, Amazon, and Microsoft are attempting to exercise caution and limit the number of acquisitions they make in the AI field, according to Cusumano.
It appears intelligent. But I believe they’re not playing tricks on anyone,” he remarked.
Building AI systems is expensive, needing pricey computer chips, power-hungry data centers, massive amounts of data to train, and highly qualified computer scientists. This presents a challenge for smaller AI firms.
Adept, a company that develops AI software agents to assist humans with chores around the office, stated that it is attempting to produce both end-user products and the underlying AI technology simultaneously.
Laptops 1000However, in a statement announcing the Amazon agreement, it stated that going forward “would’ve required spending significant attention on fundraising for our foundation models, rather than bringing to life our agent vision.”
“They probably prefer to be acquired outright, as they may have decided they have no real future and simply don’t have deep enough pockets to compete in this space,” Cusumano added.
“But this is kind of a second-best approach for them if Amazon is not willing or able to do that.”
Having drafted the 1996 legislation that established the guidelines for online free expression, Wyden has long had a fascination with technology.
According to him, a clear-cut strategy that promotes creativity while imposing necessary restraints is often preferred.
However, he said that “companies like Microsoft, Amazon, and Google, either own major parts of the AI ecosystem or they have a leg up thanks to their massive resources” in the AI space.
Enforcement officers are tasked in the letter with investigating how tech companies are solidifying their AI hegemony “through partnerships, equity deals, acquisitions, cloud computing credits, and other arrangements.”
Professor of law at the University of North Carolina John F. Coyle stated that he thinks Amazon’s decision to hire Adept staff without purchasing the business is an attempt to avoid antitrust issues. However, he clarified that this kind of employment isn’t a “reverse acqui-hire.”
According to Coyle, acquire-hires are often calculated risks that can be turned into successes and offer an alternative to corporate liquidation.
Even if it wasn’t the founders’ original intention, a smaller firm can spin it positively by saying it was sold to Meta Platforms, the parent company of Facebook or Amazon.
“This is not a hire-acquired. Regarding Adept and Amazon, Coyle declared, “This is a straight-up poach.”
He described the action as “a version of a very old story,” claiming that it is not exclusive to the tech industry.
According to Coyle, he discusses a case from the 1950s involving a New York City advertising agency with his pupils. A few workers departed to launch a new company, and they hired about 100 others.
Coyle says, “There are countless examples of one company raiding another to take all of their employees.” “That will occur after the “acqui-hire”; that existed before the “acqui-hire.”
