Pluralistic: Why aren't AI companies competing directly with their customers? (13 Jul 2026)

2025-02-17 · Source: Pluralistic: Daily links from Cory Doctorow · Field: Business & Management — Corporate Strategy & Leadership, Entrepreneurship & Start-ups, Consulting & Professional Services · Depth: Fundamental Awareness, medium

Summary

AI companies, despite claiming to develop "god-like" artificial intelligence capable of replacing human professionals like doctors, accountants, and teachers, primarily sell these tools to existing businesses rather than directly competing in those service sectors. This raises Omar Khayyám's question: if their AI is so valuable, why do they need external capital or choose to split profits by selling it? The article posits that this behavior stems from the "go meta" economy, where businesses prioritize operating at abstract layers removed from direct service provision. Analogous to a gold rush where pick-and-shovel wholesalers profit most, AI firms opt to sell "doctorbots" to hospitals instead of opening their own, reflecting a systemic preference for indirect profit generation over direct market competition.

Key takeaway

For executives evaluating AI investments, critically question why AI providers sell their "transformative" solutions instead of leveraging them to directly capture the entire market they claim to disrupt. Your due diligence should extend beyond promised efficiencies to scrutinize the vendor's own business model. If their AI can truly replace human professionals, consider the strategic advantage of internalizing that capability versus becoming a customer in a "picks and shovels" economy.

Key insights

AI companies sell powerful tools rather than using them to directly dominate service markets.

Principles

• "Go meta" strategies prioritize abstraction over direct service.
• Powerful tools imply direct market dominance potential.
• Selling infrastructure often yields higher returns.

Topics

• AI Business Models
• "Go Meta" Economy
• Market Strategy
• Venture Capital
• Economic Abstraction
• Disruptive Technologies

Best for: Entrepreneur, Investor, Consultant, Executive

Related on AIssential

• AI Didn't Replace Businesses, It Changed the Rules of Competition — AI is transforming business competition by redesigning operations around predictive decision-making and optimized workflows, not just automation.
• Meta cashes in on its excesses — Companies with significant AI infrastructure can monetize excess compute by offering cloud services to competitors.
• Satya Nadella says companies that trust one AI for everything may not survive — Companies must retain AI metadata and control their AI infrastructure to avoid dependency and competitive risks.
• The AI Revolution will not be Monopolized — AI's future will be a diverse ecosystem of many developers and projects, not a monopoly by a single winner.
• I’m on Tech Report: Companies are killing themselves with AI — Generative AI is failing to replace "load-bearing" human jobs, leading to costly rehiring and eroding employee trust.
• AI Markets: Deep Dive with a16z's David George — AI-native companies exhibit unprecedented growth and efficiency, driven by strong demand and early product cycle dynamics.

See Counsel's argued verdicts on the open AI decisions leaders are weighing →

Open in AIssential →

Editorial summary, takeaway, and curation by AIssential. Original article published by Pluralistic: Daily links from Cory Doctorow.