NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

The 1 Thing AI Still Can’t Do Better Than a Human (and How Startups Can Use It to Build a Moat)

As AI kills the traditional software moat, this strategy can help startup founders survive.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @TULLMAN

May 12, 2026

 

For quite a long time, the most common assertion regarding the threats presented by AI has been that even the most advanced systems will never reach the point where they will replace humans who are creative and innovative and who are designing new ideas, products, and solutions every day. At the same time, these are the very folks looking most anxiously over their shoulders at the oncoming onslaught.

To the extent that millions of these new ideas are never commercialized or even implemented—and worse yet, that other millions of these concepts turn out to be nothing more than incremental changes, enhancements or extensions of existing products and services which essentially add nothing to the aggregate base of human knowledge—it’s no great loss to humanity that these kinds of menial materials will soon be left to the tender mercies of AI-driven applications and programs. Ideally, getting rid of the scut work will free up folks to do more challenging and valuable tasks. Hopefully sooner rather than later.

The absolute flood of AI slop that’s already overwhelming every social media channel and other information delivery system serves as the first of many proof points in this regard. If humans who previously toiled in the creation of massive mounds of this kind of promotion, media, marketing and advertising crap are soon replaced by machines doing the same work more efficiently and economically, there’s an argument to be made that we’ll be doing those poor impoverished souls a favor to put them out of their misery so they have some prospect of finding meaningful work. And it’s not like the ultimate AI-driven output is likely to be materially better or worse. The truth is that you can’t polish a turd no matter how hard you try.

More recently, there has been a despondent group of technologists who dejectedly argue—especially because AI has proven so overwhelmingly adept at coding—that there are simply no longer any barriers to the advance across the board of these technologies. They believe that even building the best and most novel software offers an entrepreneur, a new business builder or even a senior and highly talented developer no sustainable moat or substantial protection from readily available AI tools simply copying, rewriting, reverse engineering or otherwise duplicating any of their new offerings and solutions in a matter of hours or days. How accurate this threat turns out to actually be is an open question, but it doesn’t take much talk like this to scare away early-stage investors and prospective employees. Years ago, the fear was that Microsoft (and then Facebook) would either buy you or roll right over and crush you. Today, AI is the new boogeyman.: 102006)

So, the real strategy for software startups looking to survive beyond only a momentary flash in the pan seems to be a two-fold approach. First, take what you need in the way of funding but stay lean and don’t be a pig in terms of raising capital because that only makes it harder for you to pull off the easiest of the most likely positive outcomes. In these crazy times, if you hit on a compelling idea and can build an early viable offering, you want to always have one eye on a quick exit.

I call this plan: Build to be Bought. You want to make sure that, when an eager buyer shows up, you haven’t created too many financial or other impediments to an attractive sale which can get in the way of giving your investors and your team a great return and give you all the ability to happily move on to the next challenge.

The second plan, if you’re planning to stay in the race for the long run, is to keep moving forward and head to where the machines can’t follow. Your most effective moat is that you’re constantly in motion and that you’re always at the tip of the spear, which is essentially and inevitably the point of human contact and interaction. This is hard, but not as difficult as you might imagine because what it translates into is always being focused on and building to the front end—upgrading, simplifying, and extending the points at which the end users access and interact with your product or service. That relationship which is so central to every part of our lives will never be fully appreciated and mastered by the machines because they don’t appreciate that we’re never going to be willing to fully abdicate our actions to any of our devices or machines.  

The machines keep getting swifter and smarter, but they will never bridge the final space which will always be defined by EQ emotional considerations (the user interfaces) rather than IQ technical attributes (the operating core). We see this dilemma every day when prospects are presented with and swayed by powerful utility claims and new levels of agency and then are quickly and totally turned off by the substantial technical implementation and onboarding challenges which they never signed up for. New users and even early adopters don’t want to build these things; they just want them to work. They don’t want to read a manual or learn a new trade or even invest a reasonable amount of time learning the basics.

