We are announcing the second edition of our Latent Space demo day event in SF on 2/23: Final Frontiers, a startup and research competition in “The Autonomous Workforce”, ​”Beyond Transformers & GPUs”, and “​Embodied AI”. RSVP here! The first one was aimed for 15-20 people and ended up blowing up to >200 - let’s see what a year of growth (and competition) results in.You can find all Latent Space events here.In our December 2023 recap we covered the Four Wars of the AI stack. But how do we know when it’s time to crown a winner? As we kick off 2024, we wanted to do a recap of the State of AI in 2023 to set a baseline of adoption for different products. Retool had a great report at the end of last year which covered a lot of it. David Hsu, CEO and co-founder of Retool, joined us to go over it together. We also talked about the history of Retool, why they were too embarrassed to present at YC demo day, and how they got to $1M ARR with 3 employees. If you’re a founder, there are a lot of nuggets of advice in here!Retool AIIn our modeling of the “Software 3.0 Stack”, we have generally left a pretty wide open gap as to the “user interface” equivalent of the AI stack:Retool AI launched 4 months ago with some nifty features for SQL generation, and its on hosted vector storage service (using pgvector). However, as he explains on the pod, the more interesting potential of Retool is in helping developers build AI infused applications quickly, in combination with its Workflows feature. This moves Retool down the stack from just the UI for internal tooling to the business logic “piping” as well. There are a bunch of dedicated tools in this space like Respell, BuildShip, Flowise, and Ironclad Rivet.RIP StackOverflow?In July 2023 we talked about the impact of ChatGPT and Copilot:This was then disputed by StackOverflow, who pointed out (very fairly so) that there were privacy-related changes in their analytics instrumentation in 2022. StackOverflow no longer reports traffic, but based on StackOverflow’s continuing transparency we can see that organic declines have continued throughout 2023.Retool’s report comes over a year after those changes and has some self reported samples from users:* 57.6% of people said they have used StackOverflow less; almost all of them replaced it with ChatGPT and Copilot.* 10.2% said they no longer use StackOverflow.We also saw a lot more tools being released in the dev tools space such as (one of our oldest pod friends) Codeium (which just raised a $65M Series B), SourceGraph (and their newly released Cody), Codium AI (just released AlphaCodium which was picked up by Karpathy), Phind (which beat GPT-4 with OSS models), and Cursor, one of the most beloved products in the dev community at the moment. Intelligence is getting closer and closer to the IDE, and the trend doesn’t seem to be reverting. We already said that “You are not too old (to pivot into AI)“, and the advice still stands. When asked to rate “Preference for hiring engineers effective at using ChatGPT/Copilot for coding” on a scale of 1 to 10, where 10 is “Much more likely”, ~40% of companies voted 8-10. Having an AI Engineer skillset is extremely important. 45% of companies between 1,000-4,999 employees said that they increased the difficulty of technical interviews to compensate for these new tools, so the gap between users and non-users will keep widening.Crossing the AI in Production ChasmGeoffrey Moore’s “Crossing the Chasm” is one of the most quoted business frameworks. Every market has an initial group of Innovators and Early Adopters, who are willing to suffer through the rough edges of products initially, and eventually crosses into the Early Majority, which expects a full product.In the AI world, ChatGPT and Midjourney / DALL-E have crossed the chasm in the consumer space. Copilot is probably the only tool that did it in the enterprise, having crossed 1M paid users. ~$50B were invested in AI in 2023, and we still only have <5 breakout products;