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We're witnessing a race to the bottom on pricing as it's happening. Competition based solely or mainly on pricing is a defining characteristic of a commodity ma
by cs702 2y ago
We're witnessing a race to the bottom on pricing as it's happening. Competition based solely or mainly on pricing is a defining characteristic of a commodity market, i.e., a market in which competing products are interchangeable, and buyers are happy to switch to the cheapest option for a given level of quality.
There's an old saying that if you're selling a commodity, "you can only be as smart as your dumbest competitor."
If we want to be more polite, we could say instead: "you can only price your service as high as your lowest-cost competitor."
It seems that a lot of capital that has been "invested" to train AI models is, ahem, unlikely ever to be recovered.
- __loam 2y agoYou're saying the quiet part out loud here.
- Aloisius 2y agoPrice competition isn't limited to commodities.
- cs702 2y agoI never said it was.
- EGreg 2y agoYou never said it wasn't, either :-P
- Aloisius 2y agoThen why imply that it is a commodity because they (partly) compete on price? Fungibility is the defining characteristic of commodities. While these products can be used to accomplish the same task, we're not near real fungibility yet.
- cs702 2y agoProducts that are fungible compete on price (what else?). Chat-with-AI services that have similar performance are pretty fungible today. Switching from one to the other is... remarkably easy. The moment Gemini Flash's competitors start losing customers they will lower their prices to remain competitive.
- Aloisius 2y agoLots of products besides commodities will lower their prices to remain competitive. General Electric keeps their prices competitive with Pratt & Whitney, but that doesn't make jet engines a commodity. This product from Google clearly competes on price/performance ratio, speed and of course, brand.
- Delmololo 2y agoBut the race to the bottom has an opposition right? So people expect to see a return of investment which will create the bottom of pricing (at least as soon as the old money ran out) I'm also curious if AI is a good example because ai will become fundamental. This means if you don't invest you might be gone therefore it's more like a fee in case the investment would not pan out.
- __loam 2y agoSupply and demand determines price, not the hopes and dreams of investors.
- r0m4n0 2y agoGoogle is building on top of and integrated with their cloud offerings. Having first party solutions like this gives big cloud customers an easy way to integrate. For Google it’s just another tool in the chest that gets sold to these big enterprises. Many go all in on all the same cloud products. Also the models are only the building blocks. Other cloud products at Google will be built with this and sold as a service Not so sure about Open AI though…
- daghamm 2y agoIs this race to the bottom or just Googles new TPUs being extremly efficient?
- deleted 2y ago[deleted]
- rmbyrro 2y agoGoogle figured it can't beat OpenAI technically, but they sure know they can beat them financially and infrastructurally.
- __loam 2y agoIs infrastructure and scale not an expression of technical ability? It should have been obvious that Meta and Google would bury a tiny company with less than 1000 employees given the amount of capital they can leverage for compute, talent, and data. Google literally invented GPT.
- rmbyrro 2y ago> Google literally invented GPT And if it wasn't for OpenAI, it would still be locked into Google's basement.
- tfsh 2y agoIn technical terms they're on par. But you're correct about Google being able to bet on their decades of infrastructure
- rmbyrro 2y agoI bet OpenAI has 100x more customers than Gemini, and Gemini recent growth rate will not change this picture anytime soon.