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Outsourcing plus local AI will soon become more economical vs. frontier labs

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Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#191

Post by bob1029 »

> The current closed source frontier models are more capable than the latest from DeepSeek. But is the capability difference enough to justify a 30x price difference?

We talk about capability like it's some kind of linear scale. I am not paying 30x for 30x performance. I am paying 30x so that my use case goes from "haha nope" to a signed contract with the client. Works 0% of the time => works 3% of the time is an infinite improvement in capability. That is what the premium is paying for.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#192

Post by runtime_terror »

wongarsu wrote: post #129
runtime_terror wrote: post #111

Earlier quoted context omitted.

> I'm tempted to assume that inference costs are closer to subscription pricing than to API pricing So just going on vibes? While some people don't like his content, Ed Zitron shows a lot of evidence for your assumption being very wrong. These companies are bleeding cash at ungodly rates. It's likely their API pricing is still subsidized if you look at their overall financial picture. Related, there's a good reason t…

Selling inference for more than inference costs is not incompatible with bleeding cash at ungodly rates. They do in fact pay ungodly amounts of cash for other things, like training, marketing, etc. Heck, you can bleed cash while being profitable (in the accounting sense) Also, API prices going up a lot every new version is more an OpenAI thing, and even there it's a recent trend: GPT 5.0 was a big price drop compared…

But explain to me how these companies will recoup these costs outside of increasing inference pricing?

Their business model is selling inference but the training and other costs have to be accounted for somehow. Unless I'm missing something obvious, inference costs must go up drastically if these companies are going to survive beyond the subsidy stage.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#193

Post by Forgeties79 »

anthonypasq wrote: post #180
Forgeties79 wrote: post #154

Earlier quoted context omitted.

Anthropic IPO's in less than 5 months and I guarantee you any company that officially is in the black will proudly shout it from the rooftops.

> Anthropic IPO's in less than 5 months pure speculation. about as valuable as my linked wsj reporting i suppose. given thats the case, maybe you shouldnt claim so confidently that they are money incinerators.

“pure speculation” is a bit unfair.

Back to the point: No one is profitable yet, which I think we both agree is accurate. If you are going to lean on “they will be soon” then it’s fair to say they’re going to IPO soon.

Ease off the gas. We’re just discussing a tech company.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#194

Post by runtime_terror »

Npovview wrote: post #119
runtime_terror wrote: post #108

Earlier quoted context omitted.

> The subscription token price is 10x-40x cheaper than API pricing This is a temporary phenomenon. Expect either drastic price increases or draconian throttling or both in the coming months. These companies are operating at huge loses and have hundreds of billions in liabilities and commitments. They need to turn on the money faucet sooner than later.

Even with increased prices, AI enables velocity both in development and bugs fixing. Would companies want that? If prices are biting the company, I think companies will route all development and bugs fixing requests through few superperfomer developers with complete knowledge of the different components within the company (they will be the Queen Bees holding the company on their head). The rest of the company will be…

So kinda like how stuff is now at a lot of big companies? I've worked at many different companies and almost always there are a few out-performers and a lot of people just found enough not to get fired (no hate, power to them lol).

We're already seeing slash their AI budgets. I expect that will increase till we hit more of an equilibrium.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#195

Post by _puk »

jyounker wrote: post #182

The problem with outsourcing, as opposed to remote developers, is that it takes a really good manager and tech lead to make it work. My experience is that you have to write extremely detailed design documents and work specifications in order to get effective results. These generally have to be as detailed as most effective prompts. Once you've written specs that detailed, why do you need outsourced developers and fro…

Exactly where my head is at.

Not only do you need to spec everything to the right level of detail (at which point an LLM can likely make a good go of it), but a lot of the outsourced teams don't build in anywhere near the same way as those internally, and the difference in the level and speed of delivery is absolute.

Not to mention with everything changing so quickly, why would I be spending time and money training up someone else's staff to be keeping up with the cutting edge?

