4 ms·

Do they make money? If they had to pay the true cost of GPT, would they still be in business?

janalsncm 2y ago
This is a good point. In a couple of years (or sooner) they’ll be looking for a smaller, cheaper API solution and someone will make a fortune providing it.
- muzani 2y ago
  I don't think anyone will make a fortune providing cheap AIs at a loss. In the end it might just be AWS Bedrock+llama.
  - janalsncm 2y ago
    A cheap classifier would actually be profitable since it would be millions of times less expensive than an LLM. These companies are using Lamborghinis to run errands when a 2004 corolla would be just as good.
    - muzani 2y ago
      OpenAI sells a cheap classifier tier product for $0.40/MTok (babbage-002) while gpt-4o-mini is $0.15/MTok. Multimodal AI is now cheap enough to run on ads. They might still be subsidizing some of the cost but maybe it's more like LEDs vs bulbs at this point. The power of quantum lighting for cheaper and better.
wmf 2y ago
Are they not paying the true cost through the API today?
- solardev 2y ago
  No, or OpenAI etc would be profitable. I believe they're all heavily subsidized by investors right now in a race to cement the first-mover advantage. Now if they had their own llama instance or similar that they're doing on their own machines, that would be closer to the true cost? But I doubt that quality is sufficient, or can keep up with the latest training.
  - fragmede 2y ago
    The true cost for OpenAI includes almost a decade of salaries and office space for employees, since before covid, along with a very hefty training bill. Even if inference were free for them, it'll take a while before they're profitable.
    - solardev 2y ago
      That must've been a wild time to be working there. Imagine going to work thinking one day in a few short years it's going to become one of the world's most important companies. I'd be walking back from lunch thinking "oh man, oh man..." the whole time, lol. And then to actually see it all actually happen, rise to the top, only for a failed coup to almost dismantle your organization, and then to survive THAT and keep going. Must've been nuts. I hope some of them write a memoir about it later.
  - muzani 2y ago
    It's possible the unit economics might not be that bad. It's just that they're paying people a lot. Every one of FAANG were criticized for burning money, now they're some of the most profitable companies in the world, first mover or not. AI is a little weird in that OpenAI just vastly accelerated competitors.

This is a good point. In a couple of years (or sooner) they’ll be looking for a smaller, cheaper API solution and someone will make a fortune providing it.

muzani 2y ago
I don't think anyone will make a fortune providing cheap AIs at a loss. In the end it might just be AWS Bedrock+llama.
- janalsncm 2y ago
  A cheap classifier would actually be profitable since it would be millions of times less expensive than an LLM. These companies are using Lamborghinis to run errands when a 2004 corolla would be just as good.
  - muzani 2y ago
    OpenAI sells a cheap classifier tier product for $0.40/MTok (babbage-002) while gpt-4o-mini is $0.15/MTok. Multimodal AI is now cheap enough to run on ads. They might still be subsidizing some of the cost but maybe it's more like LEDs vs bulbs at this point. The power of quantum lighting for cheaper and better.

wmf 2y ago

Are they not paying the true cost through the API today?

solardev 2y ago
No, or OpenAI etc would be profitable. I believe they're all heavily subsidized by investors right now in a race to cement the first-mover advantage. Now if they had their own llama instance or similar that they're doing on their own machines, that would be closer to the true cost? But I doubt that quality is sufficient, or can keep up with the latest training.
- fragmede 2y ago
  The true cost for OpenAI includes almost a decade of salaries and office space for employees, since before covid, along with a very hefty training bill. Even if inference were free for them, it'll take a while before they're profitable.
  - solardev 2y ago
    That must've been a wild time to be working there. Imagine going to work thinking one day in a few short years it's going to become one of the world's most important companies. I'd be walking back from lunch thinking "oh man, oh man..." the whole time, lol. And then to actually see it all actually happen, rise to the top, only for a failed coup to almost dismantle your organization, and then to survive THAT and keep going. Must've been nuts. I hope some of them write a memoir about it later.
- muzani 2y ago
  It's possible the unit economics might not be that bad. It's just that they're paying people a lot. Every one of FAANG were criticized for burning money, now they're some of the most profitable companies in the world, first mover or not. AI is a little weird in that OpenAI just vastly accelerated competitors.