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The bleeding obvious is that OpenAI is doing what most tech companies for the last 20 years have done. Offer the product for dirt cheap to kill off competition,

The bleeding obvious is that OpenAI is doing what most tech companies for the last 20 years have done. Offer the product for dirt cheap to kill off competition, then extract as much value from your users as possible by either mining data or hiking the price. I don’t understand how people are surprised by this anymore. So yeah, it’s the best option right now, when the company is burning through cash, but they’re planning on getting that money back from you eventually.

jaredklewis 3y ago
> Offer the product for dirt cheap to kill off competition, then extract as much value from your users as possible by either mining data or hiking the price. Genuine question, what are some examples of companies in that "hiking the price" camp? I can think of tons of tech companies that sold or sell stuff at a loss for growth, but struggling to find examples where the companies then are able to turn dominant market share into higher prices. To be clear, I'm definitely not implying they are not out there, just looking for examples.
- loganfrederick 3y ago
  Uber, Netflix and the online content streaming services. These are probably the most prominent examples from this recent 2010s era.
- spacebanana7 3y ago
  The Google Maps API price hike of 2018 [1] is a relevant example. [1] https://kobedigital.com/google-maps-api-changes https://kobedigital.com/google-maps-api-changes
- beezlebroxxxxxx 3y ago
  Uber is probably the biggest pure example. When I was in uni when they first spread, Uber's entire business model was flood the market with hilariously low prices and steep discounts. People overnight started using them like crazy. They were practically giving away their product. Now, they're as expensive, if not sometimes more expensive, than any other taxi or ridesharing service in my area. One thing I'll add is that it's not always that this ends with higher prices in an absolute sense, but that the tech company is able to essentially cut the knees out of their competitors until they're a shell of their former selves. Then when the prices go "up", they're in a way a return to the "norm", only they have a larger and dominant market share because of their crazy pricing in the early stages.
  - wkat4242 3y ago
    Yeah I kinda wonder why people even use them anymore. I've long gone back to real taxis because their cheaper and I don't have to book them, I can just grab one on the street. Much more efficient than waiting for slowly watching my driver edge his way to me from 3 kilometers away.
    - jdminhbg 3y ago
      The number of places where you can reliably walk out onto the street and hail a taxi is pretty small. Everywhere else, the relevant decision is whether calling a dispatcher or using a taxi company's app is faster/cheaper/more reliable than Uber/Lyft.
      - pests 3y ago
        Living in the Detroit Metro area seeing that interaction in movies always blew my mind. Just walk outside and get a taxi? Crazy talk.
        wkat4242 3y ago
        Here in Barcelona it works like that. 2-3 free taxis pass my place per minute or so. Just wave and you've got one. They're also very cheap. But yeah the movie thing is not at all unrealistic here. Though at night I usually wave the torch on my phone to attract attention because they don't always see a raised hand.
      - wkat4242 3y ago
        Here in Barcelona it's great, I really never have to call one. It's always faster just waiting. At the busiest time it's a bit harder but at that time the ride-sharing services are also overloaded so it's still faster to just wait for a green light (free taxi). We don't get Uber as far as I know but we do have a similar thing called Cabify. But it's useless if you need something quick and they've put the prices up too much. I now only use them for scheduled stuff like airport dropoffs.
      - 3y ago
- mikpanko 3y ago
  - Uber/Lyft increased prices significantly (and partially transition it into longer wait times) since they got into profitability mode - Google is showing more and more ads over time to power high revenue growth YoY - Unity has just tried to increase its prices
