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Something is changing in the unit economics of software

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Re: Something is changing in the unit economics of software

#51

Post by nostrademons »

samrus wrote: post #47
nostrademons wrote: post #26

Earlier quoted context omitted.

There wouldn't be a product. Consumers would just use the underlying foundational models directly to solve their problem. ChatGPT and Claude and Gemini are the products, not your business. Products are only viable when you do a lot of work to solve a problem, which is then shared by many potential customers. It makes sense to amortize the high costs of solving the problem across all the different customers to reap ec…

> Consumers would just use the underlying foundational models directly to solve their problem Whether this could happen is a critical question. What ive found currently is that its not possible because the non-determinism of the model means you cant trust it, and these tasks are such that people expect determinism. Even if they dont then they dont tolerate the kind of stupid mistakes these models make What could happ…

If you want determinism, you ask Claude Code to write you a computer program to the desired specs, and then run that program over and over again, instead of renting the software from a SaaS vendor. I've done that a bunch - I'll show Claude the inputs, I'll tell it what output format I want, tell it the tech stack, and then have it write the program. Then I'll ask for a systemd service or crontab entry to run it repeatedly.

For a lot of tasks, classical deterministic computer programming is better than an LLM. It's just that LLMs are very good at classical deterministic computer programming now.

Re: Something is changing in the unit economics of software

#52

Post by nostrademons »

esafak wrote: post #37
nostrademons wrote: post #26

Earlier quoted context omitted.

There wouldn't be a product. Consumers would just use the underlying foundational models directly to solve their problem. ChatGPT and Claude and Gemini are the products, not your business. Products are only viable when you do a lot of work to solve a problem, which is then shared by many potential customers. It makes sense to amortize the high costs of solving the problem across all the different customers to reap ec…

> Consumers would just use the underlying foundational models directly to solve their problem. ChatGPT and Claude and Gemini are the products, not your business. How am I going to use ChatGPT instead of, say, Figma or an office suite with my coworkers?? It's no use for it to spin up a clone for me if my coworkers can't collaborate. And if they can, what it will serve is a product. How can it be cheaper for every comp…

Actual example: my wife wanted a logo for the facepainting business she's starting with our 5yo, so she asked Gemini "I want a logo with these objects in it, drawn in these colors, with this business name." And it spits back a perfectly passable logo in 5 seconds. Done. No designer needed. No Figma needed. It cut out the entire value chain.

Is it as good as a professional could've done with Photoshop? No. But it's about 90-95% of the way there, which is good enough that neither her nor any customers would care.

A great deal of business is precisely this, tasks that need to be done but where you only care about "good enough" solutions. After all, a key principle of business is you don't outsource your competitive advantages. You pay people for the table stakes, the things that everybody needs but that they only need to be "good enough". LLMs can generate "good enough" facsimiles of a wide variety of fields.

Re: Something is changing in the unit economics of software

#53

Post by esafak »

nostrademons wrote: post #52
esafak wrote: post #37

Earlier quoted context omitted.

> Consumers would just use the underlying foundational models directly to solve their problem. ChatGPT and Claude and Gemini are the products, not your business. How am I going to use ChatGPT instead of, say, Figma or an office suite with my coworkers?? It's no use for it to spin up a clone for me if my coworkers can't collaborate. And if they can, what it will serve is a product. How can it be cheaper for every comp…

Actual example: my wife wanted a logo for the facepainting business she's starting with our 5yo, so she asked Gemini "I want a logo with these objects in it, drawn in these colors, with this business name." And it spits back a perfectly passable logo in 5 seconds. Done. No designer needed. No Figma needed. It cut out the entire value chain. Is it as good as a professional could've done with Photoshop? No. But it's ab…

Your wife would never have used Figma for that before LLMs anyway. What is she using to manage the accounts; the bread and butter of her business? Did she conjure up her own accounting and CRM software? If she vibe coded it what did she do to ensure there are no bugs? And in any case, she works alone, I presume? I'm talking about normal companies where people work together; the typical case.

Re: Something is changing in the unit economics of software

#54

Post by ahartmetz »

antonvs wrote: post #27
skinfaxi wrote: post #13

Earlier quoted context omitted.

> And, even with specialization and fine-tuning, often a high-end general purpose model is going to do a better job and people don't need a bunch of local tools installed to do their various tasks. I think this is the critical point that would be interesting to see if it holds. Technology seemingly tends towards increased specialization.

> Technology seemingly tends towards increased specialization. The bitter lesson says the exact opposite.

The bitter lesson is rather specific and IMO vastly over-applied. It basically says that you can beat hand-tuning by waiting a few years and using "more of the same" generic method.

It's not all that different from saying "Don't optimize software, just wait for faster hardware". Yet highly optimized software exist, and performance on currently available stacks is a competitive advantage.

What gives? I say: Staying ahead of the "Don't optimize, just wait" curve can absolutely make sense. At worst, your advantage decays after a few years. At best, you stay ahead by n number of years and keep increasing the gap as you invest more.

Re: Something is changing in the unit economics of software

#55

Post by alun »

The author misses one potential future of AI software where people use use their own subscriptions / API keys for their AI usage.

In this scenario the user would either sign into the platform via their Anthropic / OpenAI / Gemini account or use their API keys, and any of their usage would be billed to them directly.

The company then doesn't have to worry about the increasing costs from the AI usage.

Of course, in this future, AI providers become the new "Facebooks" of the world.

