AIWA "The One Thing" #21: Buy vs Build is the Wrong Question. Kirkland & Ellis is Spending $500M on a Better One.

Buy vs Build is the wrong question in the agentic AI era. On May 28th, Kirkland & Ellis committed to putting $500M behind a better one.

Jon A. Ballis, Kirkland’s chairman, told the Financial Times that off-the-shelf AI tools are “raising the floor for everyone.” It’s a big compliment to the vendors but it is also why using only those tools would be a strategic mistake for a firm that competes at the ceiling.

The floor rises and becomes table stakes.

Differentiation does not come from modernizing your stack or having your team automate tasks. Differentiation comes from how high you can raise your ceiling by augmenting existing workflows and ultimately, from the way you rewire your business.

*AIWA "The One Thing" #16: The Unit of Production Just Changed. Automate. Augment. Rewire. (From my RDSW Talk).

Kirkland has had a front-row seat for the AI buildout.

They advised Blackstone on its AI services JV with Anthropic. They advised CoreWeave on a $7.5B Blackstone-led financing. They advised the AI services JV itself on the Fractional AI acquisition.

*Kirkland Advises Blackstone on Launch of Enterprise AI Services Firm with Anthropic and Consortium 05.04.26

Hands in the AI dirt. Once you see it, you can’t unsee it.

The Mental Model problem is upstream of the Technology problem. Buy vs Build is downstream of both.

Kirkland solved the Mental Model problem before they committed to writing the checks. Most enterprises try to do it in the other order. Nowhere near as effective.

Ballis told Bloomberg the firm should invest “around 1% of revenues” in new initiatives. Kirkland’s scale, as he shared previously with Bloomberg's Roy Strom, lets them “take big swings.”

*Kirkland & Ellis Investing $500 Million to Build AI Platform 05.28.26

*How Kirkland's Swing-Big Mentality Powered Run to the Top 02.24.22

On $10B, 1% is $100M per year. $100M this year. Hundreds of millions over the next 3-4 years. That is $500M.

The headline number sounds like a moonshot. The actual investment is disciplined CapEx, 1% of revenue, every year.

Whether you run a $10B firm, a $500M firm or a $100M firm, 1% is the right benchmark.

The right question is what you spend it on.

If you were re-founding your company today, knowing what you know about AI, what would the operating model be?

That is the better question. The allocation of the 1% is the answer.

Ravi Gupta co-Founder, co-CEO of Ithaca Holdings called this “AI or Die.”

He’s not wrong.

*Ravi Gupta "AI or Die" via AIWA Newsletter #37

Solve the Mental Model problem. Invest the 1%. You’ve got this.

Humans + Machines. Never Humans vs. Machines.