Everyone's assuming the LLM providers will have significant leverage in the AI era.

What if that's not true?

Everyone's implicitly treating LLM providers like Google or Facebook: an end-user aggregator that then gets significant leverage.

This is partly because every LLM provider makes available an API, but also has a 1P service.

Vanilla LLMs are so useful that the no-frills default UX from the providers wins by default currently.

This leads us to analyze them mostly like the consumer aggregators.

But what if LLMs end up more like cell network operators?

Capital intensive, and theoretically compete on quality, but realistically everyone just treats them mostly like commodities.

Dumb pipes that are underneath the services the users care about.

Technically it's possible for a 3P to use one of the provider's models in a more powerful and useful UX that beats the 1P product.

You can imagine a world where the LLM providers only made a 1P tool and didn't allow a 3P API.

But that's not the world we live in, and now that Llama 3.1 405B is open weights, not a world we are likely to live in.

Who has the power in this new world comes down to what services users use most.

It could be the 1P LLM providers' UX… but that implies they will create the most compelling uses of LLMs.

Or rather, won't be significantly surpassed by others who do.

The LLM providers have a default advantage, but not a massive one.

The reason it feels like the model providers' 1P UX will win is that it assumes that the "killer use case" of LLMs is a chatbot.

If the killer use case is a vanilla chat bot, then it makes sense that the providers' own UX will be the best–they don't have to charge themselves a margin.

That could be true, but it very well might not be!

We're in the very early innings of the AI era.

The chatbot might turn out to be only a minor manifestation of LLMs.

The LLM providers could conceivably end up as dumb pipes.