Intelligence Amplifier
It's not AI that makes your product valuable—it's your product that makes AI more valuable.
Recently, I've been reflecting on how AI is changing the landscape of the software industry. Previously, I thought that while big tech companies like Google and OpenAI sold intelligence itself (similar to how utilities sell electricity), most software companies primarily sold applications that leveraged AI's capabilities in various ways. However, I've now realized that in the AI era, nearly 99% of new software companies—including those building products at the application layer—are effectively selling intelligence.
Today, the value of a software product largely depends on how well it integrates AI into specific contexts to enhance performance on particular tasks. In other words, it's not AI that makes your product valuable—it's your product that makes AI more valuable by enabling it to handle more complex tasks or achieve the same outcomes with fewer tokens. There are many ways to accomplish this: proprietary data, domain-specific UIs, system prompts, evals, tight user feedback loops, smarter retrieval methods, and workflow-aware orchestration, among others. All these approaches serve one purpose: to make your product become a better intelligence amplifier — they increase the value of each token, allowing you to sell the same number of tokens at a higher price.
The more effectively your product amplifies intelligence, the higher the profit margin you can achieve above the basic "cost of intelligence" charged by big tech providers, and the more valuable your software company becomes.