Weekly API Evangelist Governance (Guidance)
The greatest shift in the last in the last five years isn’t artificial intelligence, it is the financialization of everything in our worlds using artificial intelligence. Think bitcoin, but for everything else. When everything can be reduced down to a token, it allows the words, images, and sounds of our day to be wrapped within a variety of models, and opened up for metering and charging a fee based upon who you are, how much you use, and which model you operate within.
Financial Products
Complex financial products like Collateralized Debt Obligations (CDOs) bundle together various debts, such as mortgages, which are then repackaged into securities with different risk levels. This is just one of many different types of financial products used to make investments around the globe, in service of different outcomes. Very few people understand the entirety of modern financial products, and this is what has happened to the API infrastructure behind software, then cloud, and now artificial intelligence—making everything a very rich opportunity for speculation.
User -> Usage -> Model
The evolution of software pricing provides the foundation for the financialization of everything around use, beginning with traditional user-based pricing for our software but as a service, but then expanding to be usage-based pricing as we shifted to the cloud, all the way to wrapping that, but also reselling the experience via large language models developed by startups. This shift has been occurring throughout this century, but AI is providing a finer grained approach to the financialization of our increasingly digital world.
Ubiquitous Tokenization
In AI, a token is the basic unit of text that a model processes, such as a word, part of a word, or even punctuation. The token has become the desired unit for financializing the world around us. Not all tokens are created or priced equally, and different models bring generalization or specialization, and quality, which will fetch a variety of prices per token and model. Tokenization isn’t replacing user, usage, or model-based pricing, it is enhancing and expanding it. In a world where anything can be a token, it means anything can be financialized.
Digital Derivatives
LLMs allow for a snapshot of our world to be wrapped and pooled as an asset, similar to our loans and mortgages. Only now, the assets are our online purchases, searches, messages, photos, and videos, but also the “sentiment” and “context” that goes along with them. At the consumer level, we’ve all been the product for a number of years, and the artificial intelligence machine is taking what it learned along the way and applying it to getting access and control over company, industry, and government digital resources—expanding the financialization of everything from B2C to everything B2B.
Secondary Markets
All of this is what further gets wrapped into startups, which are then speculated and traded upon via secondary markets. You have a new healthcare LLM trained on public data or a premium source of private data, wrap it in a startup, and get selling on the secondary markets. You have a new environmental LLM trained on public data or a premium source of private data—wrap it up! The investors in these startups are as far removed from the individual pooled assets as the hedge funds, and other investors are in traditional financial products. They don’t understand the quality, risk, and opportunity, that lies at the user, usage, model, or token levels—they are just making bets on the roulette wheel.
No Going Back
I am not a believer in the common phrase that artificial intelligence is inevitable, but I do know that there is no reversing what has unfolded. I view AI like crypto, it ain’t going away, but it isn’t the solution that is being widely sold as. The expansion from user and usage based pricing to model-based will keep driving business forward, but it will also work to obfuscate things and further insulate investors from risk and accountability of what is happening with startups and the impact on primary and secondary markets.
The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. — Thomas Sowell