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#196

Post by [deleted] »

tomp wrote: post #188
jyounker wrote: post #182

The problem with outsourcing, as opposed to remote developers, is that it takes a really good manager and tech lead to make it work. My experience is that you have to write extremely detailed design documents and work specifications in order to get effective results. These generally have to be as detailed as most effective prompts. Once you've written specs that detailed, why do you need outsourced developers and fro…

The entire business model of "outsourced" developers / shops is to overbill people - "we have 4 engineers working on your project" (and also on 5 other projects). Even if the engineers themselves are cooperative, their managers / business owners will resist close cooperation and enforce work at arm's length (e.g. 1x weekly calls). Ask me how I know. I once spent £300k (fortunately not my money) on an outsourced team…

[deleted]

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#197

Post by runtime_terror »

alfiedotwtf wrote: post #118
runtime_terror wrote: post #108

Earlier quoted context omitted.

> The subscription token price is 10x-40x cheaper than API pricing This is a temporary phenomenon. Expect either drastic price increases or draconian throttling or both in the coming months. These companies are operating at huge loses and have hundreds of billions in liabilities and commitments. They need to turn on the money faucet sooner than later.

Incentives matter… If prices keep going up, watch for companies to exit frontier models and go to local llama.cpp instances for 6-month-ago SOTA, with the flex of being housed within the office - no more privacy leakage, no more price gouging. To be honest, I’m not sure why a Y-Combinator backed company hasn’t come out yet flooding the market with highly capable OPAI (pronounced “Oh-pah” as in what Greeks shout as th…

I do think many will move to lower cost models or self hosted over the next few years as prices balloon. And the privacy/control story is compelling.

If we're able to see some big increases in hardware capabilities that can be self-hosted, that will be an accelerant.

That said, most companies just want to pay a provider to delegate responsibility in exchange for cost and control.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#198

Post by runtime_terror »

anthonypasq wrote: post #112
runtime_terror wrote: post #108

Earlier quoted context omitted.

> The subscription token price is 10x-40x cheaper than API pricing This is a temporary phenomenon. Expect either drastic price increases or draconian throttling or both in the coming months. These companies are operating at huge loses and have hundreds of billions in liabilities and commitments. They need to turn on the money faucet sooner than later.

Theres recent reporting that Anthropic will be profitable this quarter... edit: I see in other comments on this thread you think Ed Zitron is a reliable pundit so that explains everything.

How will it be profitable, really?

You can dismiss Ed (and me vicariously) but what's your compelling evidence to counter their extremely uphill battle towards profitability?

Either way it will be very interesting to see their S1 when they try and IPO.

If it's anything like SpaceX's then I suspect my post will age better than yours.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#199

Post by Tade0 »

tomp wrote: post #188
jyounker wrote: post #182

The problem with outsourcing, as opposed to remote developers, is that it takes a really good manager and tech lead to make it work. My experience is that you have to write extremely detailed design documents and work specifications in order to get effective results. These generally have to be as detailed as most effective prompts. Once you've written specs that detailed, why do you need outsourced developers and fro…

The entire business model of "outsourced" developers / shops is to overbill people - "we have 4 engineers working on your project" (and also on 5 other projects). Even if the engineers themselves are cooperative, their managers / business owners will resist close cooperation and enforce work at arm's length (e.g. 1x weekly calls). Ask me how I know. I once spent £300k (fortunately not my money) on an outsourced team…

> "we have 4 engineers working on your project" (and also on 5 other projects).

Largest such scam[0] I've heard of was "we have 11 senior engineers working on this project" (actually three, two of whom were actually junior-to-mid-level).

[0] Let's call a spade a spade.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#200

Post by bobim »

regexorcist wrote: post #140

I've been saying this for a couple months now since I got decent hardware and started using my local Qwen 3.6 exclusively. I have no doubt the future for individuals and medium-sized companies is local private AI.

Could you share some of your hardware details for Qwen 3.6? And are you using the dense or MoE variant?
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