The Cannibal Economy: How AI Giants Are Building Their Own Obsolescence

This working paper argues that the dominant AI platforms are structurally compelled to cannibalize every capability layer their ecosystem produces. Through three mechanisms — the displacement-to-builder pipeline, the commoditization cascade from wrappers to agents to orchestration, and the use of builder activity as an involuntary market research signal — the major AI laboratories are conducting a knowledge transfer program that will ultimately produce a generation of builders who no longer need them. The paper covers the DeepSeek cost proof, the enshittification arc of platform economics, the Innovator's Dilemma applied to AI platforms, the open source accelerant, and the Knowledge-Is-Diamonds thesis: that successive displacement cycles force builders deeper into the stack until full ownership becomes the only rational position. Version 4 (25 March 2026) includes Appendix A, a documented real-time case study: Infinovation's memoryweb.zip archive (downloaded 12 January 2026) contains 04_consolidation.md, which explicitly names a MAJOR-CONSOLIDATION cycle as a nightly "sleep cycle" with "Dream connection generation" as a process step. Anthropic shipped a feature called AutoDream on 25 March 2026, described as mimicking human memory consolidation during sleep. This appendix was added the same day AutoDream shipped. The file timestamps are preserved on device and included as figures in this document.