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AI's economics don't make sense

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Re: AI's economics don't make sense

#61

Post by hparadiz »

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…

The economics is spending a few hundred bucks on software for an IC you're already paying over ten grand a month in order to make them more productive. How are supposedly smart industry experts not seeing this obvious fact? Are these guys actually experts?

Re: AI's economics don't make sense

#62

Post by dgellow »

GardenLetter27 wrote: post #49
doctorpangloss wrote: post #45

Earlier quoted context omitted.

lots of words. do you think per token prices will go up or down in the long term? will the price per task trend down or up? what about the price of human labor?

The price of everything will go down. That is the beauty of the free market.

The free market hypothesis is about resource allocation, nothing to do with price of everything going down

Re: AI's economics don't make sense

#63

Post by loeg »

bwestergard wrote: post #48
loeg wrote: post #41

Earlier quoted context omitted.

> How many tokens can you realistically burn through in one chat session? I've used single digit billions in a couple days, FWIW.

What sort of work were you doing?

Converting a couple hundred kLOC C++ codebase to Rust.

Re: AI's economics don't make sense

#64

Post by kgwgk »

asdfasgasdgasdg wrote: post #56
intended wrote: post #54

Earlier quoted context omitted.

> afaik most estimate north of 80% profit margins This seems to be the lynchpin of your argument. It makes me wonder if I have been living under a rock, because I have never heard of frontier labs making money. AFAIK all AI firms are simply burning money to acquire customers at this stage. Is this wrong?

>It makes me wonder if I have been living under a rock, because I have never heard of frontier labs making money. You're confusing the profit from the marginal token and overall profit (basically gross margin and operating margin). The comment you're replying to is calculating that AI labs are probably making a substantial profit per paid token. It's just that so far that profit has not been able to overcome the ongo…

> not been able to overcome the ongoing R&D and capex costs.

And the cost of not-quite-paid tokens.

Re: AI's economics don't make sense

#65

Post by pmdr »

throwawayajner wrote: post #22

Zitron misunderstands the economics of models. Inference costs have dropped 99% in less than 2 years. Models are being commoditized faster than any technology in history. A $20 subscription 2 years ago is not providing the same level of intelligence you're getting today. Every major lab knows open source models are 6 months behind (See Google's "We have no moat") and none of them plan to make money on inference. Comp…

> A $20 subscription 2 years ago is not providing the same level of intelligence you're getting today.

That subscription was then and is now likely still subsidized.

Re: AI's economics don't make sense

#66

Post by davikr »

pmdr wrote: post #65
throwawayajner wrote: post #22

Zitron misunderstands the economics of models. Inference costs have dropped 99% in less than 2 years. Models are being commoditized faster than any technology in history. A $20 subscription 2 years ago is not providing the same level of intelligence you're getting today. Every major lab knows open source models are 6 months behind (See Google's "We have no moat") and none of them plan to make money on inference. Comp…

> A $20 subscription 2 years ago is not providing the same level of intelligence you're getting today. That subscription was then and is now likely still subsidized.

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.

Re: AI's economics don't make sense

#67

Post by asdfasgasdgasdg »

ToucanLoucan wrote: post #36
vidarh wrote: post #26

Earlier quoted context omitted.

By your numbers, it'd be $120/day per developer * 5 million = $600m per day , not per year. Of course people don't work every day, but even with European-level holidays that number is off by a factor of 240 or so.

Quite right, honestly not sure how I fucked that up so bad but I'll own it. Okay so all we need is every coder + 0.6 million more or so in the United States, subscribed to this for 8 hours a day, and the business model can work. That still feels incredibly optimistic given how split the community at large seems to be about how good this tech is, and it assumes all those developers also all work for firms large enough…

It's not just developers who are using this. My economist friends are. I bet most business analysts and general administration folks are or will be soon. Every normal person I know in my neighborhood is using AI for this thing or that. 50M people are currently subscribed to ChatGPT and it would be very surprising if this number goes down in the future.

I dunno I think about the language some people are using about AI investment and it is reminiscent of the many years where people were saying Amazon was a bad buy because they never turned a profit. Admittedly AI companies are investing more than the money they've already brought in, but I would be very hesitant to predict that it's all froth given the usefulness I've gleaned from the tools.

Don't get me wrong, I'm not unconcerned, but I think there are good reasons to suspect that at least some of the AI companies are making sound investments.

Re: AI's economics don't make sense

#69

Post by xienze »

hparadiz wrote: post #61
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…

The economics is spending a few hundred bucks on software for an IC you're already paying over ten grand a month in order to make them more productive. How are supposedly smart industry experts not seeing this obvious fact? Are these guys actually experts?

> The economics is spending a few hundred bucks on software for an IC you're already paying over ten grand a month

Let's be fair here, the endgame is not "a few hundred bucks a month." Not for how much money has been invested. How much extra you have to spend to make developers how much more productive, and will companies go along with it is the trillion dollar question.

Re: AI's economics don't make sense

#70

Post by christkv »

xnx wrote: post #28
christkv wrote: post #17

I'm just flabbergasted at the massive inefficient usage of tokens. What are people doing to spend 500 usd/day in tokens. I just don't understand what you could possibly be doing that would be not complete spagetti at the end if you run something in an autoloop.

> What are people doing to spend 500 usd/day in tokens 1) They're lying 2) Status signalling

There is status in showing your inefficiency ?
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