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Why does it scare you? Why do you think it's dangerous and bad? It's a well-established, economically rational business model to subsidize prices in order to g

Why does it scare you? Why do you think it's dangerous and bad? It's a well-established, economically rational business model to subsidize prices in order to gain market share. Uber has been very successful at it. Amazon has had great success. It's standard. Investors know what they're doing and know that some companies won't be able to sustain it and will go out of business. It's a calculated, known risk. And users don't really need to be concerned. Just enjoy the low prices while they last. If the service you use goes out of business, it's pretty easy to switch to another.

yjftsjthsd-h 2y ago
> Why does it scare you? Why do you think it's dangerous and bad? > It's a well-established, economically rational business model to subsidize prices in order to gain market share. Because once they have the market share, they raise prices and/or make the product worse in order to get their money back. > And users don't really need to be concerned. Just enjoy the low prices. If the service you use goes out of business, it's pretty easy to switch to another. Well that's the question, isn't it? If the market stays healthy and they don't take the oxygen out of the room and kill the competition and switching costs stay low, then yes by all means enjoy the free ride but plan for its end. But... do plan for it.
- worldsayshi 2y ago
  >they raise prices and/or make the product worse in order to get their money back They should only be able to do that if they have a considerable moat though?
- eitally 2y ago
  I think the bigger risk is that they don't get the market share and then they're tempted to make unethical decisions to keep afloat as their unbalanced inputs & outputs start to drive increasing pressure from their investors.
IanCal 2y ago
> It's a well-established, economically rational business model to subsidize prices in order to gain market share. Right but it means you can't depend on that price remaining low. If it's below cost, the price must rise. That may be important for anyone building businesses on top. > it's pretty easy to switch to another. Well that assumes the others have true lower prices.
- crazygringo 2y ago
  > the price must rise. That may be important for anyone building businesses on top. Well yes but every business owner knows that, or should know that. That's a known business risk. We're all adults here. If your business fails because you naively assumed that prices you rely on will never go up, then that's on you.
  - Eisenstein 2y ago
    Every business owner does not know what prices for other companies actually are -- they assume that they are being charged a price which has been determined by the market and is worthwhile to the seller to cover costs and profit. By taking outside money and subsidizing certain market players so that they can sell their goods at below market value (because that is what is happening) you are undermining the market and punishing players who are acting rationally. This would be absolutely no different than taking tax money and subsidizing certain companies over others to destroy competition and then claiming that it was a market decision. 'We are all adults here' is not a magical phrase that makes cheating OK.
  - IanCal 2y ago
    > Well yes but every business owner knows that, or should know that. Know that they are buying services below cost? I don't think so. It's a reasonable bet that compute costs generally trend downwards, and in a competitive market where the key thing you're paying for is compute that should also trend downwards. That's different to finding out that everyone's been selling things way under the true cost.
    - 2y ago
observationist 2y ago
Investors don't know what they're doing. This is laughably apparent. They're monkeys throwing bananas at dart boards. There's that whole negative externality thing. There aren't alternatives to FAANG because they've viciously used their VC money to drive out competition, used their lawyers to litigate competition into extinction, and every other tool at their disposal to press an advantage in consumer exposure. This isn't a fair market where the best product wins; it's a game of "who's got the most money." https://en.wikipedia.org/wiki/Enshittification https://en.wikipedia.org/wiki/Enshittification This is how the world gets shittier. It's a whole thing. It's a large part of why things are as bad as they are. But hey, yeah, don't worry about it, they obviously know what they're doing.
simonw 2y ago
Because they are platform companies. If I launch a business that makes sense given the current pricing of LLMs, and the price then goes up by a factor of ten, my own unit economics may not make sense any more. There's an Uber comparison here: back when Uber was cheap, some people made life decisions about where they lived and worked that were predicated on being able to afford a commute in an Uber (since public transport doesn't serve a lot of places, at least in the US). This hurt a lot when the prices went up a few years later!
__loam 2y ago
Using capital to subsidize costs and sell your product for less than it's worth actually seems like a huge market failure to me, and is the consequence of huge concentrations of capital in the hands of a small and shrinking group of people. The only people who can afford to compete are the already wealthy. It stifles competition. As a consumer it should definitely concern you if you're using poorly financed or unsustainable products. Maybe it's great now but I would rather have a slightly more expensive product that is more stable than one that suddenly had to make the experience a lot worse because they burned a lot of cash and had a down round.
LordDragonfang 2y ago
>It's a well-established, economically rational business model to subsidize prices in order to gain market share. Economically rational for the business owner, maybe, but it inevitably results in eventual enshittification for the consumer. (And Uber isn't a great example of this; its share price has only recently surpassed what it was at IPO 4 years ago, and many companies don't even do that well)
0xcde4c3db 2y ago
> If the service you use goes out of business, it's pretty easy to switch to another. I'm not sure how well that works if vendors differentiate themselves through proprietary models and backend integrations. As far as I know, Mistral only releases weights for some of its models, with others being proprietary.

