The Substitution Wave in AI | Tomasz Tunguz
Frontier model prices keep rising while open-source crosses the good enough line. Coinbase, Lindy, Harvey & Cursor are substituting — & the savings go straight back into more tokens.
In short : AI buyers across enterprise, app, and seller layers are substituting cheaper open-source models for frontier closed models. The savings don't shrink the AI bill — they get reinvested in exponentially more tokens per task. Three forces are reshaping the AI cost structure : Foundation labs are moving up the stack into applications,1 2 Frontier model prices keep rising for the smartest models,3 Open-source models have crossed the good enough threshold for most use cases.4 5 The natural response from AI buyers is substitution. Coinbase6 : At Coinbase we’re working hot on…
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