4 ms·

OpenAI is Lehman Brothers: A crash is coming

17 points by NN88 2y ago

andersco 2y ago
I am no financial expert but this all feels spot on.
matt3210 2y ago
All these AI services are a great value for the money. I can’t believe that it’s profitable in any way. It seems to me anecdotally that once some market share is reached prices will skyrocket. I don’t think the barrier to entry is big enough to make this scaling model suitable.
- minimaxir 2y ago
  > It seems to me anecdotally that once some market share is reached prices will skyrocket. Competition determines pricing, and all LLM providers have to compete with "free" open-source solutions. There is no moat to justify increasing costs. Some argue that having the best model is a moat (it's not by the economic definition), but even then, permissively-licensed OSS LLMs are catching up since there is a slowdown, and anyone can host them.
  - toomuchtodo 2y ago
    The market determines pricing, but if the cost of queries exceeds what they can collect in revenue, it is unsustainable. Is it similar to the VC driven craze where gig systems were super cheap until they weren't? Maybe! "It’s easy to sell dollar bills for ninety cents."
throwup238 2y ago
This site has published a bunch of "OpenAI is [famous company]" articles today, each with a different thesis. OpenAI is Taco Bell: https://sherwood.news/tech/openai-is-taco-bell/ https://sherwood.news/tech/openai-is-taco-bell/ OpenAI is Pixar: https://sherwood.news/tech/openai-is-pixar/ https://sherwood.news/tech/openai-is-pixar/ OpenAI is Napster: https://sherwood.news/tech/openai-is-napster/ https://sherwood.news/tech/openai-is-napster/ OpenAI is Salesforce: https://sherwood.news/tech/openai-is-salesforce/ https://sherwood.news/tech/openai-is-salesforce/ And so on. They're all listed here: https://sherwood.news/tech/what-companys-past-reveals-the-future-of-openai/ https://sherwood.news/tech/what-companys-past-reveals-the-fu...
- minimaxir 2y ago
  All from different guest authors, so may be more editorial gimmick than SEO play. Walt Hickey is a respected writer/editor. It's definitely one way to hedge your bets.
  - dijksterhuis 2y ago
    it is an editorial thing. from the last link > What company’s past reveals the future of OpenAI? > Sherwood asked a baker’s dozen of writers to make their best case for what’ll happen to the most important company of 2024: OpenAI.
- fnord77 2y ago
  "Sherwood asked a baker’s dozen of writers to make their best case for what’ll happen to the most important company of 2024: OpenAI."
- theshaper 2y ago
  I understand the hook of these articles; not just from that site, but from almost the entire publishing industry and the allure of OpenAI. But we’re reaching strange new levels. What’s next? OpenAI is Númenor, OpenAI is Windows Vista, OpenAI is John Carter, OpenAI is Fyre Festival... :)
  - deleted 2y ago
    [deleted]
- krackers 2y ago
  Only thing left to do is use ChatGPT to generate random "OpenAI is X" articles.
  - throwup238 2y ago
    OpenAI is Tom Bombadil by Christopher Hitchens: https://pastebin.com/ZX2gpKa5 https://pastebin.com/ZX2gpKa5 OpenAI is Lucha Libre by Michael Lewis: https://pastebin.com/PE2uqgc2 https://pastebin.com/PE2uqgc2 OpenAI is a Pop Tart by Hunter S Thompson: https://pastebin.com/q0bVWpSG https://pastebin.com/q0bVWpSG OpenAI is a Bacon-Wrapped Hotdog Left Out in the Sun Too Long by Papa Smurf: https://pastebin.com/CDYcnRpS https://pastebin.com/CDYcnRpS Someone should make a Custom GPT.
dosinga 2y ago
The thing that made Lehman Brothers Lehman Brothers was not that they had a bad business model (the article says so much). It was that they were a central player in a network of financial products that were poorly understood that redistributed risk in a way even less understood. So when the music stopped markets froze because nobody knew who was solvent and who wasn't. Hard to see what the equivalent in the OpenAI scenario is. Presumably when the music stops a bunch of VCs lose their shirts, the three trillion companies become ordinary trillion dollar companies and silicon valley moves on to look for the next big thing. Probably way more comparable to the dotcom bust.
jmclnx 2y ago
I do not think an AI crash will come close to the damage the mortgage crisis of 2008 did. But, I agree a crash is coming and it will probably mirror the dot-com crash. The only question is Nvidia, I think Nvidia has potential to cause a lot of pain.
- fnord77 2y ago
  Nvidia is 6.73% of the S&P 500
- wmf 2y ago
  If Nvidia goes back to "only" the size it was before AI it would still be a great company. But the market will probably overreact and crush it 95%.
vanrysss 2y ago
People said the same thing about Uber, but they're still running
- bdangubic 2y ago
  in the United States, any business which can pull of scenario where a small group of rich people is exploiting large group of poor people is never going to fail - hence Uber is not a good comparison :)
  - DamnYuppie 2y ago
    Is this something specific to the United States, isn't this how most of the world works?

