---This is not written by AI --- Full Article Attached https://www.letters.senteguard.com/p/frontier-ai-firms-have-built-something https://www.letters.senteguar

---This is not written by AI --- Full Article Attached https://www.letters.senteguard.com/p/frontier-ai-firms-have-built-something https://www.letters.senteguard.com/p/frontier-ai-firms-have-... https://youtu.be/uL3YDTw0bKU?si=LKvNwOrXkHoi4F74 https://youtu.be/uL3YDTw0bKU?si=LKvNwOrXkHoi4F74 TLDR - I am attempting to describe the open model firms' lack of moat for a more general audience. I am also framing frontier LLM tech as positive-externality tech like Linux and the Printing Press. Unfortunately for the Big Frontier CEOs this means they may not necessarily reap the benefits of the valuable models they helped to build. What is a Positive Externality and What Are Some Examples? A “positive externality” technology is one which generates societal benefit that exceeds the developer's personal financial return. For example: — The Printing Press: While Johannes Gutenberg was the inventor of the printing press, he personally met financial ruin. The true economic value of the Press lay in the portability of language and the broader dissemination of ideas. — Linux: Torvalds’ open-source operating system became the basis on which countless companies built multi-billion dollar businesses (e.g., Alphabet’s Android operating system). An Analogy: Frontier vs. Open-Source as Rock Climbers Generated by ChatGPT Imagine the top AI models as a group of rock climbers. — The Lead Climbers (Frontier AI firms): Companies like Anthropic, OpenAI, xAI, and Alphabet are more capable at climbing and training the AI frontier. Because they are more skilled, the lead climbers establish the routes and place protection. — The Followers (Open-source models): Firms like DeepSeek, Kimi, and Ollama come later. By training their models on already established frontier models in a process known as distillation, these firms approach the cutting edge faster than they otherwise would have given the work from the leaders. Just as in rock climbing, sometimes lead climbers benefit from their fellow lead climbers—they use their routes or distill their models. Sometimes the followers lead in their own way as well, like when DeepSeek made massive efficiency improvements on model training in January 2025. In this way, followers and their user base capture the benefits of the positive externalities generated by model training investments financed by frontier AI firms, their investors, and the American taxpayer. ... Big Frontier’s Escape Plan ... But Distillation is Unfair to the Frontier Firms? Aren’t the Open-Source Companies Stealing? — The closed-source firms distill too. — Frontier LLMs were and continue to be trained on the internet of human language —generally without compensation for the owners. Frontier firms are throwing stones from glass houses. — OpenAI took funding and developed ChatGPT as a non-profit then transitioned into a “capped-profit” structure to secure the massive capital and computing power required for advanced AI development. But they made the investment and they did the work. Don’t they deserve to reap the economic rewards? — There is no guarantee that innovators will capture all, or even most, of the economic value they create. Linus Torvalds did not. Johannes Gutenberg did not either. — Furthermore, these investments were funded not only from private capital but also by the American taxpayer under tenuous claims of imminent AGI, catastrophic AI risk, and an existential threat from geopolitical rivals.