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NewsStructural2 min readDisconfirmAI Editorial

Economist Noah Smith's Bull Case for Anthropic: The Change Is Not in Employment, But in Corporate Capital Structure

Noah Smith argues that Anthropic's investment value lies not in AI replacing human labor, but in the persistent capability gap between frontier models and distilled models. This gap will force enterprises across industries to tie their capital structures to these frontier providers, creating an oligopolistic landscape where a few AI conglomerates compete in every sector through their subsidiaries.

2026-11-09 15:59 GMT+8

Noah Smith has put forward a bullish thesis for Anthropic’s IPO that stands in stark contrast to the mainstream AI investment narrative. He first clarifies the boundaries of his argument: he is not envisioning a world where Anthropic dominates all businesses or captures 100% of every industry, nor one where AI replaces human jobs. Instead, he focuses on a more specific structural shift—how the capital structure of an efficiently producing economy will be reshaped.

His core mechanism operates as follows: there is a persistent capability gap of several months or more between frontier AI companies (such as Anthropic, OpenAI, and Google) and distilled models. For any enterprise to win in its respective industry, it must secure internal proprietary access to these frontier models; simply purchasing external services at market price is insufficient. Smith contends that truly gaining this advantage requires firms to tie their own capital structures to the frontier AI company, effectively becoming a subsidiary in some sense.

He uses an analogy to distinguish between two possible economic landscapes for AI. If AI were like oil—where everyone must buy oil or downstream products—it would be an arm’s-length transactional relationship. However, Smith envisions a different scenario: every company must become a subsidiary of Anthropic, OpenAI, or Google to survive. These AI giants would act as a few large conglomerates competing simultaneously across every industry through their networks of subsidiaries. In this oligopolistic ecosystem, Anthropic is merely the largest fish.

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Smith points out that recent research by economists at Google DeepMind provides formal modeling support for this dynamic. A paper by Imas, Koh, and Legg (2026) demonstrates that as AI coordination capabilities improve, the Coasean constraints on firm size traditionally found in economics may be broken. Consequently, market structure could undergo a phase transition toward large, highly concentrated, AI-heavy firms. Smith believes his vision is slightly more complex than this model—as it retains elements such as human-AI complementarity and humans possessing private data—but the fundamental direction of the dynamics aligns.

However, Smith’s position carries inherent conflicts of interest. He discloses at the end of his post that while he currently holds no position in Anthropic, he will likely purchase stock after its IPO unless major changes occur; meanwhile, he holds stock in TypeSafe, a competitor of Anthropic. In this discussion, Dan Wang and Brad DeLong express greater skepticism regarding Anthropic’s prospects, whereas Smith himself is the proponent of the bull case.

Sources

  • noahpinion.blog↗
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