The Two Moats What Survives When Intelligence Becomes Cheap The Premise As foundation models become more intelligent, the cost of intelligence approaches zero, and downstream players — companies building software products on top of foundation models — face a dual squeeze: Foundation models absorb more of the value stack with each generation LLMs that are good at coding can cheaply replicate any pure-software innovation What survives this dual squeeze? The thesis is that only two moats do. Everything else commonly called a moat is, on inspection, either a temporary buffer or a misnomer. The Underlying Principle The two moats share a single underlying property: they are anchored in resources outside the model's symbolic-manipulation reach — things bits cannot conjure into existence because they require real-world time, atoms, or coordinated human action.…