The Smart Squeeze (hypersoren.xyz)

The Smart Squeeze argues that as frontier models get smarter and cheaper, “smart” AI apps that resell model cognition are being economically squeezed — Windsurf’s recent leadership exit is offered as a canary. Better models (higher K) increase the effective intelligence per token (σ(K)), which paradoxically drives far higher token consumption (J = σ(K)·I). That boosts end‑user value and incentivizes them to buy more cognition directly from labs rather than pay app margins. In practice apps see exploding usage and token cost exposure; raising seat prices can’t keep up with marginal consumption growth, so cross‑sellers get disintermediated as customers integrate model APIs themselves. The note formalizes the squeeze: apps pay p/σ(K) per unit of effective intelligence and can only charge at most what customers would pay to go direct, asymptotically p_app ≤ p/σ(K) + V′(J). Because wrapper value V′(J) falls as J grows, app margins converge toward zero when intelligence consumption is large. The takeaway for builders: avoid metered cognition as your primary revenue. Durable plays are “dumb” businesses that monetize orthogonal value — seats, workflow, proprietary/situated data, network effects, high switching costs (τ), or trust/liability products — rather than units of AI reasoning. Windsurf is a preview of an industry‑wide pressure every cognition reseller will face as models improve.