Anish Acharya on why apps, not models, capture the value
a16z's Anish Acharya argues intelligence is now an abundant primitive, so the durable value moves to whoever productizes, routes, and prices it: the application layer, not the model.
Insufficiently Optimistic
The overlooked question is not whether AI is a bubble but whether almost everyone is still far too pessimistic, because near-infinite demand is meeting badly constrained supply.
I think actually the out of distribution topic that's less discussed is what if we're insufficiently optimistic?
Most Moats Are Untouched by Cheap Intelligence
Abundant, cheap intelligence does not erase most competitive moats; network, scale, and brand hold, while integration lock-in like SAP is the most exposed of the few genuinely at risk.
no amount of coding agents is going to make Nike not Nike.
Frontier Tokens for Unbounded Upside
The right model depends on the upside of the job: pay any price for a frontier model where value is unbounded, and use cheaper open-weight models where accuracy is the ceiling.
it's economically rational to pay almost any price for a model that's even one IQ point smarter.
Models Have Temperaments, Not Just IQ
Models are not commodities; they have distinct temperaments, and a literal, rule-following model and a creative, presumptuous one are both needed because no single model can be both.
you can't be both highly open and highly neurotic.
The Labs Integrate Down, Not Up
Instead of moving up into applications as everyone feared, the labs are integrating down into inference and compute, where the workloads are homogeneous enough to scale.
yes, they are vertically integrating, but they're vertically integrating down into inference and compute.
Aggregation Beats the Single Model
Because each lab can only serve its own models, the application layer wins by becoming the one shell that routes every task to whichever outside model is best.
you really need to have one product harness or sort of product architecture that lets you use multiple models.
Everything Becomes a Loop
AI is shifting from prompting models to putting them in loops, and the coding loop that auto-fixes a reported bug generalizes to pricing, procurement, and the business itself.
agent is just a model in a loop with sort of tools and memory and a few other things.
The Birkin Bag of Software
Consumer is finally viable as open-weight models cut costs and buyers accept prices from twenty dollars to two thousand a month, opening room for luxury-tier software.
if $20 was the historic ceiling, what's the $200 a month skew of your product? And in fact, what's the $2,000 a month skew? Like what's the Birkin bag of software?