As AI spend shifts from unlimited token usage to hard budgets, every organization will need a cheaper model option, turning the mid-tier model market into a major competitive battleground.
Jason predicts that as companies move from unconstrained token spending to enforced budgets, fierce competition will emerge for cheaper models, a fight he calls 'the cheap seats.' ✦ AI generated
Jason · 20VC · 2026-07-16 · original ↗
starts at this moment · 14:02
everyone's going to be token maxing if they aren't already. everyone's going to hit the limits. I finally hit my quad limits yesterday for the first time um on my max plan and I had to decide what to do, right? So, everyone every and as every organization goes from burn all the tokens you want baby to budgets, however you do it, whether it's automated, whether it's manual, whether it's picking a drop down, everyone's going to have to have a cheaper model.
verbatim transcript · starts at 14:02
14:02Captain Obvious view is everyone's going to be token maxing if they aren't already. everyone's going to hit the limits. I finally hit my quad limits yesterday for the first time um on my max plan and I had to decide what to do, right? So, everyone every and as every organization goes from burn all the tokens you want baby to budgets, however you do it, whether it's automated,
14:25whether it's manual, whether it's picking a drop down, everyone's going to have to have a cheaper model. It may be in your product for cheaper uh workflows, it may be for coding. So everyone, so so at the moment this seems like a battle for for for the cheap seats >> and it's a big battle for the cheap seats and um we'll see what happens. Um we don't talk about it, but I think
14:46Haiku from Anthropic is a pretty damn good product and in one day they could make it better just by by adjusting the slider of how much opus uh you get in Haiku. I literally use a massive amount of Haiku and for like cheap simple stuff it's really good and it's a tenth of a cent, right? And so there's a battle for this second bucket. How much of the
15:07margin is there? How much of the revenue? Who wants to win in it? I don't know. So I think it's interesting, but but it it it appears to be a battle in the frontier bucket, but I think it's a battle to in the Btier bucket where there's still a lot of volume, but how much margin of revenue is TBD? >> I think that's correct. Not quite. But
15:25on the other first agree with you and I I think the data bricks paper and a couple other papers that we'll talk about have talked about this concept of buckets and tiers of model and I like what you're saying Jason you're exactly right when the pressure on spend is out there every the sentence you said that really resonate with me is every company is going to have an internal tearing
15:45they might all buy it from open AI or anthropic but every company with a CIO who's half awake is going to have a cheap token model to hand to stop this madness. And to some extent that means there's a slot for that. A fun interesting one would be you guys know that obviously Meta did that contract you know they're starting to offer their capacity now just like SpaceX on a you know you