DeepSeek AI perfectly embodies Frugal Innovation
DeepSeek R1 perfectly embodies the 2 complementary aspects of frugal innovation — the art of “doing more with less” — on both the supply-side and the demand-side:
- R1 was *developed* frugally by DeepSeek: R1 was trained using just US$6 million compared to $100 million for OpenAI’s GPT-4 and using 1/10 of the computing power of a comparable LLM
- R1 can be *used* frugally by all of us: R1 is 20 to 50 times cheaper to use than OpenAI o1 model
Here is the trillion-dollar question: can Western tech giants build a frugal AI product like R1 ?
I doubt it. Let me elaborate.
The media worldwide is raving about the frugal (low-cost) nature of R1.
But R1 is just a frugal product.
A frugal product is the “visible” part of the Frugal Innovation Stack (depicted below as an iceberg).
A frugal product is something you can touch, feel, and use (like the R1).
You can “reverse engineer” a frugal product and build a similar product.
But to develop and launch continually and systemically *MULTIPLE* frugal products like R1, a business needs to have three things:
- a frugal organizational structure that is flat and agile
- a variety of business models to create and capture value from its frugal products
- employees who boast a well-honed frugal mindset
As a startup, DeepSeek is a “lean and mean” frugal organization with AI experts who have a frugal mindset. These employees are “frugal natives”.
DeepSeek AI clearly has mastered the 6 core frugal principles expounded in my book Frugal Innovation, coauthored with Jaideep Prabhu
In 2019, Tsinghua University Press published the Chinese edition of my book (with support from Prof Chen Jin)
I lived in Silicon Valley (SV) for nearly 15 years.
The tech giants in SV have become so bloated organizationally (just look at the giant size of their campus in SV !) and their developers are so inured to abundance of resources that they will have a hard time emulating DeepSeek’s frugal culture and mindset.
Steve Jobs exhorted SV entrepreneurs to “Stay hungry, stay foolish”
Today, however, SV tech giants are too satiated and too risk-averse to become the masters of frugal innovation any time soon.
