Open and closed models are on different exponentials

Open and closed models are on different exponentials

From Interconnects by Nathan Lambert

June 1, 2026 · 7 min

About this episode

The episode discusses the economic implications of open versus closed AI models and the future of AI market dynamics.

The largest debate that’ll define the future balance of power between the open and closed AI model ecosystems is primarily economic — it’s if users of AI will continue to pay dramatically more, i.e. large margins, for the top closed models. Early 2026 is a seminal time for the AI industry, as the coding agents have shown the first area where a huge AI market will continue to pay a substantial premium for better intelligence. The other side of this dichotomy is the inevitable decay of API businesses at these same labs. These labs will realize they need to protect their best models, rolling them out later in APIs to both protect token supply, avoid distillation, and stick to use-cases with higher margins. All of these effects will be clearly visible in 5-10 year timelines, as in the near term markets, prices, margins, and demand will be dictated by a rapid buildout of compute (supply-limited in the near term) and mass subsidization of tokens (through continued investment in new AI companies). The core of this argument rests in the obvious habit changes that are setting in with coding agents past the Opus 4.5 and Codex 5.2 thresholds. People are not making this switch because they…

People in this episode

Host: Nathan Lambert

Topics covered

  • AI models
  • economic debate
  • coding agents
  • market dynamics
  • API businesses

Keywords

  • AI models
  • economic debate
  • coding agents
  • API businesses
  • market dynamics

Mentioned in this episode

Books & works: Opus 4.5, Codex 5.2

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