Agentic AI may render tokens obsolete as a unit of measure

Tokens do not accurately reflect compute. They are merely the tip of the iceberg.

By Alan Jacobson, AI Economics Strategist

This week, stories in The New York Times and The Wall Street Journal highlighted something that’s been quietly building inside companies: employees are deploying AI agents that generate massive volumes of tokens—and massive, unexpected costs.

The assumption behind most AI systems is simple: tokens approximate usage, and usage approximates cost.

That assumption is now breaking, because…

Tokens measure text.
Compute measures work.

If tokens don’t track compute, pricing can’t track cost—and profit margins compress.

“This is like measuring electricity in horsepower.
It made sense when machines replaced horses.

It stopped working when you needed to meter and bill actual energy usage.
That’s when kilowatt-hours took over.”

Tokens are the horsepower of AI.
Compute is the kilowatt-hour.

In early AI systems—simple prompt and response—that approximation mostly held. One request triggered one model pass. Tokens were an inaccurate, albeit workable proxy for compute.

Agentic AI changes that.

A single request now triggers multiple steps:

planning
retrieval
tool use
validation
retries
sub-agents running in parallel

Each step requires compute. Each step reprocesses context. Each step adds work.

But not all of that work shows up proportionally in token counts.

The result:

Compute grows with execution depth.
Tokens do not.

This is the disconnect now surfacing in real-world deployments.

Tokens have never been an accurate proxy for compute. They were merely easy to count.

But in a world of compound execution, the gap becomes impossible to ignore.

A system can:

reprocess the same context multiple times
execute chains of model calls
spawn parallel tasks
run validation and retry loops

All of which consume compute—without a clean, proportional increase in tokens.

So while organizations can:

count tokens
monitor usage
even reduce spend

They still cannot measure or control the underlying compute driving cost

And if cost cannot be measured correctly, it cannot be priced or controlled.

That’s why this is surfacing now.

Not because AI suddenly became expensive—but because agentic AI multiplies compute in ways tokens were never designed to capture.

The industry is still measuring output.

The cost is coming from execution.

Tokens just show the tip of the iceberg.

– Published on Sunday, March 22, 2026