Unlike competitors feeling pressure to build proprietary AI foundation models, Apple can simply partner with providers like Google. This reveals Apple's true moat isn't the model itself but its massive hardware distribution network, giving it leverage to integrate best-in-class AI without the high cost of in-house development.

The stickiest software is critical but inexpensive relative to a customer's overall budget, like payroll services. This 'Goldilocks zone' makes the software too small a cost for C-suite review, yet too embedded to easily replace, creating a powerful moat.

Traditional SaaS switching costs were based on painful data migrations, which LLMs may now automate. The new moat for AI companies is creating deep, customized integrations into a customer's unique operational workflows. This is achieved through long, hands-on pilot periods that make the AI solution indispensable and hard to replace.

As AI commoditizes user interfaces, enduring value will reside in the backend systems that are the authoritative source of data (e.g., payroll, financial records). These 'systems of record' are sticky due to regulation, business process integration, and high switching costs.

When asked if AI commoditizes software, Bravo argues that durable moats aren't just code, which can be replicated. They are the deep understanding of customer processes and the ability to service them. This involves re-engineering organizations, not just deploying a product.

The long-held belief that a complex codebase provides a durable competitive advantage is becoming obsolete due to AI. As software becomes easier to replicate, defensibility shifts away from the technology itself and back toward classic business moats like network effects, brand reputation, and deep industry integration.

Creating a basic AI coding tool is easy. The defensible moat comes from building a vertically integrated platform with its own backend infrastructure like databases, user management, and integrations. This is extremely difficult for competitors to replicate, especially if they rely on third-party services like Superbase.

While competitors focus on software, Square believes designing hardware "from the chip up" is a key advantage. This control allows for a superior, integrated experience for both customers and staff at the physical counter, making the technology feel seamless and delightful.

Excel's market dominance stems from Microsoft's strategy of bundling it into the non-negotiable Microsoft Office suite. This made it impossible for enterprise customers to purchase software à la carte, effectively locking out competitors and making individual user preference irrelevant.