  - jaredklewis 3y ago
    I think Google fits more in the "extract as much value from your users" bucket more than the price hiking one. Uber/Lyft did raise prices, but interestingly (at least to me) is that if the strategy was the smother the competition with low prices, it didn't seem to work. Unity is interesting too, though I'm not sure it would make a good poster child for this playbook. It raised prices but seems to be suffering for it.
    - HillRat 3y ago
      Everyone's in "show your profits" mode, as befitting a mature market with smaller growth potential relative to the last few decades. Some of what we're talking about here is just what happens when a company tries to use investment capital to build a moat but fails (the Uber/Lyft issue you mentioned -- there's no obvious moat to ride-hailing, as with many software and app domains). My theory is that, going forward, we're going to see a much lower ceiling on revenue coupled with lots of competition in the market as VC investments cool off and companies can't spend their way into ephemeral market dominance. As for Unity, they're certainly dealing with a bunch of underperforming PE and IPO-enabled M&A on the one hand (really should have considered that AppLovin offer, folks), but also just a failure to extract reasonable income from their flagship product on the other; I don't think their problems come from raising prices per se (game devs pay for a lot already, an engine fee is nothing new to them) as much as how they chose to do it and the original pricing model they tried to force on their clients. What they chose to do and the way they handled it wasn't just bad, it was "HBS case study bad."
- dboreham 3y ago
  VMWare, Docker.
- Bukhmanizer 3y ago
  I was most thinking of Uber and AirBnB for price hiking and Google and Facebook for extracting value.
- polski-g 3y ago
  Unity. Atlassian. Jetbrains. Elastic.
zarzavat 3y ago
OpenAI doesn’t own transformers, they didn’t even invent them. They just have the best one at this particular time. They have no moat. At some point, someone else will make a competitive model, if it’s Facebook then it might even be open source, and the industry will see price competition downwards.
- strangemonad 3y ago
  This argument has always felt to me like saying “google has no moat in search, they just happen to currently have the best page rank. Nothing is stopping yahoo from creating a better one”
  - jdminhbg 3y ago
    Google has a flywheel where its dominant position in search results in more users, whose data refines the search algorithm over time. The question is whether OpenAI has a similar thing going, or whether they just have done the best job of training a model against a static dataset so far. If they're able to incorporate customer usage to improve their models, that's a moat against competitors. If not, it's just a battle between groups of researchers and server farms to see who is best this week or next.
    - mbb70 3y ago
      But that's exactly what they have: millions of high quality, rated chat interactions that no one else has. I don't know how they could _not_ incorporate customer usage to improve their models.
      - omeze 3y ago
        well, this assumes the chat (where the ratings are given) is what people are using and paying for. I think most businesses pay for some combination of API access and specific use cases like code generation (at least, thats what I pay for) that don't really impact RLHF data. General search for consumers is likely to schism since chatGPT isn't especially different from Bard or Edge's AI assistant or the myriad of other product surface areas that can add it.
martypitt 3y ago
I agree with this. However, what will be interesting is if the price of delivering ChatGPT-style experiences drops as the industry matures/advances, and their pricing moat erodes. Unlike Uber - where prices are dictated by factors unlikely to move significantly (Labour / Vehicles / Fuel / etc), The LLM space doesn't have these types of overheads.
quickthrower2 3y ago
The real problem for the OP is not prices going up but open AI making something like the AI equivalent of Excel (an AI swiss army knife) such that middle companies are not needed for chatbots or talk to your pdf type apps.