This is where AI falls off the cliff because the machines’ tendencies are always to growing complexity, increasing bells and whistles, and expanding functionality while the target users want simplicity, rapid access, obvious controls and inputs and useable results and outputs. This is the old curse of engineers who are building to impress their peers and not to satisfy the real needs of their customers. It’s the reason that less than 5 percent of the tens of millions of users of all of the major Microsoft products never use or even discover 95 percent of the bloated and buried functions and features of the software.

The moat that still makes the difference and the key to sustainable success is to be constantly focusing on the quality of the end users’ experience, building customer confidence and continuity, and managing and meeting or exceeding the buyers’ expectations. The goal is simple: you want the competition to find your warm campfires and by then, you’ll be over the next hill.

 

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Unsubscribing Will Only Get Harder in the Age of AI. Don’t Let Your Company Be Part of the Problem.

The price doesn’t matter when you’re the product.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @HOWARDTULLMAN1

JAN 12, 2026

Illustration: Inc; Photo: Getty Images

With the arrival of the New Year has come the inevitable onslaught of renewal requests, demands, entreaties and, of course, the slippery automated extensions designed to slip under the radar and convert low-ball promotional offers into full-bore subscriptions. Along with these ploys, and arguably as a product of them, come the seductive ads from subscription clean-up companies like Rocket Money which promise to quickly display on a single screen all your subscriptions—many of which they suggest with good reason that you didn’t even know you still had—and which their system will magically cancel at your direction and thereby save you grief, effort and hundreds of dollars as well.

You can decide for yourself how valuable and effective services like these are (Rocket claims to have saved its members over $2.5 billion) and do the cost-benefit calculation for yourself as well, but to be clear, they’ve clearly identified a serious problem which afflicts millions of us every year. And, needless to say, the magazine and service vendors themselves are the last businesses likely to or interested in informing you about your wastes of money.

Aside from the dollars saved, the real benefit (if these services work as represented) is that you avoid the pain, wasted time, and harrowing hurdles of trying to wend your way through the chutes and ladders, hoops and mazes, chatbots, and flat-out dead-ends in order to attempt to cancel these things on your own. And even if and when your journey finally delivers you to a human being or a chat window manned by a real person on the other end, you discover that you’re actually far from home free, unless you have a very thick skin and the ability to be unbelievably rude to some poor fool tasked with making you a series of increasingly desperate financial offers to retain or extend your subscription.

It’s pretty clear that these sad people who are actually paid to not take “No” for an answer have an entire set of scripts that they employ, and the tactics they use rarely vary much between companies. The standard ploys include guilt-tripping or otherwise shaming the subscriber, intentionally misunderstanding or misinterpreting the customer’s statements and desire; understating or concealing costs or terms, and dishonestly explaining the associated consequences and difficulties which may arise from a cancellation.

The only good news is that the Federal Trade Commission (largely pre-Trump II) has cracked down on many of these actions and operations in the traditional paid subscription and boiler room world, which has always been largely an analog operation and remains so today. The bad news is that there’s been a substantial gap in terms of acknowledgment of the similar concerns and in any enforcement in the new digital world of social networks (which are frankly far more addictive than any print magazine) where even the idea of “subscriptions” isn’t exactly applicable. And the matter is made even worse when there’s no payment involved. Regulators and legislators have had difficulty understanding the nature of the harms associated with the intended and manufactured difficulty that exists in cancelling “free” memberships or voluntary participation in social networks and in other especially addictive services like TikTok.

Of course, we’ve all learned by now that the reason you’re not asked to pay for your Facebook or Instagram or Messenger memberships or services like TikTok is that it’s your attention and mindshare that’s being sold by the tech companies to marketers, advertisers and politicians. The price doesn’t matter when you’re the product. This is the reason why it’s not simply been in the economic interests of Facebook and the other social networks to make it hard to quit; it’s a conscious, intentional and pernicious part of the underlying design and economic model of these businesses. And frankly, it’s far harder to drop these services or cancel your memberships than anyone would imagine until you’ve tried.

