The 3-Layer Framework That Predicts Which Jobs AI Will (and Won't) Replace

AI's impact on business isn't uniform; it bifurcates the economy, intensifying competition in digital spaces while lowering overhead in physical markets. In digital, contestable markets, AI crushes middle-tier businesses by commoditizing the baseline, whereas, in physical, relationship-heavy markets, it lowers overhead without increasing competitive pressure, thus raising prices and margins. The standard narrative of lean AI startups devouring giants is misleading because many giants possess moats AI can't erode, and startups' capabilities are becoming cheaper. Firms selling first-layer work like drafting and analysis are vulnerable, unlike those focused on judgment, accountability, or physical execution. For mid-tier firms in contestable digital markets, the paths are radical leanness or moving up the stack to emphasize judgment; for physical businesses, AI investments should focus on back-office efficiency.