Being 'in the token path' is now the single most important factor for assessing a company's staying power, because the market structure of frontier model companies (how much competition exists) will determine token prices and thus who captures economic value.
David explains that being positioned in the 'token path' is now the top criterion for evaluating a company, since the unknowable competitive structure among frontier model labs will set token prices and dictate where value accrues. ✦ AI generated
David · a16z Podcast · 2026-05-29 · original ↗
starts at this moment · 12:45
“Is that something that you guys are seeing like internally in your portfolios?”
right now, you have to be in the token path. Like that is the number one thing that we're looking to for our companies... The biggest driver of where value is going to get captured right now is I would say something that is totally unknowable, which is what is the market structure of the model companies? How much competition is there? If there's a couple at the frontier, token prices will probably be higher. If there are five at the frontier, token prices will probably be lower.
verbatim transcript · starts at 12:45
12:30companies are going to be everything. There's never going to be any more application companies. They're all going to go away. And then we went through a cycle where we said there's going to be application companies for everything and the model companies are just going to be APIs. And then now we're back in this moment where the model companies are kind of legging their way up into the
12:44application. And you know, this is their biggest way to drive stickiness. Um so, as it relates to assessing something's place in the world, first of all, like right now, you have to be in the token path. Like that is the number one thing that we're looking to for our companies. And um the reason that's so important is what I had said earlier. So, there's actually cost pressure happening at buyers of
13:07technology already. Like very it's happened very fast. Um so, they're not going to be increasing budget for things that are like previous generation software. In fact, they can't even cover the growth in their costs that is happening from AI with that with reductions in that. So, there's going to be pressure on those. Um and you know, honestly, it's probably going to have to come from either higher
13:31prices that they can charge or restructuring of of the labor force. Um, the biggest driver of where value is going to get captured right now is I would say something that is totally unknowable, which is what is the market structure of the model companies? How much competition is there? If there's a couple at the frontier, token prices will probably be higher. If there are five at the frontier, token
13:56prices will probably be lower. Token prices being lower probably is better for the overall economy because there's not this pressure to kind of restructure the labor force as quickly as things get really, really big. Um, you know, right now the number is smaller. It's not five. Um, there's a tremendous amount of inelasticity for frontier intelligence right now. There's also question of how much does that change over time? Like, are a lot
14:24of the jobs that can be done fine to be done with previous generations of models? That's not the way anyone is consuming tokens today. Um, so, you know, that's an unknowable. The market structure is an unknowable. Um, you know, what role does open source play? You know, that's a tenuous situation. Um, you know, how much can you run locally? Um, how much can you run with small models? Like, these are all the