unit economics – Scott Loftesness

I’ve been wondering whether we’ve been looking at the AI stack from the wrong end.

Recently Kris Patel on X laid out a set of excellent questions that he’s looking to have answered as Anthropic and OpenAI move toward going public:

Do you really need frontier-scale intelligence for every task?
Can open-weight models provide an effective alternative to frontier models at a significant discount?
Is the ultimate moat the intelligence or the harness?
What other business models will the frontier labs have to adopt to make the unit economics work long term?
How are you going to prevent distillation from capturing your IP and releasing it?

I’m going to explore only the third question here — moat versus harness. The other four deserve their own consideration, particularly once we have the Anthropic and OpenAI S-1s in hand, revealing for the first time the unit economics of the two largest frontier labs and how much runway they have to support the capacity they’ve contracted.

By “harness” we mean everything surrounding the model: the interface, context, memory, tools, orchestration, evaluation, permissions, and increasingly the user’s accumulated habits and data. The model supplies intelligence. The harness turns intelligence into a product.

Listening to Gavin Baker on the recent All-In episode sharpened this line of thought into something more concrete. He referenced a thought experiment from Eric Vishria: even if OpenAI or Anthropic lost their edge at the pure model layer, they would still retain significant value because of the product harness—the interface, the surrounding tooling, the orchestration—and the user familiarity and habits that have already formed around those platforms. Baker said there is a strong element of truth to it. I think he’s right, and the reasoning behind it is worth spelling out. A model can be replicated, distilled, open-weighted, or commoditized. A mature harness has network effects, switching costs, proprietary context, distribution, workflow integration, and accumulated user behavior. That’s a much harder thing to dislodge.

We are watching intelligence become more abundant and more interchangeable at the same time that the systems built around that intelligence are becoming stickier. On the developer side, the strongest examples are already clear. Cursor turns the IDE into a multi-model agentic environment with deep codebase awareness. Claude Code runs long-horizon coding agents from the terminal, planning, editing, testing, and iterating. Grok Build, Claude Cowork and similar tools emphasize parallel agents and tighter control over local context. In each case the model is a component; the surrounding system does the real work of routing, memory, tool use, and evaluation.

The consumer version of the same idea is now taking clearer shape at Apple. The rebuilt Siri AI shown at WWDC 2026 is not trying to win the pure model race. It is built as a personal harness. A system orchestrator decides what stays on-device with Apple’s Foundation Models, what moves to Private Cloud Compute, and when heavier reasoning is required. Personal context—messages, email, photos, calendar, notes, on-screen awareness—is handled largely on-device through the Spotlight semantic index and App Toolbox. Apple is designing the system so that personal context can be used without giving Apple itself access to it. Conversation history lives in a dedicated Siri app for the user to revisit. And it all syncs across all your Apple devices.

Here is the part I think matters most, and it’s easy to miss if you only read the privacy story. Apple’s Foundation Models framework doesn’t just call Apple’s own models—it’s built to support cloud models from other providers, including Claude and Gemini, conforming to a common protocol. Which means the system orchestrator, not the user, decides which model handles which task. This request goes to the on-device model. That one goes to Private Cloud Compute. A harder one might go to Claude or Gemini. The user doesn’t need to choose, and increasingly doesn’t need to know.

That’s the inversion worth exploring further. The frontier model stops being the interface and becomes a component underneath someone else’s interface. The harness chooses the intelligence. And the company that owns the harness—the OS, the identity layer, the permissions, the apps, the sensors, the notifications, the semantic index tying all of it together—has a form of leverage that has very little to do with whose model is smartest this quarter.

That reframes the subscription question too. I don’t think the right question is whether Siri gets good enough to beat ChatGPT or Claude at reasoning. I think Siri doesn’t need to win that fight at all. It needs to win a different layer entirely—the ambient assistant layer, not the reasoning layer. They’re doing different tasks. ChatGPT or Claude might remain where you go when you think, when I need to reason about something. Siri becomes where I go when I need something done: find (or make) my reservation, text my friend, find that old photograph, update my shopping list, schedule that meeting, add this thought to my notes, figure out when we’re free next week, remind me about that thing we discussed three months ago. Apple’s advantage as an ambient assistant isn’t primarily that it has your personal data. It’s that it has OS-level authority over the world that my personal data lives in.

Of course this is still early. Execution will determine how much of the architectural promise becomes daily reality. Reliability, agentic follow-through, and the quality of the on-device models will matter as much as the privacy story or the multi-model routing. But the strategic bet itself is clear, and it aligns with the broader shift: durable value is migrating toward the systems built around the models, especially systems that sit atop private, permissioned, personal context that competitors cannot easily reach. My early personal experience with the new Siri in iOS 27 betas has impressed me so far. All of this also seems to apply to Google in the context of their Pixel family of devices.

This doesn’t mean frontier labs lose. Pricing power still exists at the high end for the hardest agentic and long-horizon work. Open-weight models will continue to pressure costs and expand access. Distillation remains a real risk. But the more the capability gap narrows, and the more a harness like Apple’s can route among interchangeable frontier models rather than depend on any single one, the stronger the case that value settles into whoever controls the context—not whoever trained the model.

The coming Anthropic and OpenAI S-1s will tell us whether the frontier labs can make their economics of intelligence work. The next generation of Siri, Gemini, ChatGPT, Claude, and whatever comes after them may tell us something even more important: who gets to own the primary relationship with the user.

The model may be the engine. But the harness is where the driver sits.

What a time to be alive!

“There are three elements to every great idea: 1. It solves for ‘why.’ Long before you figure out what a product will do, you need to understand why people will want it. The ‘why’ drives the ‘what.’ 2. It solves a problem that a lot of people have in their daily lives. 3. It follows you around. Even after you research and learn about it and try it out and realize how hard it’ll be to get it right, you can’t stop thinking about it.”
— Tony Fadell, Build

The third element is the only one that isn’t optional. You can fake the why — retrofit it, hire a consultant to write it on a slide in a font called Montserrat. You can borrow the what; most products are just other products in a better jacket. You cannot fake the third thing, because the whole test of it is that it happens without your permission.

Call it a visitation. It shows up uninvited at the stoplight, in the shower, at 2:40 a.m. when the ceiling becomes a screen for it. You know the unit economics don’t work. You know the regulatory path is nine years long. You know — you know — that fourteen better-funded people already tried this and left with nothing but a Delaware C-corp and a grudge. None of it helps. The idea has already filed its paperwork. It lives here now.

You cannot bullet-point a visitation. There is no OKR for thinking about landing gear hydraulics while your wife is telling you about her sister’s wedding. Everyone who’s built something that mattered will tell you this, late enough at a dinner and honest enough on the wine: not conviction, not passion — that laminated word — but the visitor, still standing in the doorway of every other thought you’re supposed to be having.

It doesn’t check your calendar. It doesn’t care that you’ve moved on to point two, the sensible one, the one venture capitalists nod along to with their flat whites going warm. It was never about the market. The market is the alibi you build afterward, so you don’t have to say the true thing: I didn’t choose it. It moved in while I was asleep, and my life rearranged itself around the shape of it, the way a house rearranges itself around a family it didn’t ask for.

Maybe the third element isn’t a filter for the idea. Maybe it’s a filter for you — a way of finding out, by accident, at 2:40 in the morning, staring at a ceiling that has decided to keep the light on.

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