The missing step between hype and profit
The AI industry faces a critical gap between building technology and achieving actual profit, often referred to as the missing 'Step 2'. While companies promise transformation, real-world integration remains a significant challenge.
This story originally appeared in The Algorithm, our weekly newsletter on AI.
In February, I picked up a flyer at an anti-AI march in London. It read: “Step 1: Grow a digital super mind. Step 2: ? Step 3: ?” Produced by Pause AI, it ended with a plea: “Pause AI until we know what the hell Step 2 is.”
This riffs on a classic 1998 South Park episode where gnomes steal underpants with a business plan: “Phase 1: Collect underpants. Phase 2: ? Phase 3: Profit.” This meme perfectly captures the current state of AI. Companies have built the tech (Step 1) and promised transformation (Step 3), but how they get there remains a massive question mark.
While AI boosters see an “economically transformative technology” ahead, real-world data is more sobering. An Anthropic study predicted job impacts based on task suitability, but a February study by Mercor found that AI agents from OpenAI, Anthropic, and Google failed most real-world tasks for bankers and lawyers.
Why the gap? AI tools don't operate in a vacuum; they must integrate with messy human workflows. Sometimes, adding AI makes things worse unless entire systems are redesigned—a process that takes time and guts. The lack of clarity on “Step 2” creates an information vacuum filled by hype. We need more evidence and transparency from model makers to see if the AI promise will truly pay off. Until then, most businesses are still figuring out what to do with their metaphorical underpants.
Source: MIT Technology Review AI
