Why AI Moats Still Matter (And How They've Changed)

The a16z Show

a16z

Science, Innovation, Business, Entrepreneurship, Culture, Disruption, Software Eating The World, Technology

4.4 • 1.1K Ratings

🗓️ 3 December 2025

⏱️ 52 minutes

🔗️ Recording | iTunes | RSS

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Summary

a16z General Partners David Haber, Alex Rampell, and Erik Torenberg discuss why 19 out of 20 AI startups building the same thing will die - and why the survivor might charge $20,000 for what used to cost $20. They expose the "janitorial services paradox" (why the most boring software is most defensible), explain why OpenAI won't compete with your orthodontic clinic software despite having 800 million weekly users, and reveal how non-lawyers are building the most successful legal AI companies. Plus: the brutal truth about why momentum isn't a moat, but without it, you're already dead.

Transcript

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0:00.0	The thing that is fundamentally different about this product cycle is that the software itself can actually do the work. And therefore, the market opportunity for software today is no longer just IT spending. It's largely labor. It's not like all the jobs will go away. I actually think that's not going to happen at all. There are a lot of things where if I could hire somebody for a dollar to do this task, I would 100% do that. I've never been able to hire somebody for a dollar. Now I can hire software for a dollar to do this task, I would 100% do that. I've never been able to hire
0:22.6	somebody for a dollar. Now I can hire software for a dollar. While it is important to understand
0:26.4	model capabilities and what's happening in the frontier, you still need to figure out how to apply
0:30.5	that technology. I think modes matter just as much as they did before. The one change is that in
0:35.6	the supply demand equation, there's conceptually more supply
0:38.5	of software on the cup, because the barrier to creating this stuff has gone down dramatically.
0:43.7	I think AI is an incredible tool for differentiation. The idea that a voice agent can speak in 50
0:49.5	languages, fully compliantly, 24-7, highly differentiated, you know, certainly versus the human.
0:55.0	The A-Iness of that capability, in my opinion, is not a source of defensibility.
0:58.5	It is just so consensus.
1:00.6	Like, cloud was not consensus.
1:02.6	Mobile was not consensus.
1:04.4	And that's why the incumbents kind of screwed up.
1:07.8	Everyone saying that AI killed the concept of most, that anyone can vibe code a Zendesk competitor in their bedroom, that 20 companies are building the exact same thing you are.
1:17.1	So why are software companies potentially more defensible today than any other time in history?
1:21.9	A16Z general partners, David Haber and Alex Rampel, are seeing companies charge $20,000 for what used to be called a feature,
1:28.7	because that so-called feature now replaces an entire person.
1:32.4	They're watching startups attack markets that were never worth touching with software,
1:36.0	like plaintiff law and auto loan servicing, because suddenly the market isn't IT spent, but labor spent.
1:41.9	The counterintuitive reality is this.
1:45.8	The same force creating infinite competition is also creating trillion-dollar opportunities in places nobody's looking. In today's
1:51.0	episode, we explore the relationship between momentum and moats, why the 19th player always dies,
	...

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