To The Moon

Last year I wrote an article about how the front door to systems of record were evolving. I think a better title would have been something about how the “interaction layer” is evolving. The general idea of the post is that when we saw the internet arise it ended up “layering” platforms that used to own the customer interaction layer (and turned “front door” applications into middleware).

The other point of the post is that whoever owns the interaction layer (ie the place where the end user takes actions) ends up capturing most of the profits. The example in that post was OTAs became the interaction layer for travel (in the age of the internet) and pushed down the GDS systems to middleware. This last week we started to really see a tangible example of how this may play out with AI, and ironically travel was at the center again!

What’s happened is that general purpose personal agents like Instinct, Muse, Grok Bot, etc have taken off. The last few weeks they’ve all gone vertical. For anyone who hasn’t tried one of these, you should! They’re quite powerful and cool. The idea of all of them is similar - a single place to get work done on your behalf. Receive a healthcare bill in the mail? Simply take a picture of it, send it to you personal agent, and ask it to pay it. Need to book a haircut? Ask your agent to go online and reserve you a time in the morning that works with your calendar. The agent handles the rest. It gathers context from your calendar, spins up a virtual browser in a VM, and completes the task.

Then this week I saw two announcements:

1. Expedia announced a partnership with Muse

   ( $Meta Platforms, Inc.(META)$ ’s personal assistant product).

2. $Amazon.com(AMZN)$ blocked Muse

Both are quite interesting! Let’s take a look at the first (Expedia). In the early days of the internet, the OTAs (ie $Expedia(EXPE)$ , $Booking Holdings(BKNG)$ , etc) took over the interaction layer and became the place travel was booked. GDS platforms got squeezed as they were the interaction layer pre internet, and then became middleware. Are personal assistants now doing to OTAs what OTAs did to GDS systems?? If all I do to book travel is go to my personal assistant, then the OTAs are reduced to commodity middleware. In this scenario, all of the profits will aggregate at the interaction layer - the personal assistant. The market may be pricing this in - Expedia was down almost ~10% this week AFTER announcing this partnership with Muse. My guess - whether it’s travel (or many forms of commerce) the battle for owning the interaction layer is about to get super intense.

Then there was the Amazon announcement. They took the opposite approach! They don’t want to get reduced to middleware. I could say to Muse “I’m running low on laundry detergent, go on Amazon and buy more of the same detergent I always buy.” In this case, I never have to go to Amazon. My assistant just purchases it for me. But by doing this, Amazon looses my eyeballs. Can’t sell ads. They don’t want to get reduced to middleware, so they’re fighting it. They want to continue owning the interaction layer.

In my opinion - fighting this change is a loosing battle. The interaction layer aggregating around personal assistants feels inevitable. Because what will almost certainly happen - “challengers” will embrace personal assistant agents, and “incumbents” will fight it. Let’s take an example of Uber Eats vs $DoorDash, Inc.(DASH)$ . Doordash is the dominant incumbent. They want to keep owning the interaction layer. BUT - every other challenger will want to catch up on market share. They don’t have the dominant market position. They’re playing behind. And it will be very easy for them to view AI assistants as a way to gain ground on market share. The challengers will embrace, the incumbents will cede market share as more and more food delivery is ordered through an assistant, and eventually the incumbents will be forced to adopt personal assistants (but at a later time, with inopportune structures).

This cycle feels so inevitable. And it begs the question - how many companies / products today own the interaction layer that are at risk of being disintermediated? I bet the list is longer than most think.

For founders - owning the interaction layer will be incredibly important!

One other side note - as I was writing this, I started to realize how many businesses rely on consumers being lazy. Think about insurance - how often have I received a bill where the out of pocket was higher than expected. Or certain procedures wasn’t deemed “covered.” What I could do is get on the phone for 5 hours, bang my head against the wall sitting on hold, to talk to a representative to figure out the bill. My guess is I have lots of wasted money I paid out of pocket that I didn’t have to. But I was just too lazy to spend the time.

I valued my time greater than the expected savings. BUT - this completely flips with personal ai agents. I can explore all of this with zero time. There are so many other examples of this. The subscription economy basically runs on “churn that should happen but doesn’t.” Could be a streaming service I forgot to cancel. Agents can simply scan my credit card bills, see what I’m not using, and go through the cancel flow themselves. Or any kind of insurance product. I’ve had the same car insurance for decades.

I’ve never price shopped. Too much of a hassle for unknown savings. What if I asked my agent to shop around every 6 months and always get met the same coverage for the cheapest price? Now repeat for home insurance, internet or cable plans, cell phone service provider, etc. The possibilities become endless! So many businesses could come under threat if the “consumer laziness” goes away.

Markets are always moving - and sometimes, the best move is knowing what works for you.

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