Ooh, I love this analogy of LLMs being the equivalent of market beta by Karthik Shashidhar:

In a sense, LLMs are like an index with a lag. Assuming that these models are constantly trained, the “intelligence” of LLMs basically represents the average internet of the internet from a (slightly) prior point in time. And this lag is super useful in not making it a zero sum game.

As long as people use LLMs cleverly, the average quality of “intelligence” or “writing quality” can go up over time. Basically, if you consider yourself to be a bad writer, or doing something you don’t know, just use an LLM. If you know what you are doing, add your own intelligence.

In other words, LLMs are Beta. Or index investing. For any given task they will give you the average output. If you decide to vibe code an app or algorithm, what you get is the average.

I’ve been a long time reader of his writing and enjoy reading his musings. Subscribe to both his newsletters.

This piece reminds me of another piece by Venkatesh Rao in which he used the same analogy of LLMs as index funds:

Foundation models like GPT and Claude now serve as the index funds of language. Trained on enormous corpora of human text, they do not try to innovate. Instead, they track the center of linguistic gravity: fluent, plausible, average-case language. They provide efficient, scalable access to verbal coherence, just as index funds offer broad exposure to market returns. For most users, most of the time, this is enough. LLMs automate fluency the way passive investing automates exposure. They flatten out risk and elevate reliability.

But they also suppress surprise. Like index funds, LLMs are excellent at covering known territory but incapable of charting new ground. The result is a linguistic landscape dominated by synthetic norms: smooth, predictable, uncontroversial. Writing with an LLM is increasingly like buying the market—safe, standardized, and inherently unoriginal.

Now, as a person who works in a stock brokerage and has been a staunch advocate of index funds for over a decade, it’s only natural I’d love this analogy.

By the way, I keep track of Karthik’s writing on this simple site I vibe-coded to keep track of writing from writers I follow: smallweb.blog