They like them when they’re free and/or cheap. But will that be sustainable? The answer to that question is far less certain. Maybe Ads will save them, maybe royalties, maybe price hikes. But it’s far from certain at least.
They like them when they’re free and/or cheap. But will that be sustainable? The answer to that question is far less certain. Maybe Ads will save them, maybe royalties, maybe price hikes. But it’s far from certain at least.
I really don’t get this. People actually pay and use and enjoy llms. My company has paid for Gemini and ChatGPT subscriptions and people actually use them.
Why do you automatically assume that people won’t pay for it?
Because they probably would have to pay a lot more to make this profitable at the levels current valuations and investments indicate. And the barrier for private persons to pay is much larger than for companies. I don't think anyone has a really solid handle on the economics here yet, as the field is changing very quickly.
But there is a big difference here compared to most software companies. The product does cost significant money per additional customer and usage.
There is a real product here. And you can likely earn money with it. But the question is "how much money?", and whether these huge data center investments will actually pay off.
> Because they probably would have to pay a lot more to make this profitable at the levels current valuations and investments indicate.
I keep hearing this but this is very unlikely to be true. The cost of LLMs have gone down by more than 30 times in the past 1 year. How much more should it go down until you consider it economically feasible?
Why are they building so many data centers then? That is all cost that has to be earned back. And using them as agents creates much higher costs per interactions than just chatting. We also don't know if the current prices are in any way economical, or how they are related to actual development and interference costs.
Do you think people should have not invested in data centers because of moores law that also applies for cpus? Same mechanics applies there - turns out that when things get efficient, demand increases and more possibilities are unlocked.
When Moore's Law was still effective, did you ask why people produced chips?
Because all numbers point towards it being incredibly far away from being profitable? We also pay for Google Workspace and at 10 euro a month we get Gemini Pro. So while we might pay for it, it’s more of a free addon, we would’ve paid 10 without it too.
You can also do a simple analysis on the Anthropic Max plan and how it successively gets more and more limited, they don’t have the OpenAI VC flow to burn so I believe it’s a indicator of what’s to come, and I could of course be wrong.
It’s not profitable because of massive reinvestments to r and d.
If you want to question to on the fundamental economics of LLm themselves then how efficient should LLMs get till you decide that it’s cheap enough to be economically viable? 2 times more efficient? 10 times? It has already gotten more than 30 times over last 2 years.
And Claude is more expensive than ever, efficiency gains and all. Those investments doesn’t necessarily pay off, and historical performance is not indicative of future ditto.
I don’t think it’s a matter of efficiency at current pricing but increased pricing. It would be a lot more sane if the use cases became more advanced and less people used them, because building enormous data centers to house NVIDIA hardware so that people can chat their way to a recipe for chocolate cake is societal insanity.
> And Claude is more expensive than ever, efficiency gains and all
This is not true for any LLM and not just Claude.
> I don’t think it’s a matter of efficiency at current pricing but increased pricing.
I don't know what this means - efficiency determines price.
> It would be a lot more sane if the use cases became more advanced and less people used them, because building enormous data centers to house NVIDIA hardware so that people can chat their way to a recipe for chocolate cake is societal insanity.
Do you think same thing could have been said during the internet boom? "It would be more sane if the use cases become more advanced and less people used them, because building enormous data centers to house INTEL hardware so that people can use AOL is societal insanity".
Weird how Sonnet 3.7 cost the same (when released) as Sonnet 4.5. That is with all those efficiency gains you speak about. 4.5 is even more expensive on bigger prompts.
Efficiency doesn’t determine price, companies does. Efficiencies tend to give more returns, not lower prices.
Internet scaled very well, AI hasn’t so far. You can have millions of users on a single machine doing their business, you need a lot of square footage for millions of users working with LLM’s. It’s not even in the same ballpark.
Did we build many single company data centers the scale of manhattan before AI?
> Weird how Sonnet 3.7 cost the same (when released) as Sonnet 4.5
Then I think we agree that while the cost remained the same, the performance dramatically increased.
FWIW Sonnet 3.7 costs 2.5x as much as GPT-5 while also being slightly worse.
Well with a 30x increase in efficiency and far from 30x more performance that would be a price increase in this context, the efficiencies clearly doesn’t trickle down to customers.
As for OpenAI I don’t think anyone is working on the API side of things since GPT-5 has had months of extreme latency issues.