It can take as many as eight or more discrete steps (and the ability to ignore suggestions, blandishments, warnings about losing friends and other functionality and services) to finally reach the final stage where you can actually cancel your Facebook profile. The government has begun to work with some of the states to get a handle on this situation, but it’s slow going and nothing regulatory is likely to move rapidly over the next three years of Trump’s rule.

This may all seem like a relatively minor concern apart from the continuing damage all these services are doing to our kids, but that’s not the main reason I’m raising the issue. No matter how many times new technologies bite us in the collective ass because we launch and implement them before we fully understand their impact or consequences, we never seem to learn the lessons. Indeed, humans can ruin the spirit of just about anything if given the time and technology.

Right now, when nothing in our lives is more omnipresent and potentially threatening than AI, we’re learning that the tech guys have done it to us again. Facebook has built its AI chatbot into Instagram and WhatsApp, and there is no option to turn it off. Google searches result initially in an A.I.-generated result, and the stats already make it clear that the vast majority of all searchers never go beyond that first level quasi-generic answer to their queries. Even more problematic, Google has massively updated Gmail (3 billion users worldwide) and embedded its Gemini AI across the entire platform so the AI system will be reading all your emails whether you like it or not or, more importantly, whether you even know that it’s happening. Of course, if you are aware of this change and a complete gearhead, there’s an onerous multi-step process to shut the service off but, here again, you’ve got to know about it, find and implement it, and recognize that in doing so you will lose some other desirable and longstanding Gmail functionality.

The bottom line is that more and more of these new technologies are not being offered to new business builders as choices or options but instead are imposed on them whether they like it or not.  Only two industries call their customers “users” – tech software vendors and drug dealers.

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Beware the Coming Carnage in the Electric Vehicle Industry

Car buyers are no longer beating down dealers’ doors to get in line for the latest electric offerings, regardless of how smart the cars may be.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @HOWARDTULLMAN1

Nov 18, 2025

 

If you ever doubted that the electric automobile industry was rapidly becoming a pedestrian and commoditized business of wrapping steel around smarts, where the software was everything of value and the shell was simply the latest look-alike clone, the signs couldn’t be any clearer than they are today. We are reaching the point where the carnage is about to hit every car manufacturer who is trying to make a go of it in electric vehicles (EVs).  The public is increasingly taking a pass. All the German manufacturers are backing away from their electric-only focus. Mercedes just reported almost a 20 percent year-over-year sales slump.

Buyers are simply no longer beating down dealers’ doors to get in line for the latest electric offerings, regardless of how smart the cars may be. Tesla’s recent profits fell almost 40 percent and, while they sold more cars in the third quarter year-over-year, they earned less money per car due to price cuts and low interest loans.  However, as I suggested many years ago, it’s likely when all the dust settles that Tesla will be the last U.S. player standing that’s making a real business out of EVs and also trying to hold off the Chinese onslaught, even without being able to sell the highly-profitable clean-air credits to all the other carmakers or the other prior government incentives. Mercedes, for example, is getting killed in China by BYD and Xiaomi, with sales off 27 percent in the third quarter.

The tariff problems are substantial for all the foreign automakers, but even if you put the current tariff issues aside for the moment and ignore the expiration of the EV credit that incented domestic sales for quite a while earlier this year, the fact that—according to the Kelley Blue Book—the average price of new cars has risen above $50,000 (driven largely by EVs and luxury models) has nothing to do with the realities that the vast majority of car dealers are seeing every day in their stores. This “real world” scenario is reminiscent of the fact that the continued surge in the stock market is a grossly misleading metric for what life is like for the average American at the grocery store, gas station, or local greasy spoon restaurant. Inflation continues to rise, prices at the pump keep jumping, and every shopper sees the truth regarding the sad shape of the economy despite Trump’s daily lies.

