For those of us who have been around long enough, I’m sure we’ll remember the Tamagotchi craze from the '90s.
In Japanese, Tamagotchi — or たまごっち — is a combination of the two words たま (egg) and ウオッチ (watch).
These small, egg-shaped electronic devices housed a digital character that begins as an egg. As the character hatches, the player has to care for the digital pet throughout its life.
In addition to “providing” proper hydration, you must also be sure to give your digital pet well-balanced meals and snacks. You must clean up after it, and ensure it gets a proper night’s sleep, among other things.
Poor care could result in an early death. A well cared for pet would result in a happy, healthy long life.
I’m sharing this story to illustrate an important point…
That the concept of having — and caring for — “artificial companions” has been around for decades.
In the case of Tamagotchi, it was remarkable how attached consumers became with their digital pets.
Owners developed an emotional connection and commitment to care for and nurture these completely artificial characters. It was a form of companionship. And oddly, not really weird at all.
That might seem counterintuitive: How is possible to form a connection with such a simple device with so limited interactivity?
And yet it happened.
In fact, since the release in 1996 in Japan, more than 80 million Tamagotchi have been sold, generating more than $1 billion in sales for game company Bandai. And yes — they’re still being sold today.
A recent product announcement from an up-and-coming artificial intelligence company, Digi AI, is what reminded me of Tamagotchi.
Only this time, it feels a lot more real.
It was only a matter of time before the technology behind ChatGPT — large language models (LLMs) — was used for companionship and even romance.
This is an industry that is now on an exponential growth trajectory. And now, with the help of LLMs, the digital characters are anthropomorphic — they look, feel, and sound very human.
Our first reaction might be to think that this is ridiculous, or it will never work. But the reality is quite different…
It already has.
Yes, Tamagotchi was a raging success — but that was quite different. There has actually been decades of development and experimentation with digital characters and animation in Japan.
The characters are often so compelling, consumers have developed deep emotional connections with them.
It was inevitable that characters would be developed that could converse. And now, leveraging artificial intelligence (AI) for this purpose was also inevitable.
In 2017, Replika launched its AI-enabled companion service. Users can create their own Replika, which is positioned as “the AI companion who cares.”
Here’s Alice...
She has a diary, which explores her own thoughts and emotions, which you can read.
Right out of the gate, Replika was successful, despite not having the advantage of advanced AI like LLMs.
In the first year after the launch, Replika managed to sign up 2.5 million users.
That equates to a massive business. At an annual fee of $69.99, that would amount to nearly $175 million in annual revenues.
Replika now has a PRO version that charges $20 a month for access to the most advanced features…
And yet that’s just scratching the surface.
The global online dating market exceeded $10 billion for the first time this year. Match Group (MTCH), the owner of online dating services like Match, Tinder, OKCupid, and many more, is currently valued at more than $12 billion.
What comes next?
Digi AI is the next generation of digital companionship.
The concept is similar to what Replika tried to achieve, but it is powered with the breakthroughs that we’ve seen this year in artificial intelligence related to large language models.
Anthropomorphic characters — powered by generative AI technology — are now capable of fostering feelings and even love with humans.
For some of us, that might seem wrong. Others might think that it’s unethical or dangerous. But for many, it will make perfect sense.
So much so, many will declare themselves AIsexual.
AIsexual is a word I coined. It describes those that prefer an AI for companionship. It seemed a perfect word to describe what I believe is inevitable.
AI, of course, stands for artificial intelligence. And “ai” in Japanese is the word for love — 愛 or あい.
Given the Japanese affinity for digital characters and its love of manga and animation, it was an obvious name to me for this emerging phenomenon.
Users of Digi AI can select the kind of person they’d like to meet… or start with a new AI that has no preset personality.
Who would you like to meet?
Perhaps a more traditional Hilda…
Or a fun gamer like Gwendolyn.
Where this is so powerful, and why it will be wildly successful, is that these AI-enabled companions will — in time — understand their human partners better than they understand themselves.
They will be able to respond in the most emotionally comfortable way, irrespective of what mood we’re in.
And the early indications are that this kind of companionship will be almost as attractive to women as it is to men...
Imagine a nearly perfect relationship with someone who is there for you 24/7, never gets tired or grumpy, always has time for you, and “loves” you for who you are…
This is such a powerful concept. So powerful that hundreds of millions will choose to be AIsexual as this technology improves.
Some of us may have seen the movie Her starring Joaquin Phoenix. Phoenix develops a relationship with an AI — Samantha — who is the voice of actress Scarlett Johansson.
I won’t ruin the ending of the movie, so anyone who hasn’t seen Her and is interested in this subject, Her is a must watch.
And another incredible movie, but much darker, is Ex Machina, which embodies AIs in human-like robotic form.
At the moment, Digi AI represents its companions as animated characters. Its initial focus is to build something at least 10-times better than Replika’s technology.
Much like in the movies, consumers actually develop relationships with their AIs. It is very much a human like process of dating, romance, and increased intimacy as the relationship progresses.
In a short period of time, the generative AI will become so good, most won’t be able to tell they are chatting with an AI at all. And the characters will evolve into AI-generated, human-like characters that look and talk just like we do.
Just imagine being able to have a FaceTime call with your AI partner at any time, and it looks and feels entirely real.
I’m sure that this topic is deeply uncomfortable for some. And I’ll be the first to say, this is going to be a horrible development for society.
Many will prefer these “perfect,” friction-free relationships over relationships with real humans. And that means the ability for individuals to interact with one another in a healthy way will diminish.
Sadly, this is already an issue, thanks to social media platforms that are used to create division and fuel passive aggressive tendencies.
I wish it were different, but there is no stopping this trend. The technology is capable now, and the demand for a product like this is pervasive.
The good news is that none of us needs to use the technology if we don’t want to.
It’s not necessary for us to be a user in order to make great investments that profit from such an explosive trend.
However, I’m actively looking for ways to gain exposure to these developments, as a consumer product like this will catch on like wildfire.
Digi AI is only on its first generation, and Replika is trying to catch up by employing more advanced AI.
This is a race to employ the outer limits of artificial intelligence technology and grab the largest market share of this emerging market.
A clear leader in this space could potentially be worth more than $100 billion.
What do you think of this issue of Outer Limits? As always, we welcome your feedback and questions, and look forward to them. We read each and every email. Please write to us by clicking here.
