I loved your talk about AI and wanted to bounce an idea off you.

I think AI may be bad for corporate profit margins.

A lot of companies make money because their customers can’t be bothered to monitor them more closely, or to insource something. Customers let the company make some money in exchange for doing a decent-enough job and making the problem go away.

Bank of America has $2 trillion of deposits, not a penny of which is optimized. Most enterprise software vendors could be switched out far more often, or displaced by home-built software, but it’s too much of a pain. I could run a 12-party RFP for an Uber ride or a pair of socks, but I don’t.

In a sense, many professionals are an extension of the same idea. I could research my own real estate law, or my own insurance, whether business or personal, but I don’t because it would be too hard.

Google Search might be the biggest example. It makes money because advertisers know they need to be at the top of the results to be found. But my agent will happily search all the results across multiple search engines.

AI agents should change all this. By acting as incredibly rational and vigilant sourcing agents, CFOs, and experts for their users, they will take rents previously collected by these toll-takers and redistribute them to consumers.

And I don’t think the AI stack itself necessarily makes much profit. Commodity and open-weight models are hot on the heels of the major model companies, and competition in GPUs should intensify. Indeed, making a GPU is in some ways similar to making software, so perhaps it can commoditize substantially. Chip manufacturing may remain high-margin, but there are now plenty of entrants drawn in by the shortage who could make TSMC’s market more competitive over time.

Some companies will win. Low-cost providers may gain share as customers switch more often. Richer consumers may consume more high-end goods. Companies with genuinely advantaged business models and limited competition will be able to become more efficient. But my overriding sense is that the equilibrium outcome is lower margins for companies.

Of course, people will build new businesses, and maybe they will use AI to generate very high margins in ways I haven’t considered. That would prove me wrong.

But if this lower-margin hypothesis is true, the knock-on effects are probably positive for AI adoption, since it will make the models more popular with consumers.

And if your view is that AI drives GDP growth to be only 5–10% higher over the next decade, it’s possible that a 100–200 bp decline in corporate margins from roughly 12% would mean companies in aggregate don’t see much benefit — or in fact lose — even as consumers are better off.