Why AI Models Aren’t the Product Any More | TWiAI Ep 18

By This Week in AI

Categories: AI

Summary

AI models are no longer the competitive advantage—the real value is in agents, applications, and proprietary data at the layer above. Expect data spend to shift almost entirely to application layers rather than model companies, creating orders of magnitude more agent-building opportunities than model development.

Key Takeaways

  1. The model is no longer the product. Agents, user interfaces, and the harness layer on top are where competitive moats form. Companies should build proprietary application layers, not license third-party models.
  2. Proprietary data and knowledge should stay in-house rather than sent to Claude, OpenAI, or Gemini. This creates defensibility and keeps data assets internal to your business.
  3. Data spending will shift from model companies to application and agent layers (close to 100%). This represents a fundamental revenue stream migration in the AI economy.
  4. Flat-rate pricing aligned with customer outcomes beats billable hours. Crosby Legal demonstrates this model in legal services—pricing per deal, not per hour, aligns incentives and captures value from AI efficiency.
  5. Expertise marketplaces connecting domain experts to AI labs for fine-tuning are emerging as critical infrastructure. Companies like Micro One create full-stack operations bridging human judgment and model training.

Related topics

Transcript Excerpt

SpaceX formally announced plans to buy Cursor for 60 billion in stock. Curser once accounted for 40 to 50% of Anthropic's total revenue. >> It is Game of Thrones in terms of talent, in terms of territory, in terms of weapons. In AI, >> the model is no longer the product. The agent evaluations that sort of come on top, the harness, the the user interface and so forth. >> You don't want to give your knowledge to Claude. You don't want to give it to OpenAI or Gemini. You want that for yourself. The majority of the data spend, in fact, probably close to 100% of it will be on the agent and the application layer versus the model companies. There's just going to be orders of magnitude more agents built than obviously models. >> Cursor will have the number one model at this time next year. >> Than…

More from This Week in AI