Packy McCormick cuts through the noise of AI hype with a provocative thesis: the real danger isn't that software will become abundant, but that the companies failing to own the "High Ground" of their industries will be crushed by those who do. While the market obsesses over "vibe coders" and software moats, McCormick argues we are witnessing a historic re-concentration of power where winners take not just the market, but the entire economic value of their sectors.
The Illusion of Software Moats
McCormick begins by dismantling the prevailing anxiety about AI rendering software companies obsolete. He suggests that focusing on how to protect code is a strategic error. "Thinking about software moats, how a software company might protect itself from abundant code, is the wrong frame altogether," he writes. Instead, he urges investors and founders to look at which entities stand to benefit most from newly abundant inputs. This reframing is crucial because it shifts the conversation from defense to offense. The companies that will dominate are not those trying to build walls around their code, but those using cheap, abundant intelligence to capture the "High Ground."
He illustrates this with a striking comparison between payments giants Stripe and Adyen. Despite handling similar volumes, Stripe commands a valuation nearly four times higher than Adyen. McCormick posits that this isn't irrational VC enthusiasm, but a rational bet on "winner takes more." He notes, "The history of business is basically the history of increasing concentration of value, accelerated in spurts by technological change." This observation aligns with historical precedents like Standard Oil, where technological shifts in refining and logistics didn't just improve the industry; they allowed a single entity to capture the vast majority of its value. The data supports this: McCormick cites research showing that the top 1% of U.S. corporations now control 97% of total corporate assets, a massive jump from the 1930s.
The abundant inputs keep getting cheaper. The scarce asset keeps getting more valuable.
The New Center of Gravity
The core of McCormick's argument relies on military strategy and economic theory to explain why point-solution software is now vulnerable. He introduces the concept of Schwerpunkt, or the "center of gravity," from Carl von Clausewitz. "The first task, then, in planning for a war is to identify the enemy's center of gravity, and if possible trace it back to a single one," McCormick quotes. In the business context, this means identifying the specific constraint holding an industry back and attacking it to secure a dominant position.
McCormick argues that the "SaaSpocalypse"—the recent crash in software valuations—is not the death of software, but the death of the era where good business models were enough. "The past few decades of software exceptionalism have been an exception based on a business model so sweet and capabilities so universally useful that the rules of strategy, while not wholly unimportant, were less consequential than normal," he writes. This is a sharp critique of the venture capital playbook that relied on generic metrics like ARR and growth rates without understanding the specific competitive landscape. He warns that companies without a defensible, scarce asset face existential risk. "Companies that don't own the High Ground face existential risk from technological progress," he asserts.
Critics might note that this view underestimates the agility of smaller, niche players who can pivot faster than massive incumbents. However, McCormick counters this by citing David Teece's 1986 work on complementary assets, arguing that innovation alone rarely captures value; it is the ownership of distribution, manufacturing, and customer relationships that does. Just as the containerization revolution didn't just help shipping companies but fundamentally reshaped global trade by concentrating power in those who owned the ports and logistics networks, AI will likely concentrate power in those who own the industry-specific data and workflows.
Building the Magnificent Business
The essay concludes with a call to action for founders and investors to abandon old heuristics. McCormick suggests that the opportunity is no longer to marginally improve industries with software, but to "win those industries and capture their economics." He draws a parallel to the landowners of the agricultural revolution who benefited from better tools, arguing that modern "landowners"—companies with the High Ground—will corner the best talent and capital. "It's not the vibe coders you should be worried about," he writes. "Newly abundant resources can have opposite effects on your business depending on your position."
He emphasizes that hardware is not an automatic moat either, noting that "Hardware is a moat is the same kind of lazy thinking that 'SaaS is the greatest business of all time' is." The true moat is strategic positioning. As he puts it, "If your aim is to build or invest in these companies, old heuristics will do you no good. You need a brain of your own, some sweat on your brow, and some good ol' fashioned strategy frameworks to help you reason about the opportunity at hand."
If winner takes more, it's about what it takes to build, or invest in, the companies that will own the High Ground.
Bottom Line
McCormick's most compelling insight is that AI will accelerate, not disrupt, the trend toward extreme market concentration, rewarding those who own scarce, defensible industry assets while punishing generic point solutions. The argument's greatest vulnerability is its assumption that incumbents will always be able to leverage new technology; history shows that established giants often fail to adapt to paradigm shifts, potentially leaving room for agile newcomers to seize the High Ground. Investors and founders should watch for which companies are actively acquiring the complementary assets needed to turn AI abundance into permanent dominance.