Comment by jeremyjh

Yesterday’s frontier is today’s commodity, so I don't think frontier AI is out of reach. With computing and solar energy costs continuing to drop, the current AI supply shortages are just a temporary blip. We’ll probably land right back in standard boom-and-bust cycles.

But it is not a constant point of "this % of people needs the frontier intelligence".

As thje models get better, the % of the pie gets smaller and smaller. So higher and higher cost of getting frontier model out gets divided onto smaller and smaller customer base as other models catch up

Agreed, but I I wonder what fraction of tasks really require frontier performance, either in terms of sheer difficulty or where speed is a matter of necessity. For many jobs, it's increasingly a question of whether you'd rather have one filet mignon or 20 good cheeseburgers (all from the same cow).

A high margin luxury good with huge r&d costs is a death spiral.

A high per-user r&d means high costs per user. So then users leave to save a buck, qnd the price goes up again for the remaining users.

Maybe it works out OK if you want to signal wealth - the high price is the selling point. But luxury pure utility is a hard sell to consumers, and for luxury B2B it's about high touch sales (e.g. Oracle).

I’m not sure if this counts as a nitpick, but the definition of frontier automatically includes the cheapest models

The models will be a commodity, the resources to run the frontier will be the luxury good. This is already the case nearly.

The market for "frontier intelligence" will be too small to serve outside of certain government/military applications that exist in spite of market forces, in the same way that the market for small, portable nuclear reactors is exclusively limited to submarines and aircraft carriers. When I call a plumber, I don't need a frontier plumber, I just need someone who's baseline competent.

there is definitely an asymptote

Non-frontier intelligence has become a commodity already.

And the success of things like ESP32 shows that good price + good enough is a powerful combination.

> Usually we end up with cartels in such cases, see OPEC, mafias etc.

Whether a cartel forms is independent of whether a product is a commodity. To the extent that commodity markets are more likely to form a cartel, it's only because it's harder for them to form a monopoly.

The general problem is that if your legal system allows competitors to buy each other then they have the incentive to do that instead of competing. This is why there are supposed to be antitrust laws, and why we get problems whenever they're not actually enforced. But in a typical commodity market, even buying the competition doesn't quite work because someone new can always enter the market. Congratulations, you've cornered the market on landscaping services... until some unemployed fellow who already owns a lawnmower and a truck starts advertising their services.

OPEC is kind of a special case because the product is entirely fungible but it's also finite and consumed by usage. Landscaping services aren't meaningfully finite, if demand increased then supply could match it under any plausible scenario. Copper is finite but it isn't destroyed by usage, so if someone had a lock on copper mining then people could still get it by recycling existing products.

Whereas oil is finite but then the end customer burns it. If Saudi Arabia cuts production, Germany can't make up for it by extracting more domestically because they haven't got enough in the ground, but they also can't capture the exhaust from their cars or power plants and turn it back into petroleum because the product is really energy and it takes more energy to do that than you get from burning it to begin with. So if the largest exporters get together, they control enough of the market to control prices and there is no real way for anyone else to enter the market with enough production capacity to change that.

Until you realize that the product is really energy and you can get out from under their thumb by switching to electric cars and generating electricity without burning fossil fuels.

A commodity is an undifferentiated good. I expect gasoline to be practically the same at each provider. AI will be similar.

China is doing all the heavy lifting for the free market in AI right now. I did not have that in my 2020s playbook.

> what does this even mean, the commoditization...

Like a utility. Not 'ACME intelligence' but just 'Intelligence'. With multiple providers selling you intelligence that is 'good enough' by the token.

>Usually we end up with cartels in such cases, see OPEC, mafias etc.

No we don’t. That’s quite rare.

Look at the collapse of the solar market around 2010 as the price collapsed.

Look at the collapse of the steel industry in the US as outsourcing to Asia took over in the 70s-80s.

Look at the entire computing boom from 1990-2020. Memory and storage followed such a steady line down and to the right that people are struggling to operate compute businesses in a normal market.

E-bikes, scooters, electric cars, lithium ion batteries in general. Most food.

The list of these commoditized things that started out as areas of innovation and became just the marginal cost of production is enormous.

I don't see the average person being able to run DeepSeek's most competitive models though.

Isn't the modern economy already a runaway improvement? First writing and agriculture, the stone age became copper became bronze became iron became steel, and one Revolution after another - agricultural 1 and 2, industrial, information.

Looks like AI will be another revolution, and eventually, probably the largest.