This is great analysis but my first reaction was - is this trolling?
The fact that we have to think about whether a $1TN company has achieved product-market fit both articulates 1/just how high the valuations are 2/How hard it is to pin down EXACTLY what PMF is.
As a pre-revenue startup, I am laser focused on PMF and frankly if this is the bar, no one will achieve it. But OTOH its heartwarming that people are willing to value you at $1TN before you reach that. Guess everything is in the eye of the beholder?
I think Anthropic and OpenAI have found product-market fit
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Re: I think Anthropic and OpenAI have found product-market fit
#432Earlier quoted context omitted.
Now try to take back llms from developers and see what happens.
If, by some miracle, all LLMs ceased working right this second, any developer who would no longer be productive should not have been a developer in the first place.
True, but they will not want to work for you anymore, they'll want to work for company that provides it.
Re: I think Anthropic and OpenAI have found product-market fit
#433They've got, ballpark, $5t to $10t to make back in the next 5 years, or the hardware buildouts will start getting written down. This means we're going to need $1t+ per year in spending, per year, on tokens. 200m knowledge workers in the world, 30m developers. We're talking about a world where you need 5% of every knowledge workers salary to go into tokens. 20% if you're a developer. That's a _huge_ shift. Most people…
I work for a tiny little company ($150MM annual rev with 9% net) and we are already looking at dropping $100k on hardware to run local models because, for us, they're "good enough." Our estimated spend for AIaaS would exceed that cost in less than a year. In a few years, there will be hardware capable of running frontier models good enough for most things at accessible prices for even tiny companies.
On prem AI makes sense for more than just the cost. More control, IP, model improvements you can keep, data privacy to name a few. People will realize that AI is not like compute the moment they get their own knowledge sold back at a premium.
Re: I think Anthropic and OpenAI have found product-market fit
#434Earlier quoted context omitted.
You're suggesting that 1 in 8 people worldwide, including every one from infants and the elderly, are knowledge workers. Are you sure that's what you mean? I'm not even sure that 1 in 8 people I know would qualify as a knowledge worker, let alone a knowledge worker that might profoundly benefit from on-the-horizon AI. And I'm in a highly skewed population.
I think the underestimation is how many people want a personal knowledge worker in their pocket, and are willing to pay ~$65/mo for it.
The competitors of $65/mo subscriptions are the free models and services that are good enough. It will only get worse as open models or free tiers catch up. For most people, they just use whatever that's free
Re: I think Anthropic and OpenAI have found product-market fit
#435Earlier quoted context omitted.
I work for a tiny little company ($150MM annual rev with 9% net) and we are already looking at dropping $100k on hardware to run local models because, for us, they're "good enough." Our estimated spend for AIaaS would exceed that cost in less than a year. In a few years, there will be hardware capable of running frontier models good enough for most things at accessible prices for even tiny companies.
Yeah, that's the part that just seems to be wildly under-discussed to me. If open source models are ~3-6 months behind SOTA, and ~opus4.6 capabilities are good-enough for product market fit, do the frontier labs have half a decade to catch up on their prior burn? AI cost ballooning faster than companies can afford is becoming a very common topic in my circles right now. The era of "I'll pay infinitely more for margin…
If only the AI era was born in ZIRP.
Re: I think Anthropic and OpenAI have found product-market fit
#436Earlier quoted context omitted.
I've written a great deal of code - code that would have taken me years of work to produce without LLMs. (It's mostly open source, you're welcome to dig around in https://github.com/simonw and https://github.com/datasette if you like.) My time as an experienced software engineer is worth a lot of money - a whole lot more than $12,000 for the past six months.
> code that would have taken me years of work to produce without LLMs As you might suspect, this is what I have an issue with. Without LLMs, isn't it possible or even likely that that code wouldn't have been written at all, and wouldn't have been missed? If LLMs are mostly used to produce throwaway prototypes then it's a stretch to say that's money well spent. If indeed it let you advance your main product much faste…
I've thought about this a lot. I am very confident that the way I use LLMs is both accelerating progress on my core projects (here's a substantial, reviewed PR I landed just yesterday https://github.com/simonw/datasette/pull/2741) and helping me create plenty of projects that otherwise would not have existed.
Re: I think Anthropic and OpenAI have found product-market fit
#437I see two really good ideas for monetizing the free tier for consumers.
Firstly, if the user is asking for things where AI can link to products or services to buy, there's a very good relevancy, much higher than in other types of ads.
Secondly, since the AI often takes time to compute answers to user's questions, they could be shown ads while waiting. People could perhaps be less annoyed by this than some other commercials since they know the break has to be there anyway.
(First idea is something I came up when asking Claude to compare some products, or ask for help in lawn care. Second idea was by a colleague.)
Re: I think Anthropic and OpenAI have found product-market fit
#438Earlier quoted context omitted.
CATIA licenses which are the most expensive I've seen are roughly $600/month per user. Where are you seeing "thousands of dollars per seat"?
CATIA with plugins can go up to 100k a year. That’s what we currently pay
100k per seat? That's crazy. How do you even hire or train employees with software that expensive?
Re: I think Anthropic and OpenAI have found product-market fit
#439Earlier quoted context omitted.
Outsourcing of knowledge workers didn't work out because at large enough scales, the geographic arbitrage disappeared. Companies mostly always got what they paid for. The determinant of success was only whether the task needed American-tier labor or could make do with sub-American quality labor.
I am not sure this feels right. I agree that the US currently has leading minds in terms of tech, but I am not sure it is too big of difference with the EU knowledge workers. EU is still a lot cheaper then US in terms of wages you would need to pay.
Sure is an interesting thought. None of this is sarcasm: why do US companies deal with the time zone differences and language barriers they won’t need to bother with so much by outsourcing to say, Ireland?
Re: I think Anthropic and OpenAI have found product-market fit
#440This is great analysis but my first reaction was - is this trolling? The fact that we have to think about whether a $1TN company has achieved product-market fit both articulates 1/just how high the valuations are 2/How hard it is to pin down EXACTLY what PMF is. As a pre-revenue startup, I am laser focused on PMF and frankly if this is the bar, no one will achieve it. But OTOH its heartwarming that people are willing…
The title was indeed meant to throw subtle shade at the idea that supposedly $1tb companies were only just now starting to figure out product-market fit.