The rapid release of ever-smarter AI models is outpacing the average developer's and business person's ability to leverage the incremental gains. This suggests future competition will shift from raw intelligence to speed, cost, and usability, as users have hit a saturation point for absorbing new capabilities.

Product-market fit is no longer a stable milestone but a moving target that must be re-validated quarterly. Rapid advances in underlying AI models and swift changes in user expectations mean companies are on a constant treadmill to reinvent their value proposition or risk becoming obsolete.

The flattening of consumer AI usage is attributed to a "capabilities overhang." While models have become vastly more powerful, the majority of users still engage with them in basic, information-retrieval ways (e.g., checking sports scores), failing to leverage their more advanced, agentic capabilities.

Users frequently write off an AI's ability to perform a task after a single failure. However, with models improving dramatically every few months, what was impossible yesterday may be trivial today. This "capability blindness" prevents users from unlocking new value.

Even as AI models become vastly more powerful, widespread adoption is throttled by the slow evolution of users' mental models of what AI can do. People rely on a system based on past experiences, and it takes a 'magical' result to expand their belief in its capabilities for new, complex tasks.

AI models improve in significant step-changes monthly, making a user's prior experience an unreliable guide. Users must adopt a "beginner mindset" and continually re-test tasks that the AI previously failed at to fully leverage its evolving capabilities.

A paradox of rapid AI progress is the widening "expectation gap." As users become accustomed to AI's power, their expectations for its capabilities grow even faster than the technology itself. This leads to a persistent feeling of frustration, even though the tools are objectively better than they were a year ago.

The market is evolving so rapidly, largely due to AI's influence on buyer behavior and competitive landscapes, that companies can't rely on a static product-market fit. It's now a continuous process of re-evaluation and adaptation every few months.

Early AI products face a unique challenge: millions of users form a lasting impression based on an early, less-capable version. As the AI rapidly evolves, the company must overcome this outdated perception by proactively demonstrating new use cases and capabilities to re-engage its massive initial user base.