jaredklewis 3y ago

> Offer the product for dirt cheap to kill off competition, then extract as much value from your users as possible by either mining data or hiking the price. Genuine question, what are some examples of companies in that "hiking the price" camp? I can think of tons of tech companies that sold or sell stuff at a loss for growth, but struggling to find examples where the companies then are able to turn dominant market share into higher prices. To be clear, I'm definitely not implying they are not out there, just looking for examples.

loganfrederick 3y ago
Uber, Netflix and the online content streaming services. These are probably the most prominent examples from this recent 2010s era.
spacebanana7 3y ago
The Google Maps API price hike of 2018 [1] is a relevant example. [1] https://kobedigital.com/google-maps-api-changes https://kobedigital.com/google-maps-api-changes
beezlebroxxxxxx 3y ago
Uber is probably the biggest pure example. When I was in uni when they first spread, Uber's entire business model was flood the market with hilariously low prices and steep discounts. People overnight started using them like crazy. They were practically giving away their product. Now, they're as expensive, if not sometimes more expensive, than any other taxi or ridesharing service in my area. One thing I'll add is that it's not always that this ends with higher prices in an absolute sense, but that the tech company is able to essentially cut the knees out of their competitors until they're a shell of their former selves. Then when the prices go "up", they're in a way a return to the "norm", only they have a larger and dominant market share because of their crazy pricing in the early stages.
- wkat4242 3y ago
  Yeah I kinda wonder why people even use them anymore. I've long gone back to real taxis because their cheaper and I don't have to book them, I can just grab one on the street. Much more efficient than waiting for slowly watching my driver edge his way to me from 3 kilometers away.
  - jdminhbg 3y ago
    The number of places where you can reliably walk out onto the street and hail a taxi is pretty small. Everywhere else, the relevant decision is whether calling a dispatcher or using a taxi company's app is faster/cheaper/more reliable than Uber/Lyft.
    - pests 3y ago
      Living in the Detroit Metro area seeing that interaction in movies always blew my mind. Just walk outside and get a taxi? Crazy talk.
      - wkat4242 3y ago
        Here in Barcelona it works like that. 2-3 free taxis pass my place per minute or so. Just wave and you've got one. They're also very cheap. But yeah the movie thing is not at all unrealistic here. Though at night I usually wave the torch on my phone to attract attention because they don't always see a raised hand.
    - wkat4242 3y ago
      Here in Barcelona it's great, I really never have to call one. It's always faster just waiting. At the busiest time it's a bit harder but at that time the ride-sharing services are also overloaded so it's still faster to just wait for a green light (free taxi). We don't get Uber as far as I know but we do have a similar thing called Cabify. But it's useless if you need something quick and they've put the prices up too much. I now only use them for scheduled stuff like airport dropoffs.
    - 3y ago
mikpanko 3y ago
- Uber/Lyft increased prices significantly (and partially transition it into longer wait times) since they got into profitability mode - Google is showing more and more ads over time to power high revenue growth YoY - Unity has just tried to increase its prices
- jaredklewis 3y ago
  I think Google fits more in the "extract as much value from your users" bucket more than the price hiking one. Uber/Lyft did raise prices, but interestingly (at least to me) is that if the strategy was the smother the competition with low prices, it didn't seem to work. Unity is interesting too, though I'm not sure it would make a good poster child for this playbook. It raised prices but seems to be suffering for it.
  - HillRat 3y ago
    Everyone's in "show your profits" mode, as befitting a mature market with smaller growth potential relative to the last few decades. Some of what we're talking about here is just what happens when a company tries to use investment capital to build a moat but fails (the Uber/Lyft issue you mentioned -- there's no obvious moat to ride-hailing, as with many software and app domains). My theory is that, going forward, we're going to see a much lower ceiling on revenue coupled with lots of competition in the market as VC investments cool off and companies can't spend their way into ephemeral market dominance. As for Unity, they're certainly dealing with a bunch of underperforming PE and IPO-enabled M&A on the one hand (really should have considered that AppLovin offer, folks), but also just a failure to extract reasonable income from their flagship product on the other; I don't think their problems come from raising prices per se (game devs pay for a lot already, an engine fee is nothing new to them) as much as how they chose to do it and the original pricing model they tried to force on their clients. What they chose to do and the way they handled it wasn't just bad, it was "HBS case study bad."
dboreham 3y ago
VMWare, Docker.
Bukhmanizer 3y ago
I was most thinking of Uber and AirBnB for price hiking and Google and Facebook for extracting value.
polski-g 3y ago
Unity. Atlassian. Jetbrains. Elastic.

zarzavat 3y ago

OpenAI doesn’t own transformers, they didn’t even invent them. They just have the best one at this particular time. They have no moat. At some point, someone else will make a competitive model, if it’s Facebook then it might even be open source, and the industry will see price competition downwards.

strangemonad 3y ago
This argument has always felt to me like saying “google has no moat in search, they just happen to currently have the best page rank. Nothing is stopping yahoo from creating a better one”
- jdminhbg 3y ago
  Google has a flywheel where its dominant position in search results in more users, whose data refines the search algorithm over time. The question is whether OpenAI has a similar thing going, or whether they just have done the best job of training a model against a static dataset so far. If they're able to incorporate customer usage to improve their models, that's a moat against competitors. If not, it's just a battle between groups of researchers and server farms to see who is best this week or next.
  - mbb70 3y ago
    But that's exactly what they have: millions of high quality, rated chat interactions that no one else has. I don't know how they could _not_ incorporate customer usage to improve their models.
    - omeze 3y ago
      well, this assumes the chat (where the ratings are given) is what people are using and paying for. I think most businesses pay for some combination of API access and specific use cases like code generation (at least, thats what I pay for) that don't really impact RLHF data. General search for consumers is likely to schism since chatGPT isn't especially different from Bard or Edge's AI assistant or the myriad of other product surface areas that can add it.

martypitt 3y ago

I agree with this. However, what will be interesting is if the price of delivering ChatGPT-style experiences drops as the industry matures/advances, and their pricing moat erodes. Unlike Uber - where prices are dictated by factors unlikely to move significantly (Labour / Vehicles / Fuel / etc), The LLM space doesn't have these types of overheads.

quickthrower2 3y ago

The real problem for the OP is not prices going up but open AI making something like the AI equivalent of Excel (an AI swiss army knife) such that middle companies are not needed for chatbots or talk to your pdf type apps.