Chinese labs like Kimi are no longer merely distilling American models; Kimi K3 beat the best closed-source American models on important subsets of tasks, violating the persistent American narrative that China only keeps up through distillation.

2:18of them bluntly, I just am faced with the one question. Holy [ __ ] >> Is this like the true commoditization of models? Are they just a complete utility layer at this point? Well, I think that there's uh the the big question around this has started to arise because of open source models. So, I think if you were to only look at the closed source models, you would say there's

2:42acceleration, but it hasn't quite commoditized yet because that layer is still owned by a pretty small group of companies. It would be an oligopoly if we only had the closed source models. But what seems to be happening is that the open source models especially from China have really rapidly improved. And for the first time ever, we saw a couple weeks ago that Kimmy K3 actually beat the best closed source American models

3:08uh on a you know pretty important subset of tasks. For example, front end frontend coding like web development which a huge fraction of developers are web developers. >> Dude, can I ask how big a moment was that? Because it's like a I'm going to butcher it but you know I'm a podcaster so I can get away with it. you're a PhD master, you can't uh it's like a 27

3:27trillion parameter model. Um it's pretty clunky. This is not a agile model and actually you know I was with Jason Lamin yesterday from SAS who's as AI pilled as they can be and he's like honestly it's not better than the others. How big a moment is Kimmy? >> No, it was a pretty big moment. It was a pretty big moment. And the reason I'd say it was a big moment is because it

3:50violates a narrative that has been persistent in the United States, which is that the Chinese are just distilling American models. And that's the only way that they're able to, you know, keep up. When really what happened is that Kimmy actually beat all American models, including Fable, in some subset of tasks. That doesn't mean that they're not distilling. They may still be using distillation as a substep in their

4:16training procedure, but it does mean that distillation is only part of the story and that there's something that those labs are doing above and beyond distillation that's bringing the performance up above what the American labs are are currently doing. And so that narrative violation has been hugely important to the way that people view the ecosystem both from the scientific dominance of Americans and the American sort of hegemony uh which of course

4:44Americans love hegemony uh to um the uh economics of the whole thing and to to your point are these things are these models a commodity or not? when we see you know when we look at your open routers of the world you know the top five models are all open source Chinese models when we see the proliferation of Chinese models today does that cannibalize the closed frontier model business

5:10meaningfully well I think that you need to think about the um the incentives and economics behind it so first thing I'll say is that the open router metrics are not truly reflective of reality and that's because the business router The business model of open router is to charge uh like a fraction uh like a fee on top of every token. And so what happens is that people don't use open