Professor (UC Berkeley) Brad DeLong, one of my favorite economists, says this about #AI companies & their profit potentials: “The problem is this: the moats are shallow.
Nothing stops a rival from offering a near-equivalent model—if only by distilling yours, training a cheaper system on the outputs of the expensive one you spent a fortune to build. Moreover, whatever frontier edge you do manage to open up commoditizes fast: today’s lead is gone in months, as competitors catch up and open-weight models undercut proprietary pricing all the way down toward zero. Put those together. Selling LLM model services looks likely to become a commodity business. And commodity businesses, as every economist since Smith has known, do not earn large economic profits.” #ArtificialIntelligence #business #investing #StockMarket #finance
Charlie McHenry
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2026-08-17 00:21:49 UTC
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2026-08-17 00:21:49 UTCEvent JSON
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"content": "Professor (UC Berkeley) Brad DeLong, one of my favorite economists, says this about #AI companies \u0026 their profit potentials: “The problem is this: the moats are shallow.\nNothing stops a rival from offering a near-equivalent model—if only by distilling yours, training a cheaper system on the outputs of the expensive one you spent a fortune to build. Moreover, whatever frontier edge you do manage to open up commoditizes fast: today’s lead is gone in months, as competitors catch up and open-weight models undercut proprietary pricing all the way down toward zero. Put those together. Selling LLM model services looks likely to become a commodity business. And commodity businesses, as every economist since Smith has known, do not earn large economic profits.” #ArtificialIntelligence #business #investing #StockMarket #finance",
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