Foundation models are heading toward becoming low-level commodity infrastructure with no pricing power, because there's no network effect or sustainable differentiation between models, so value will accrue to layers built on top of them rather than to the model companies themselves.

21:24that further up the stack you don't have leverage you don't have a network effect you don't have control. Um that sort of prompts me to incidentally to to say well maybe the right comparison here is with semiconductors where with each generation it just gets more expensive and so you have fewer players. Um, so all of that kind of taken together, well, the models are kind of diff

21:41commodities and the chatbot isn't the right UI or the right product and the companies aren't going to be able to build all of that stuff themselves. So therefore, they're low-level infrastructure. And so then, well, do they have pricing power? Well, you're going to have, pick a number, three to six companies making a Frontier model, spending no one knows, no one honest knows, like something between $200 billion and $2

22:02trillion a year on building these models. Plus, there'll be a bunch of edge and a bunch of open source. So where's this going to settle down? you're going to have as it might be half a dozen companies that are all competing to sell this stuff. And so where is the price discipline going to come from? Particularly when some of them have got like whole other business models as well

22:16like you know um Google selling ads so you know they've got a different attitude to pricing to to open AI. Um and so like I think the the challenge here is like there's a difference between where we are right now and where this should end up which is kind of a first year economics student kind of conversation. Right now we're in this period of extreme dis equilibrium of supply and

22:38demand and price and capace and capacity. But just because demand for tokens is infinite that doesn't mean that you can't get to a different price equilibrium because of course that's what happened with mobile data. Like demand for bits is infinite. It's grown 1500 2x in the last 15 years. But you still got your supply and dem price equilibrium and you still got a murderous price war between Telkos in

22:56most parts of the world because fundamentally you're selling kind of a commodity um to people who will swap back and forth and of course developers will also swap back and forth. Now this is you know I'm happy to say that this might be completely wrong. It may be that we we we get to a world in which there's only two companies that can make an LLM and they have pricing power or we

23:16get to a world in which most of what we do gets subsumed into the model or they have leverage further up the stack. Um, and you know, it's kind of my point about iOS versus Android. Just because you can say, well, it worked like that the last three times, that doesn't prove that it's what tell prove what's going to happen this time. But it doesn't mean at least you should sort of ask the

23:33questions and you should certainly I'll just say as a sort of a primary observation like this situation right now is transitory. You know, we're in this extreme scarcity and then we have a pricing system and we have a free market and we have a surge of capex and like a trillion dollars of capex. [snorts] So like those multiples are going to move around and then what >> going back to your your it's a good