The real early warning signal for the car guys isn’t simply the slowdown in new EV sales, which have not been successfully altered by aggressive price cuts that are simply cutting into the dealers’ profits. It’s what you see in terms of the product sitting on the floors of the showrooms these days. They simply can’t sell anyone on the idea of buying a used EV. Upfront in the store, they may have positioned all the fanciest high-end versions of the 2025 and 2026 models, but if you step into the second or third tiers of demos and used cars, the asking prices for the 2023s and 2024s EVs are simply shocking. These are typically low mileage trade-ins that the dealers had to grudgingly take in to make a new sale—typically not an EV—and the prices look to be around half of what they were originally listed and sold for. Depreciation in luxury cars has always been a dramatic hit in the first year (right after the buyer drives the car off the lot), but these prices are absolute fire sales, and they still can’t move them.

The truth is that if you ask an honest dealer what’s going on, they will admit that the EVs are tough and costly to service; their unhappy owners are still plagued by the scarcity and wait times of charging stations—even though range anxiety is largely a fiction for folks driving six-figure vehicles to begin with—and the dealership owners hate taking these cars back in trades because they can’t do anything with them other than sending them to auction. The very last thing a Cadillac dealer wants to see sitting on his lot is a used Tesla. Dealers make a material portion of their overall income from the sales of pre-owned vehicles and there’s simply no buyer appetite right now for taking in or taking over someone else’s EV problems at any price.

But if anyone is going to come out of these dramatic dips in demand, it’s likely to be Tesla because Elon’s interest and business have always been about the software and the massive amounts of driver data that his systems were capturing. I’m sure he’s interested in selling plenty of cars (although he’s already more likely interested in selling them to fleet operators of trucks and robot taxis), but the long run view—typically tech-centric—is always the same, and that’s a winner-take-all game.

There’s never going to be a future for the majority of the manufacturers in the U.S. to try to build, maintain or enhance their own unique control and software systems. It’s just a matter of time before they begin to license Tesla’s tools and systems just as they’ve all been buying credits from Tesla for some time and since they’ve already begun to provide adapters for their vehicles to use Tesla charging stations. The ultimate value and the critical margins are in the software and the captured data which informs and strengthens the Tesla algorithms—not in the platform/shell that they’re housed in. At the same time, in a very new and rare twist, it appears that Tesla may be getting ready to license Apple’s CarPlay for its vehicles. 

Interestingly enough, in a completely different industry, we’re finally seeing a similar phenomenon where meeting the need and demand for increased access and expanding the reach of the “software” is far more important to all the parties than exclusivity, competitive considerations, or the platform on which the product is delivered and enjoyed. Microsoft is adopting this expansion strategy in the computer gaming industry, where it has bought two leading game studios in order to grow its multi-platform content offerings. But its most dramatic move has been the recent Halo announcement. Microsoft’s Xbox has been the exclusive home of the Halo video game for the last 25 years and Halo’s success has been responsible in part for the successive launches of four generations of updated Xbox consoles.

But Microsoft just announced that the 25th anniversary version of Halo will also be available for Sony’s PlayStation. Sony and Nintendo are Microsoft’s most important direct competitors in the game space. It’s clear that the new MSFT plan is to provide its games, software and other properties everywhere and make them available on all of the various platforms. Selling software, data and games is a lot more lucrative than building cars or consoles. These days, it’s not clear that it makes sense to manufacture anything.

In fact, following the many earlier examples in the mobile phone industry, where Facebook and others struggled and rapidly failed to introduce their own proprietary phone hardware, or the fitness field, where dozens of players entered and quickly exited the dedicated hardware device competition, I wouldn’t be surprised to see Microsoft step away entirely from its console hardware offerings and focus all of its attention on its desktop computers and its online offerings.

Since Microsoft Windows is installed on about 75 percent of all desktops worldwide, it’s a pretty short step to turn them all into mini-Xboxes as well. An early indication is the development of a new genre of video games that sits on your desktop just above the task bar (taking up only a fraction of your screen) so that you can keep one eye on the action and jump back and forth from work to wasting time in no time at all.

This takes multi-tasking to an entirely new level and is a significant step up from the old one-button fake spreadsheets we used to use to hide our screens from roving supervisors. But it’s also a reminder as well that—for too many of us—multi-tasking is simply another word for trying to do a lot of things all at once and doing each of them poorly. The critical key to success is to focus on being productive, not just being busy.