What is value, even? A dollar bill is worth a dollar, but even that’s made up too. A crappy crayon drawing of stick people and a house is utterly priceless if your kid made it, worthless if it's some other kid. AI is forcing us to confront how squishy valuation is in the first place.

Prices are not fundamental truths. They’re numbers that happen to work. Ideally price > cost, but that’s not even reliably true once you factor in fixed costs, subsidies, taxes, rebates, etc. Boeing famously came out and said they couldn't figure out how much it actually cost to make a 747, back when they were still flying.

Here's a concrete example: You have a factory with $50k/month in fixed costs. Running it costs $5 per widget in materials and labor. You make 5,000 widgets.

Originally you sell them for $20. Revenue $100k, costs $75k, pocket a cool $25k every month. Awesome.

Then, a competitor shows up and drives the price down to $10. Now revenue is $50k. On paper you “lose money” vs your original model.

But if you shut the factory down, you still eat the full $50k fixed cost and make $0. If you keep running, each widget covers its $5 marginal cost and contributes $5 toward fixed costs. You break even instead of losing $50k.

That’s the key mistake in "AI output is worth zero." Zero marginal value does not imply zero economic value. The question is whether it covers marginal cost and contributes to something else you care about: fixed costs, distribution, lock-in, differentiation, complements, optionality.

We've faced this many times before so AI isn't special in this regard. It just makes the gap between marginal cost and perceived value impossible to ignore.