When Intelligence Gets Cheap, Distribution Wins

Run the trend forward. The models most businesses actually run on have gotten materially cheaper this year, more than once. Context windows have expanded by an order of magnitude. Capabilities that were research demos eighteen months ago, like having a model operate a browser directly, moved to generally available this month.

If that continues, the reasoning layer becomes something close to a utility. Everyone can buy it. Nobody's version is meaningfully better than anybody else's for most business tasks.

So where does the value go?

Not to the model

This is the uncomfortable part for a lot of AI startups. If your product is a thin layer over someone else's model, your moat is the difficulty of writing a good prompt, and that is not a moat.

I say this as someone building with these models daily. They are extraordinary. They are also available to my competitors on identical terms.

It is worth being precise here, because the trend is not uniform. The very top of the market has not gotten cheaper. The most capable models still command a premium, and the gap between them and the mid tier is real. What has changed is that the tier most businesses actually deploy is now good enough for the overwhelming majority of commercial work, and that tier is where the price competition is happening.

To distribution, data, and trust

Three things do not commoditize.

Distribution. Reaching thousands of barbershops is hard, slow, relationship driven work. No model release makes that easier. The company that already has the customer relationship gets to deploy every new capability into it immediately.

Proprietary data. The model is general. Your data is not. Years of transaction history for a specific trade is something no lab can replicate, and it is what turns a general model into something useful for a particular business.

Trust. When AI touches someone's money or their customers, the bar is not novelty. It is reliability. Trust is earned slowly and it does not transfer.

What this means for operators

If you run a business, the strategic question is not which AI vendor to bet on. It is which of your assets gets more valuable as intelligence gets cheaper. Usually it is your customer relationships and your data, which means the right response to cheap AI is often to invest harder in things that have nothing to do with AI.

If you are building, the question is whether you own any of the three. If the honest answer is no, the model getting better does not help you. It helps whoever does.

Cheap intelligence is genuinely good news. It is just not evenly good news, and it rewards a different set of assets than most people expect.