{"slug": "the-end-of-consumer-ai-winter", "title": "The end of consumer AI winter", "summary": "American AI companies are repeating the mistakes of the 1983 video game crash by rushing low-quality AI products to market, eroding consumer trust. This creates an opportunity for ambitious startups to build high-quality consumer AI applications, similar to Nintendo's successful entry after the video game industry collapse.", "body_md": "After Atari launched Space Invaders on the Atari 2600 in 1980, dozens of companies jumped into what had become an overnight multibillion dollar industry. For a year it seemed like all you had to do was put a video game console on the shelf and it would sell out immediately. There wasn't time to focus on making good games because you had to get to market first. It culminated in 1983 when Warner Brothers had to bury in cement a million copies of \"ET the video game\", just to find a way to get rid of unsold inventory.\n\n**By 1983 consumers had lost trust in junky lame video games, but that's what made Nintendo's entry to America possible.**\n\nUnlike the American market, Japanese retailers had been selective in what they stocked. That created breathing room for Nintendo to focus on making games that were actually fun. After two years of video game winter where nearly every American firm exited the video game space, Nintendo brought high quality and fun games to the American market in 1985. Once American consumers realized Nintendo's games were actually fun, they demanded as much Nintendo as they could get. Nintendo earned the trust that the American firms had destroyed. Because of it, Nintendo got to enter the American market without any notable competition. Nobody remembers that they got a Mattel video game console in 1982, but they might go to bed on Pokemon bed sheets.\n\n## American AI companies are creating consumer AI winter\n\nToday AI brands like Microsoft Copilot mean less than nothing. Some users pay for enterprise-oriented versions of Windows just to get a cleaner operating system without Copilot. In the rush to integrate AI into applications, every quality bar for product decisions got steamrollered by the need to not be \"behind in AI\". A few noteworthy consumer apps like Google's notebook LM app got created that were actually high quality and considered. But in general, consumer apps in 2024-2026 have been made worse by the addition of AI.\n\nRecently the president of Y Combinator, Garry Tan, said in [a video](https://www.youtube.com/watch?v=oHwUD9b9_pg) that \"consumer AI is uninvestable.\" Despite controlling one of the largest institutions of new startups in the world, he didn't seem to believe that YC has a role to play yet. I think everyone has gotten so myopically focused on quick to market startups that they're falling for the same trap as the American video game consoles. Some AI companies are making unprecedented MRR, but how much of that is sustainable? The low quality bar on consumer apps has burnt a lot of trust. Consumers have much more skepticism today than they did a year ago.\n\nThe frontier labs have mostly focused on making general-purpose assistants rather than building opinionated consumer applications.\n\n## This creates a great opportunity for consumer AI products that don't suck\n\nI don't think it's possible to create these products using the existing lean startup framework. Product development has changed enough that a small AI-native team can punch far above its weight — but only if it's adequately ambitious. The Super Mario Bros team was tiny, and they pushed the hardware to its limit in music and graphics while everyone around them shipped shovelware because shovelware sold. Winning in consumer AI takes that same ownership of ambition. These teams will need to be capable of building their whole AI stack, from custom embedding models, to training their own models, to hacking the inference stack for real control over cost. Sometimes off the shelf options will be best, but if it's core to your product you need to own it.\n\n## Consumer AI makes people more powerful\n\nThere's another reason this opportunity is being overlooked. Many of the people closest to frontier AI have become convinced that the end state is AI replacing people. If that's true, consumer products barely matter. The only thing that matters is building a bigger model. I think that's backwards.\n\nWe've taught AI agents to imitate how expert humans use existing tools, but we haven't made the AI tools that humans can become expert at yet. Today's AI products mostly ask models to imitate humans using software that was designed for humans. Browser agents are literally pretending to click buttons on interfaces never meant for them. At the same time, humans are interacting with frontier AI through chat windows and command lines that were never designed for this medium either.\n\nWe haven't invented the native interface for intelligence.\n\nNobody in 1983 could have told you what the most compelling video games would look like. They just knew the current ones were junk. The native interface for intelligence won't spill out of an RL training loop, it's going to be designed by people who believe that there's a more interesting future than living under \"[machines of loving grace](https://darioamodei.com/essay/machines-of-loving-grace).\"", "url": "https://wpnews.pro/news/the-end-of-consumer-ai-winter", "canonical_source": "https://jonready.com/blog/posts/the-end-of-consumer-ai-winter.html", "published_at": "2026-07-10 18:47:04+00:00", "updated_at": "2026-07-10 19:05:20.587782+00:00", "lang": "en", "topics": ["artificial-intelligence", "ai-products", "ai-startups", "ai-ethics"], "entities": ["Microsoft", "Google", "Y Combinator", "Garry Tan", "Nintendo", "Atari"], "alternates": {"html": "https://wpnews.pro/news/the-end-of-consumer-ai-winter", "markdown": "https://wpnews.pro/news/the-end-of-consumer-ai-winter.md", "text": "https://wpnews.pro/news/the-end-of-consumer-ai-winter.txt", "jsonld": "https://wpnews.pro/news/the-end-of-consumer-ai-winter.jsonld"}}