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I think Anthropic and OpenAI have found product-market fit

simonwillison.net

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Re: I think Anthropic and OpenAI have found product-market fit

#651

Post by nl »

trjordan wrote: post #11

They'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…

> They've got, ballpark, $5t to $10t to make back in the next 5 years, or the hardware buildouts will start getting written down.

I find it disappointing that a completely wrong statement like this ends up the top comment on HN.

It is wrong in both the math, the logic about public markets and understanding accounting.

> $5t to $10t to make back in the next 5 years

I don't know where this number comes from, but it has gone unchallenged.

OpenAI and Anthropic combined have raised around $100B. This is an investment so isn't something the have to "pay back" from earnings - instead investors expect to make that back from the share price being higher than what they paid for it.

> or the hardware buildouts will start getting written down.

The hardware buildouts get written down anyway!! That is a good thing for investors because as the value gets written down they can book a tax loss. ANd it turns out that generally agreed depreciation schedule for GPUs (used to be 3 years, now 5 years by places like Coreweave) is still too conservative since GPU rental prices for 5 year old chips are higher now than when they were new (!!)

All of this makes the rest of the math in the comment incorrect by at least an order of magnitude and under some scenarios possibly 2 orders of magnitude!

That's not a small error!

Re: I think Anthropic and OpenAI have found product-market fit

#652

Post by simonw »

what wrote: post #646
simonw wrote: post #529

Earlier quoted context omitted.

My point with the $2,180.16 thing is that the price for consumers like myself is heavily discounted... but the price for enterprise companies is not discounted. My usage is therefore a useful indicator of quite how much those enterprise companies may be spending on tokens, given the new pricing scheme. If enterprise companies were still getting the same discounts that I get myself I would not have written this articl…

When you have to train a new model every few months to stay competitive, discounting that cost is rather dubious.

They key difference here is that training costs are fixed. If you train a model for $100m dollars, how much of that training fee should you allocate to each token that the model serves?

It's impossible to know, because you don't know how many tokens total will be served by that model until you retire it at some point in the future.

So you can't say "1,000,000 tokens costs $X in inference and $Y in training" because $Y is not possible to correctly calculate.

So, if you want to have a productive conversation about "margin on inference", it's sensible to look at the cost of serving the tokens independently of the cost of training the underlying model.

Re: I think Anthropic and OpenAI have found product-market fit

#653

Post by manquer »

trjordan wrote: post #11

They'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…

One factor to consider , the base will not remain the same over the next 5 yearts.

Every generation of developer tooling that increase of absolute code throughput creates a new class of developers (and users).

Always been the case since first compilers, through eras of frameworks to today, and the skill level needed to be one has dropped. In mid/late 80s only Master / Doctorate level Comp Sci professional could write any applications. It dropped to undergrad and just Information Technology engineers and comp sci theory became mostly optional and dropped further to any college level educated with some training and has been trending below with no/low code tools like retool pre 2022, that was before agent codegen services such as v0/replit and so on.

The next generation developers will not produce applications and architecture as previous generations did, just as we most of us here don't produce the level of quality that pg did when building this platform[1] , but as long as the user can find value it doesn't matter as countless enterprise applications of middling quality already prove today.

All this to say the 200M/30M numbers will not remain the same is the thesis for these businesses, will it change by large enough at a fast enough pace to justify the capex, I don't think so either. However web 1 then 2.0 , saas and mobile revolutions were pretty quick with new class of users and developers so not completely unrealistic .

[1] While HN is a heavy outlier with its custom lang lisp implementation, there are any number of examples from previous eras that are more moderate in choices but written with solid architecture with skill levels would be hard to find in today's generation founders.

Re: I think Anthropic and OpenAI have found product-market fit

#654

Post by lbreakjai »

simonw wrote: post #510
mbesto wrote: post #499

Earlier quoted context omitted.

> My core point is more that April 2026 was the point when Anthropic and OpenAI finally appeared to have figured out a credible business model. How so? What's specifically changed? We still don't know what their unit economics are and everything you've documented is basically speculation at this point.

> What's specifically changed? 1. Both Anthropic and OpenAI significantly increased the prices of their latest models. They're clearly not trying to offer the lowest-price-possible to drum up demand any more. 2. Both Anthropic and OpenAI no longer let enterprise companies buy discounted almost-all-you-can-eat subscriptions. Those big enterprises are now paying full API prices. 3. According to reasonably well-sourced…

Let's see how it goes in three months. I'm not convinced it's anything but an attempt to make the numbers look better just long enough to IPO.