yjftsjthsd-h 2y ago

> Why does it scare you? Why do you think it's dangerous and bad? > It's a well-established, economically rational business model to subsidize prices in order to gain market share. Because once they have the market share, they raise prices and/or make the product worse in order to get their money back. > And users don't really need to be concerned. Just enjoy the low prices. If the service you use goes out of business, it's pretty easy to switch to another. Well that's the question, isn't it? If the market stays healthy and they don't take the oxygen out of the room and kill the competition and switching costs stay low, then yes by all means enjoy the free ride but plan for its end. But... do plan for it.

worldsayshi 2y ago
>they raise prices and/or make the product worse in order to get their money back They should only be able to do that if they have a considerable moat though?
eitally 2y ago
I think the bigger risk is that they don't get the market share and then they're tempted to make unethical decisions to keep afloat as their unbalanced inputs & outputs start to drive increasing pressure from their investors.

IanCal 2y ago

> It's a well-established, economically rational business model to subsidize prices in order to gain market share. Right but it means you can't depend on that price remaining low. If it's below cost, the price must rise. That may be important for anyone building businesses on top. > it's pretty easy to switch to another. Well that assumes the others have true lower prices.

crazygringo 2y ago
> the price must rise. That may be important for anyone building businesses on top. Well yes but every business owner knows that, or should know that. That's a known business risk. We're all adults here. If your business fails because you naively assumed that prices you rely on will never go up, then that's on you.
- Eisenstein 2y ago
  Every business owner does not know what prices for other companies actually are -- they assume that they are being charged a price which has been determined by the market and is worthwhile to the seller to cover costs and profit. By taking outside money and subsidizing certain market players so that they can sell their goods at below market value (because that is what is happening) you are undermining the market and punishing players who are acting rationally. This would be absolutely no different than taking tax money and subsidizing certain companies over others to destroy competition and then claiming that it was a market decision. 'We are all adults here' is not a magical phrase that makes cheating OK.
- IanCal 2y ago
  > Well yes but every business owner knows that, or should know that. Know that they are buying services below cost? I don't think so. It's a reasonable bet that compute costs generally trend downwards, and in a competitive market where the key thing you're paying for is compute that should also trend downwards. That's different to finding out that everyone's been selling things way under the true cost.
  - 2y ago

observationist 2y ago

Investors don't know what they're doing. This is laughably apparent. They're monkeys throwing bananas at dart boards. There's that whole negative externality thing. There aren't alternatives to FAANG because they've viciously used their VC money to drive out competition, used their lawyers to litigate competition into extinction, and every other tool at their disposal to press an advantage in consumer exposure. This isn't a fair market where the best product wins; it's a game of "who's got the most money." https://en.wikipedia.org/wiki/Enshittification https://en.wikipedia.org/wiki/Enshittification This is how the world gets shittier. It's a whole thing. It's a large part of why things are as bad as they are. But hey, yeah, don't worry about it, they obviously know what they're doing.

simonw 2y ago

Because they are platform companies. If I launch a business that makes sense given the current pricing of LLMs, and the price then goes up by a factor of ten, my own unit economics may not make sense any more. There's an Uber comparison here: back when Uber was cheap, some people made life decisions about where they lived and worked that were predicated on being able to afford a commute in an Uber (since public transport doesn't serve a lot of places, at least in the US). This hurt a lot when the prices went up a few years later!

__loam 2y ago

Using capital to subsidize costs and sell your product for less than it's worth actually seems like a huge market failure to me, and is the consequence of huge concentrations of capital in the hands of a small and shrinking group of people. The only people who can afford to compete are the already wealthy. It stifles competition. As a consumer it should definitely concern you if you're using poorly financed or unsustainable products. Maybe it's great now but I would rather have a slightly more expensive product that is more stable than one that suddenly had to make the experience a lot worse because they burned a lot of cash and had a down round.

LordDragonfang 2y ago

>It's a well-established, economically rational business model to subsidize prices in order to gain market share. Economically rational for the business owner, maybe, but it inevitably results in eventual enshittification for the consumer. (And Uber isn't a great example of this; its share price has only recently surpassed what it was at IPO 4 years ago, and many companies don't even do that well)

0xcde4c3db 2y ago

> If the service you use goes out of business, it's pretty easy to switch to another. I'm not sure how well that works if vendors differentiate themselves through proprietary models and backend integrations. As far as I know, Mistral only releases weights for some of its models, with others being proprietary.