AI Moat Lies in Context and Memory

The emergence of ChatGPT as a new distribution platform follows historical patterns of platform cycles that create massive growth opportunities for early adopters.

The Four-Step Platform Cycle

Every new distribution platform follows a predictable four-step cycle:

Step 0: Market Conditions
- Consensus emerges about a new huge category (social, mobile, AI chat)
- No clear winner yet, with 5-7 major players battling
- Fierce competition with massive capital investment
Step 1: Identifying the Moat
- A player identifies what will create defensibility and escape velocity
- They press this advantage as quickly as possible
- They need an ecosystem to gather more of this moat
Step 2: Opening the Platform
- Company establishes a third-party platform with incentives
- Value exchange: developers add use cases and engagement in exchange for distribution
- Creates a gold rush of developers and applications
Step 3: Closing for Control and Monetization
- Platform begins locking down to monetize and prevent disruption
- They either shut down third-party access, develop first-party applications for high-value use cases, or suppress organic distribution to push paid mechanisms

Historical Examples

Facebook Platform: Opened to developers with canvas apps and viral distribution, then gradually restricted access, took revenue cuts, and built first-party versions of successful features
Google Search: Incentivized web developers to optimize for their algorithms, then gradually increased ad real estate and absorbed high-value use cases
iOS App Store: Created distribution for mobile apps, then imposed restrictions and fees
LinkedIn: Boosted company pages then personal content, then restricted organic reach to push toward ads

Why ChatGPT Will Likely Be the Next Major Platform

The moat is context and memory: Models alone produce similar results, but context + model produces better outputs
ChatGPT leads in retention: Has significantly higher retention curves than competitors
Signals of platform launch: Hiring for "agent platform" roles and forming preferred partnerships
Massive user advantage: 10x more monthly active users than competitors like Claude

How to Play the Game

You can't opt out: If you don't participate, competitors will gain advantage and customer expectations will change
Place focused bets: Late-stage companies can spread bets across platforms, but startups must choose one and go all-in
Evaluate platforms based on:
- Retention and depth of engagement (more important than MAUs)
- User quality and monetization potential
- The value exchange offered to developers
- Scale and momentum
Plan your exit strategy: Immediately start thinking about how to exit when the platform eventually closes
- Own important parts of the user experience
- Accumulate specialized data the platforms don't have
- Create micro network effects

The Opportunity Timeline

The cycles are getting shorter and shorter
ChatGPT is likely to launch a third-party platform within the next six months
They've already launched agent mode and are forming preferred partnerships
The window to capitalize will be brief but potentially transformative