Enterprises will take a while to adjust. We're going along with Copilot price changes in the short term "just to see what it'd look like". They will get customers to continue with the all you can eat mindset at API pricing for a while, but the finance departments will start asking questions very soon.

Re: I think Anthropic and OpenAI have found product-market fit

#655

Post by narnarpapadaddy »

bradleyjg wrote: post #640
trjordan wrote: post #11

They'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…

> That's a _huge_ shift. Most people I know cite +20%-40% velocity with these tools, against the actual work their company cares about doing. We all have our own observations and mine don’t significantly diverge. But that’s bottom up. At this point shouldn’t we be seeing it top down? If we are beyond potential and into significant productivity gains, why isn’t that showing up for the customers? Why didn’t delta airli…

Anecdotally, my take on this is that biggest value lever is strategy and alignment, not implementation. The typical company is dozens of little vectors pointed in different directions, and they cancel each other out. Scaling up the magnitude of each is still net zero.

I was recently consulting at org where two separate engineering teams were all in on two different, incompatible deployment platforms and using AI to accelerate adoption of each.

Management was mystified why their engineering leads kept telling them they couldn’t deploy a complete implementation of their solution.

Re: I think Anthropic and OpenAI have found product-market fit

#656

Post by th0ma5 »

simonw wrote: post #290
aerhardt wrote: post #265

Earlier quoted context omitted.

I like his other posts. He's bullish on AI, which is fine. I'd like to read a mix of bearish and bullish level-headed takes from people who are subject matter experts. His technical credentials are well past discussion - I love Django, and he comes across as a pretty upbeat but level-headed guy. Certainly beats radical takes in either direction from people who have no clue what they're talking about. It's just this a…

The thing that matters most to me is if reading what I wrote teaches you some new things and gives you something useful to think about. If I make an argument and you disagree that's fine with me, provided I didn't use misinformation or sloppy thinking in making that argument.

[dead]

Re: I think Anthropic and OpenAI have found product-market fit

#657

Post by try-working »

FuriouslyAdrift wrote: post #246
trjordan wrote: post #11

They'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.

What about using DeepSeek API? Practically free.

Re: I think Anthropic and OpenAI have found product-market fit

#658

Post by brazukadev »

aspenmartin wrote: post #242
eqvinox wrote: post #86

Earlier quoted context omitted.

Just because API pricing would've been $2180.16 doesn't mean that's the value of those tokens. For starters, you personally probably wouldn't have paid that. But also, sales price isn't value. This is like saying, oh, I saw this bar of gold somewhere for $10000 but got it here for $1000! So I got $10000 worth of gold for $1000! - no, the value of that gold is determined by its weight, which wasn't even mentioned. We…

He's saying he's getting a great deal...a token from Opus on Claude code is the same as a token from Opus on the API. I remain as confused as Simon. He's not talking about "here's the ROI I got from my $100 subscription" it's "here's how much I saved from getting the monthly subscription instead of sending things through an API".

Which is a terrible metric sending a wrong message.

Re: I think Anthropic and OpenAI have found product-market fit

#659

Post by brokencode »

overgard wrote: post #594
brokencode wrote: post #43

Earlier quoted context omitted.

Usage costs will come down with better hardware. Hardware is improving rapidly each generation.

A lot of the new hardware requires retrofitting existing datacenters for appropriate cooling, or is waiting to be installed because the new datacenters haven't been built yet. By the time they're installed it's likely a lot of Blackwell GPUs are going to be very out of date. Newer hardware is turning into huge capex bills along with the corresponding depreciation costs. Basically, it's not the same as plugging a new…

Sure, with all the component shortages it’s not surprising the current GPUs are coming at a massive premium.

Eventually either the supply will go up or companies will start buying fewer overpriced GPUs.

Either way, the price per token will come down as hardware improves and supply and demand reach equilibrium.

Re: I think Anthropic and OpenAI have found product-market fit

#660

Post by firesteelrain »

lugu wrote: post #633
firesteelrain wrote: post #83

Anyone actually making money paying all of these monthly fees? Or just hobbyists? I have yet to see any real ROI posted anywhere.

Ask yourself: what is the ROI I provide? It isn't trivial most of the time.

We measure ROI of employees annually via ranking systems, who gets bonuses, promotions etc
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