Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

AI's economics don't make sense

wheresyoured.at

Post reply on HN
Print view View original

121–130 of 201 posts

Re: AI's economics don't make sense

#121

Post by tobbe2064 »

joshjob42 wrote: post #10

There's a few major problems with the article. The most obvious is that frontier labs are not charging remotely close to the cost of tokens; afaik most estimate north of 80% profit margins. As a reference, providers are profitably providing Kimi K2.6 for $4/1Mtok out. Is that as good as Opus? No, but it's probably at least Sonnet level, so that's ~4x cheaper than Sonnet while still being profitable to serve on the ma…

Your math is pretty bad 50$/h is a yearly cost of going by swedish standards, 50$/h × 40h/week × 48 weeks / year = 96k$/year At that rate is a really shitty bargin for 30% increase in productivity. Even if you drop it to 20$/h and sort of break even, you are loosing competens building and teory building, decreasing the likeleyhood of making architectual progress and risk getting bogged down in a swamp.

Re: AI's economics don't make sense

#122

Post by dualvariable »

mrandish wrote: post #115
JohnMakin wrote: post #53

I've sort of lost some respect for ed that I had early on in the hype cycle - he's still right about some things, but I can see him slowly and subtly retreating from his strong position, held even a few months ago, that these things will never ever be useful for anything and it's all a scam because they don't actually do anything at all except burn money. He would say it like 8 times a monologue. I remember one podca…

I've only read a few of his pieces here and there and had just assumed he was an AI skeptic, so I never thought his position was LLMs would never be good for anything at any price. That's a pretty extreme thing for any serious person to have ever claimed. Frankly, it seems more like a straw man exaggeration of AI skepticism. I consider myself to generally be an AI skeptic, but to me that means skepticism about: 1) Ne…

Yeah, I similarly doubt that LLMs are going to directly lead to AGI just via scaling and might almost be a dead end in that direction.

But they're still quite useful tools and accelerators or force-multipliers.

And you're still going to need humans in the loop.

And I'm very worried that the capex buildout will implode once we hit diminishing returns and good-enough models can be run on substantially smaller footprints.

It all isn't going away, though, and it will still continue to improve.

Re: AI's economics don't make sense

#125

Post by Lionga »

mitjam wrote: post #99

I would be curious to see a calculation backwards from TAM. Napkin: 50M developers worldwide (SlashData, 20M in China and India). If every developer had a $200/month subscription, that‘s $10B / Month. I think, many developers are expected to pay much more than that.

Most developers in China or India have a monthly salary of 1 K USD. If you expect them to pay way more then 200USD thats like asking US Devs to pay 5K a month. Yeha not gonna happen.

And the funny thing is the estimate pure CAPEX Spend of AI companies needs them to earn about $20B to $40B a month to cover cost of capital alone of their trillion dollars of investments.

Re: AI's economics don't make sense

#126

Post by warkdarrior »

mitjam wrote: post #99

I would be curious to see a calculation backwards from TAM. Napkin: 50M developers worldwide (SlashData, 20M in China and India). If every developer had a $200/month subscription, that‘s $10B / Month. I think, many developers are expected to pay much more than that.

Microsoft made $17B/month in 2024, Google made $25B/month, Amazon $48B/month. And the computing market is growing.

Re: AI's economics don't make sense

#127

Post by warkdarrior »

Lionga wrote: post #125
mitjam wrote: post #99

I would be curious to see a calculation backwards from TAM. Napkin: 50M developers worldwide (SlashData, 20M in China and India). If every developer had a $200/month subscription, that‘s $10B / Month. I think, many developers are expected to pay much more than that.

Most developers in China or India have a monthly salary of 1 K USD. If you expect them to pay way more then 200USD thats like asking US Devs to pay 5K a month. Yeha not gonna happen. And the funny thing is the estimate pure CAPEX Spend of AI companies needs them to earn about $20B to $40B a month to cover cost of capital alone of their trillion dollars of investments.

> Most developers in China or India have a monthly salary of 1 K USD. If you expect them to pay way more then 200USD thats like asking US Devs to pay 5K a month. Yeha not gonna happen.

That's exactly what is going to happen. India/China prices will be $100-200/month, US prices will be $5000/month. Keep in mind that most of these costs will be covered by the employer. It'll put downward pressure on dev pay, of course.

Re: AI's economics don't make sense

#128

Post by cottoneyejoe »

JohnMakin wrote: post #53

I've sort of lost some respect for ed that I had early on in the hype cycle - he's still right about some things, but I can see him slowly and subtly retreating from his strong position, held even a few months ago, that these things will never ever be useful for anything and it's all a scam because they don't actually do anything at all except burn money. He would say it like 8 times a monologue. I remember one podca…

His reasoning about costs are also completely flawed. API fees aren't the providers' costs. It's a largely arbitrary number that they think they can get away with based on what everyone else seems to be doing that they also expect to cover on-demand usage as well as their research, marketing, and stock buybacks. They likely have a 60-90% gross margin.

Re: AI's economics don't make sense

#129

Post by warkdarrior »

pmdr wrote: post #108
davikr wrote: post #66

Earlier quoted context omitted.

For all we know, there could be 10 people paying for a ChatGPT subscription and not using it enough to subsidize 1 power user _and_ still have money left for profit.

Oh they'd be sure to let us know if that were the case.

Why would the AI companies advertise that most of their users do not use their subscription in full??

Re: AI's economics don't make sense

#130

Post by blks »

fancyfredbot wrote: post #117

He does have a point about fees. It's not really surprising that the fee structure designed for chatbots would not make sense when applied to long running tasks and agents. But an increase in prices can solve this problem. Doubtless some people will reduce usage as a result. But Ed seems to find the idea that a 10 man developer team might spend 80K a year on tokens ridiculous. I don't understand this. Has he seen how…

I think that team is better off with a junior developer. This alleged “20% productivity boost” even if it exists, is individual. On the team level, it will be largely offset by people having to review 20% more code.
Post reply on HN