#196: Can Old Guard Resist the Temptation of Rent-Seeking in AI?

As the 20th century drew to a close, music lovers faced a nagging frustration: the album-only model. You’d hear a catchy tune on the radio, rush to the nearest store, and find out the only way to get that one song was to purchase the entire album. It was the ultimate "one-song trap"—forcing fans to pay for a dozen tracks they didn’t want, just to own the one they couldn’t live without.

Fast forward two decades, and while vinyl has given way to virtual, the tune remains eerily familiar. In today's AI landscape, we're witnessing a fascinating replay of this dynamic, but with a twist: the emergence of two distinct players—the benefactors and the rent-seekers.

The Gen AI Benefactors and Rent-Seekers

Recently, a revolutionary tool has emerged, empowering users to convert any content into podcasts, embodying the essence of innovation and community empowerment. Excited, I imagined hosting these podcasts on our content repository, hosted on a well-known CMS that prides itself as the central "hub" and ideal "spot" for small businesses. However, I quickly discovered that access to this AI-powered podcast feature was locked behind the most expensive enterprise plan.

The trend doesn’t stop there. In workplace chat, where seamless communication should be standard, the same frustrating pattern repeats. A certain app that promises to pick up the slack in team collaboration ironically disrupts workflows by restricting access to its AI features behind a steep paywall. Their claim of being "where work happens" only applies if you're willing to pay extra for that work to happen smarter.

The Packaging Defense: A Closer Look

When examining the practices of companies that appear to engage in rent-seeking behavior in the AI sector, two defenses are often invoked: free enterprise principles and claims of packaging strategies. Regarding free enterprise and freedom of choice, there's little room for argument, especially when we're not dealing with monopolies. In a competitive market, businesses have the right to price their products as they see fit, and consumers have the freedom to choose alternatives if they're dissatisfied.

However, what we're observing in the AI sector isn't packaging in the traditional sense. True packaging, like when Microsoft offers Teams virtually free to challenge competitors (like where work happens), has its own set of anti-competitive concerns – but that's a different discussion. What we're seeing here is companies forcing customers to buy entire expensive upgrades just to access a single AI feature. This isn't packaging; it's an upgrade trap that exploits the growing necessity of AI tools in modern business operations.

Conclusion

Timeless wisdom teaches us that when you pursue excellence, success—and often wealth—follows. But chase money directly, and you may end up with neither. The tech empires of Silicon Valley and beyond are built on this foundation of excellence, exemplified by the Magnificent Seven. They’re far from flawless, but their immense contributions, like Google’s Transformer paper, can’t be ignored. After all, maybe attention is all we need!