This piece originally appeared in American Affairs.
"What is your moat?” That’s Silicon Valley-speak for “what defends you from the competition.” As investors hunt for the next big AI company, it’s also one question that the hundreds of start-ups launched in the wake of ChatGPT increasingly can’t avoid.
How do you profit off intelligence once it’s been commoditized? Will the AI transition let a thousand flowers bloom, or will the returns largely flow to a few tech behemoths and their infrastructure providers? If there is anything we’ve learned from the social media era, it is that the rules governing AI today have the potential to shape the distribution of economic and cultural power for decades to come. We better get it right.
The way value gets captured in the post-AI economy has implications for domestic competition as well as America’s technological competition with China. Just as AI could lead to monopolization domestically, the first country to develop AI systems advanced enough to automate most existing forms of human labor could unlock productivity growth so explosive as to secure indefinite economic and technological supremacy. Alternatively, AI’s deflationary effects could paradoxically undermine U.S. economic leverage by eroding key areas of comparative advantage—higher education, cultural exports, financial services, and R&D—while pushing value into a handful of scarce inputs over which we have limited control.
