Wednesday, April 22, 2026

AI and Enshittification

"Enshittification" is a term that describes a specific corporate economic activity. In short, products and services start out great for consumers, and over time become more expensive and offer lower quality.

My take: "enshittifcation" is a company adjusting prices and quality to maximize profits. They don't do it to irritate users. They don't do it to annoy employees (enshittification happens to employees too; witness the conversion of employer-paid pensions with employee-paid 401-k plans). Companies "enshittify"products and services to increase profits.

So let's look at AI.

If "enshittification" is simply "maximizing profits", then what will happen to AI services?

The "free" AI services (such as Google's search engine and Microsoft's Bing) will see more advertisements and more sponsored results.

The paid-for services will see... price increases.

I expect that AI services will follow the path set by video streaming services. They will start with simple and inexpensive plans, and then change to include multiple tiers with different capabilities at each (differently priced) tier. Just as video streaming has ad-supported and ad-free tiers, AI will develop tiers, although perhaps not split into ad-supported and ad-free.

And, just like video streaming services, AI services will increase their fees (for all tiers, although perhaps not all at once) over time. And increase them faster than inflation, just like video streaming services.

How high will prices go? If an AI engine can replace a human at certain jobs, then the cost for that AI engine should rise to match that cost. If employers are willing to pay a certain amount for a human to provide coding (for example) then those same employers should be willing to pay just as much for an AI bot to provide coding.

For the AI enthusiasts, these price increases are in a blind spot. I suspect that the enthusiasm for AI in the workplace is driven not by what AI can produce, but by the cost. I also suspect that many employers think that AI costs will remain the same, or roughly the same, over time. They are not expecting the higher-than-inflation cost increases that I am predicting here.

There are, of course, multiple AI services. One can argue that competition will act as a brake on price increases. That doesn't hold for video streaming services, because streaming services are not interchangeable. Each service has its own proprietary content, and that "locks in" customers.

The ability to lock in customers is not immediately obvious for AI services. Today's services are different but also very similar. AI companies may be working on ways to lock in customers, probably by building custom models (or custom weights) for each customer. Or possibly by offering custom APIs for specific capabilities. I'm not sure of the form, but I'm confident that some will be attempted.

In the long term, I think that those who adopt AI will find that it is not as cheap as they thought, and that it will be expensive to move to another (also not so cheap) AI service, and especially difficult to switch back to humans.