Re: Something is changing in the unit economics of software

#56

Post by SwellJoe »

ahartmetz wrote: post #54
antonvs wrote: post #27

Earlier quoted context omitted.

> Technology seemingly tends towards increased specialization. The bitter lesson says the exact opposite.

The bitter lesson is rather specific and IMO vastly over-applied. It basically says that you can beat hand-tuning by waiting a few years and using "more of the same" generic method. It's not all that different from saying "Don't optimize software, just wait for faster hardware". Yet highly optimized software exist, and performance on currently available stacks is a competitive advantage. What gives? I say: Staying ah…

The question is: How soon?

If you make a specialist model and harness that takes six months to train and launch, will you have enough time to recoup your costs and make a profit before the generalists get good enough and cheap enough in your area of specialty and become the simpler option?

We already see "skills" repos containing a bunch of specialist stuff being pushed to general models via prose instructions for how to do various things and use various tools; and those models will do the tasks much more expensively and slowly, but without needing the user to find/buy/learn something specific to do the job.

The bitter lesson may be narrow, but the fact is people have been using spreadsheets for everything for 50 years, and only sometimes can a specialist tool effectively displace it in an organization. Very powerful generalist models are starting to feel like spreadsheets: The default way to solve problems in organizations. You might be able to pick off some of the specialist cases, but you might also miss.

Re: Something is changing in the unit economics of software

#57

Post by dalenw »

margalabargala wrote: post #28
chr15m wrote: post #11

"Inference" is just software running. It has always cost money to run software, it's just that it is generally too cheap to matter. If a client makes a regular API call to your server, you pay for that compute, probably in the form of a flat hosting fee. If too many calls come in and workload goes up, you pay for a more expensive hosting tier to handle it (or do dynamic scaling which is per-unit of compute). Right no…

> There is a lot of inefficiency right now keeping prices elevated. That will change very fast and soon paying for inference will likely resemble paying for hosting your app. I don't know about "very fast" or "soon" unless you're speaking in geological terms. SOTA models like Kimi 3 require thousands of GB of RAM/VRAM to run at speeds that are real-time useful. Manufacturing the memory necessary for that quantity to…

Speaking of soon, tangentially related this just got announced: https://standardcode.ai/

They claim to support 24/7 agent coding with no VC subsidizations or money lost on a subscription, instead relying on optimizations on agent selection. I think it'll shift sooner rather than later.

Re: Something is changing in the unit economics of software

#58

Post by ahartmetz »

SwellJoe wrote: post #56
ahartmetz wrote: post #54

Earlier quoted context omitted.

The bitter lesson is rather specific and IMO vastly over-applied. It basically says that you can beat hand-tuning by waiting a few years and using "more of the same" generic method. It's not all that different from saying "Don't optimize software, just wait for faster hardware". Yet highly optimized software exist, and performance on currently available stacks is a competitive advantage. What gives? I say: Staying ah…

The question is: How soon? If you make a specialist model and harness that takes six months to train and launch, will you have enough time to recoup your costs and make a profit before the generalists get good enough and cheap enough in your area of specialty and become the simpler option? We already see "skills" repos containing a bunch of specialist stuff being pushed to general models via prose instructions for ho…

I think the bitter lesson (from 2019, what is now seen as the tail end of an AI winter - probably wasn't at the time) made the most sense in academia during AI winter. There is no academic fame to be had by making something a little better for a limited time. When billions are at stake, there is potentially a lot of money (and utility for customers) to be gained by doing some extra work even if the work is thrown away soon after. Most commercial products contain a ton of extra work to be slightly better than the competition in one area or another.

Perhaps we can call this "The sweet dollars lesson".

Re: Something is changing in the unit economics of software

#59

Post by nostrademons »

esafak wrote: post #53
nostrademons wrote: post #52

Earlier quoted context omitted.

Actual example: my wife wanted a logo for the facepainting business she's starting with our 5yo, so she asked Gemini "I want a logo with these objects in it, drawn in these colors, with this business name." And it spits back a perfectly passable logo in 5 seconds. Done. No designer needed. No Figma needed. It cut out the entire value chain. Is it as good as a professional could've done with Photoshop? No. But it's ab…

Your wife would never have used Figma for that before LLMs anyway. What is she using to manage the accounts; the bread and butter of her business? Did she conjure up her own accounting and CRM software? If she vibe coded it what did she do to ensure there are no bugs? And in any case, she works alone, I presume? I'm talking about normal companies where people work together; the typical case.

My wife wouldn't have considered this a business before LLMs. She's mostly just doing friends' parties, and oftentimes getting paid in-kind (i.e. instead of bringing a gift, she just facepaints all the neighborhood kids).

Remember that in the mid-00s, this is what YouTube and the social web was. Folks doing little, productive economic activity, usually unpaid, which can now reach an audience through technology. And now the top career aspiration in young kids is "Be a social media influencer." That's how disruptive innovations start: with little transactions that aren't considered business at all, which then grow until they subsume the economy that everybody knows of.

Re: Something is changing in the unit economics of software

#60

Post by jolmg »

mullingitover wrote: post #24

If I'm any kind of indicator of where Youtube users are headed, their AI chatbots in the video pages are going to kill their business model. There are so many videos with hooks/teasers/'you won't believe what we discovered!!1', and now I just pause the video in the first second, ask "what's the tldr" and get the value from the video without a single ad impression (and likely racking up far more opex for Youtube than…

Seems it's only available to users on YouTube Premium. I imagine most viewers are not.
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