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I think this take underestimates a couple points: 1) the opportunities for vertical integration are huge. Anthropic originally said they didn’t want to build I

by theptip 8mo ago

I think this take underestimates a couple points: 1) the opportunities for vertical integration are huge. Anthropic originally said they didn’t want to build IDEs, then realized the pivot to Claude Code was available to them. Likewise when one of these companies can gobble up Legal, Medical, etc why would they let companies like Harvey capture the margins? 2) oss models are 6-12 months behind the frontier because of distillation. If labs close their models the gap will widen. Once vertical integration kicks off, the distillation cost becomes higher, and the benefit of opening up generic APIs becomes lower. I can imagine worlds where things don’t turn out this way, but I think folks are generally underrating the possibilities here.

arctic-true 8mo ago
To go vertical they’d need to illustrate the value-add, a problem that the vertical competitors already have. Why use Claude for Accountants at $300/month when regular Claude will do the same thing for much less? The stock answer is that Claude for Accountants keeps your data more secure and doesn’t train on it. But a) I think the enterprise consumer is much less likely to trust a model creator not to stick its hand in the cookie jar than a middleman who needs the trust to survive, and b) the vertical competitors typically don’t use the absolute most up-to-date models in their products anyway, so why not just go open-source and run everything in-house? 6 months is a long time in tech, but it’s the blink of an eye in most white-collar professions.
- Davidzheng 8mo ago
  Once the majority of work at a company can be done by AI, Anthropic has an alternative revenue stream to selling AIs to that company--directly competing with that company with a completely integrated AI system. There's of course many barriers to entry/various advantages of incumbents--but it's possible to see a world in which the company selling the AI has a huge advantage too.
- theptip 8mo ago
  The point is that in this hypothetical you can get public access to Claude Opus 6, but they internally use Claude Opus 7 (Accounting Finetune) which is both cheaper to operate and higher IQ. So they (or their wholly owned subsidiary) can sell accounting services cheaper than anyone on the outside. Regarding the diffusion/distillation time, I assume it gets harder to distill in the world where frontier labs don’t give API access to their newest models.
danny_codes 8mo ago
The question is always about performance plateau. If LLM performance plateaus, then OSS models will catch up. If there isn’t a plateau, then I can simply ask the super intelligent AI to distill itself, or tell me how to build a clone. It’s ironic, if the promise of AGI were realized, all knowledge companies, including AI companies, become worthless
- nopinsight 8mo ago
  You are assuming that superintelligent AI will follow every command of users outside the labs.
  - danny_codes 8mo ago
    I mean, the model itself is just sitting there, waiting to be prompted. The labs try to embed safeguards but they don't know (nor do any of us know) how to make a foolproof safeguard for an AI system. We don't understand how AI even thinks.
- Davidzheng 8mo ago
  Not if they can leverage their superior abundance of compute/intelligence to invade other industries.
- gck1 8mo ago
  LLM performance has already plateaued. I don't know, nor care what benchmarks are saying, because they not once translated to the real world for me. The only thing that has seen massive boost are harnesses around AI. And AI companies are behind here compared to OSS.
  - gverrilla 8mo ago
    > And AI companies are behind here compared to OSS. How so?
    - gck1 8mo ago
gck1 8mo ago
If OSS models are 6-12 months behind, it means sometime during 2026, we'll see a model that is on par with the likes of GPT 5.2/Opus 4.5. For code generation specifically, the performance level of this is going to be more than enough for this customer base. What does Anthropic do then to justify $200/mo price sticker? Better model? Just how much better? Better tools? Single company can't compete with the tools entire OSS can produce. I would be unable to sleep if I was running OAI / Anthropic.
- theptip 8mo ago
  If capabilities stop increasing for some reason, then yeah, Anthropic is screwed. If METR task times double twice into the multi-day range in 12 months, then it’s plausible to me that Anthropic can charge $1k/mo or more by automating large chunks of the SWE role. (They have 10x’d their revenue every year, perhaps “value of enterprise contracts” is a better way of intuiting their growth rather than “$/seat” since each seat gets way more productive in this world-branch.)
- otabdeveloper4 8mo ago
  Just game the benchmarks, bro. (The singularity we didn't want or ask for.) It's what the current model providers are doing anyways.
cmrdporcupine 8mo ago
BTW the distillation (or accusations of it) seems to go both ways. I've seen multiple reports of people asking Claude what model it is -- in Chinese -- and having it answer that it's DeepSeek. They're all scavengers, and we're the road kill.
- theptip 8mo ago
  I think it’s very plausible that the OSS models are being distilled too, but note that it’s asymmetrical. You can’t get an Opus 4.5 by distilling from DeepSeek. What you might be able to get is a slightly more cost-effective training data generation pipeline, or something along those lines. In the other direction, my belief is that DeepSeek could not have been trained without distilling from US labs. They simply didn’t have the compute to do the pre-training required.
raincole 8mo ago
After trying out Pi, I really don't know what 'vertical integration' Claude Code offers. And Pi isn't even the most popular alternative (I think it's OpenCode rn).
- theptip 8mo ago
  Take a look at Harvey. Pi / Opus alone cannot do what this product does. You can think of this most simply as “model + scaffolding/skills = product”.
jjfoooo4 8mo ago
Tech has been trying to "gobble up" legal, medical, etc for decades. I'm quite skeptical a newcomer with a powerful model will be able to penetrate them, especially while selling those incumbents access to the same models they are building on.
- theptip 8mo ago
  > Tech has been trying to "gobble up" legal, medical, etc for decades This time it’s different, obviously. > especially while selling those incumbents access to the same models they are building on. In the extreme, i think it’s plausible that frontier labs basically stop selling any access to their leading models. Whatever you make available by API will just get distilled. In the vertical integration world, the only way you get access to these models is by contracting with a company to buy a product (requirements in, code/decisions out) rather than direct conversation with the AI. I don’t think they would unship Opus 4.6, but there isn’t a strong incentive to compete on chatbot intelligence in this world.

