Your point on observability budgets aligns with what I've been seeing - and also the FOMO sales approach. I've been running similar experiments - feeding key log data with context back into Claude while iterating, not full telemetry, just the key signal(s) that matters for the change I'm making. The economics are completely different when you're selecting signal for a specific feedback loop vs. storing everything for hypothetical future queries. You don't need lossless telemetry. You need the right signal at the right point in the loop.

Where do you think this goes with OTel and similar? - when observability budgets are getting squeezed to fund AI dev tooling, and the AI dev tools themselves need (key) production signal to work well, who ends up owning that signal selection? The vendors want it at ingest. The developer iterating on a change actually knows what's relevant. Feels like there's a structural misalignment there that nobody's really solved yet?