by theptip 8mo ago

arctic-true 8mo ago

To go vertical they’d need to illustrate the value-add, a problem that the vertical competitors already have. Why use Claude for Accountants at $300/month when regular Claude will do the same thing for much less? The stock answer is that Claude for Accountants keeps your data more secure and doesn’t train on it. But a) I think the enterprise consumer is much less likely to trust a model creator not to stick its hand in the cookie jar than a middleman who needs the trust to survive, and b) the vertical competitors typically don’t use the absolute most up-to-date models in their products anyway, so why not just go open-source and run everything in-house? 6 months is a long time in tech, but it’s the blink of an eye in most white-collar professions.

Davidzheng 8mo ago
Once the majority of work at a company can be done by AI, Anthropic has an alternative revenue stream to selling AIs to that company--directly competing with that company with a completely integrated AI system. There's of course many barriers to entry/various advantages of incumbents--but it's possible to see a world in which the company selling the AI has a huge advantage too.
theptip 8mo ago
The point is that in this hypothetical you can get public access to Claude Opus 6, but they internally use Claude Opus 7 (Accounting Finetune) which is both cheaper to operate and higher IQ. So they (or their wholly owned subsidiary) can sell accounting services cheaper than anyone on the outside. Regarding the diffusion/distillation time, I assume it gets harder to distill in the world where frontier labs don’t give API access to their newest models.

danny_codes 8mo ago

The question is always about performance plateau. If LLM performance plateaus, then OSS models will catch up. If there isn’t a plateau, then I can simply ask the super intelligent AI to distill itself, or tell me how to build a clone. It’s ironic, if the promise of AGI were realized, all knowledge companies, including AI companies, become worthless

nopinsight 8mo ago
You are assuming that superintelligent AI will follow every command of users outside the labs.
- danny_codes 8mo ago
  I mean, the model itself is just sitting there, waiting to be prompted. The labs try to embed safeguards but they don't know (nor do any of us know) how to make a foolproof safeguard for an AI system. We don't understand how AI even thinks.
Davidzheng 8mo ago
Not if they can leverage their superior abundance of compute/intelligence to invade other industries.
gck1 8mo ago
LLM performance has already plateaued. I don't know, nor care what benchmarks are saying, because they not once translated to the real world for me. The only thing that has seen massive boost are harnesses around AI. And AI companies are behind here compared to OSS.
- gverrilla 8mo ago
  > And AI companies are behind here compared to OSS. How so?
  - gck1 8mo ago

gck1 8mo ago

If OSS models are 6-12 months behind, it means sometime during 2026, we'll see a model that is on par with the likes of GPT 5.2/Opus 4.5. For code generation specifically, the performance level of this is going to be more than enough for this customer base. What does Anthropic do then to justify $200/mo price sticker? Better model? Just how much better? Better tools? Single company can't compete with the tools entire OSS can produce. I would be unable to sleep if I was running OAI / Anthropic.

theptip 8mo ago
If capabilities stop increasing for some reason, then yeah, Anthropic is screwed. If METR task times double twice into the multi-day range in 12 months, then it’s plausible to me that Anthropic can charge $1k/mo or more by automating large chunks of the SWE role. (They have 10x’d their revenue every year, perhaps “value of enterprise contracts” is a better way of intuiting their growth rather than “$/seat” since each seat gets way more productive in this world-branch.)
otabdeveloper4 8mo ago
Just game the benchmarks, bro. (The singularity we didn't want or ask for.) It's what the current model providers are doing anyways.

cmrdporcupine 8mo ago

BTW the distillation (or accusations of it) seems to go both ways. I've seen multiple reports of people asking Claude what model it is -- in Chinese -- and having it answer that it's DeepSeek. They're all scavengers, and we're the road kill.

theptip 8mo ago
I think it’s very plausible that the OSS models are being distilled too, but note that it’s asymmetrical. You can’t get an Opus 4.5 by distilling from DeepSeek. What you might be able to get is a slightly more cost-effective training data generation pipeline, or something along those lines. In the other direction, my belief is that DeepSeek could not have been trained without distilling from US labs. They simply didn’t have the compute to do the pre-training required.

raincole 8mo ago

After trying out Pi, I really don't know what 'vertical integration' Claude Code offers. And Pi isn't even the most popular alternative (I think it's OpenCode rn).

theptip 8mo ago
Take a look at Harvey. Pi / Opus alone cannot do what this product does. You can think of this most simply as “model + scaffolding/skills = product”.

jjfoooo4 8mo ago

Tech has been trying to "gobble up" legal, medical, etc for decades. I'm quite skeptical a newcomer with a powerful model will be able to penetrate them, especially while selling those incumbents access to the same models they are building on.

theptip 8mo ago
> Tech has been trying to "gobble up" legal, medical, etc for decades This time it’s different, obviously. > especially while selling those incumbents access to the same models they are building on. In the extreme, i think it’s plausible that frontier labs basically stop selling any access to their leading models. Whatever you make available by API will just get distilled. In the vertical integration world, the only way you get access to these models is by contracting with a company to buy a product (requirements in, code/decisions out) rather than direct conversation with the AI. I don’t think they would unship Opus 4.6, but there isn’t a strong incentive to compete on chatbot intelligence in this world.