17 points by NN88 2y ago

I am no financial expert but this all feels spot on.

All these AI services are a great value for the money. I can’t believe that it’s profitable in any way. It seems to me anecdotally that once some market share is reached prices will skyrocket. I don’t think the barrier to entry is big enough to make this scaling model suitable.

minimaxir 2y ago
> It seems to me anecdotally that once some market share is reached prices will skyrocket. Competition determines pricing, and all LLM providers have to compete with "free" open-source solutions. There is no moat to justify increasing costs. Some argue that having the best model is a moat (it's not by the economic definition), but even then, permissively-licensed OSS LLMs are catching up since there is a slowdown, and anyone can host them.
- toomuchtodo 2y ago
  The market determines pricing, but if the cost of queries exceeds what they can collect in revenue, it is unsustainable. Is it similar to the VC driven craze where gig systems were super cheap until they weren't? Maybe! "It’s easy to sell dollar bills for ninety cents."

throwup238 2y ago

This site has published a bunch of "OpenAI is [famous company]" articles today, each with a different thesis. OpenAI is Taco Bell: https://sherwood.news/tech/openai-is-taco-bell/ https://sherwood.news/tech/openai-is-taco-bell/ OpenAI is Pixar: https://sherwood.news/tech/openai-is-pixar/ https://sherwood.news/tech/openai-is-pixar/ OpenAI is Napster: https://sherwood.news/tech/openai-is-napster/ https://sherwood.news/tech/openai-is-napster/ OpenAI is Salesforce: https://sherwood.news/tech/openai-is-salesforce/ https://sherwood.news/tech/openai-is-salesforce/ And so on. They're all listed here: https://sherwood.news/tech/what-companys-past-reveals-the-future-of-openai/ https://sherwood.news/tech/what-companys-past-reveals-the-fu...

minimaxir 2y ago
All from different guest authors, so may be more editorial gimmick than SEO play. Walt Hickey is a respected writer/editor. It's definitely one way to hedge your bets.
- dijksterhuis 2y ago
  it is an editorial thing. from the last link > What company’s past reveals the future of OpenAI? > Sherwood asked a baker’s dozen of writers to make their best case for what’ll happen to the most important company of 2024: OpenAI.
fnord77 2y ago
"Sherwood asked a baker’s dozen of writers to make their best case for what’ll happen to the most important company of 2024: OpenAI."
theshaper 2y ago
I understand the hook of these articles; not just from that site, but from almost the entire publishing industry and the allure of OpenAI. But we’re reaching strange new levels. What’s next? OpenAI is Númenor, OpenAI is Windows Vista, OpenAI is John Carter, OpenAI is Fyre Festival... :)
- deleted 2y ago
  [deleted]
krackers 2y ago
Only thing left to do is use ChatGPT to generate random "OpenAI is X" articles.
- throwup238 2y ago
  OpenAI is Tom Bombadil by Christopher Hitchens: https://pastebin.com/ZX2gpKa5 https://pastebin.com/ZX2gpKa5 OpenAI is Lucha Libre by Michael Lewis: https://pastebin.com/PE2uqgc2 https://pastebin.com/PE2uqgc2 OpenAI is a Pop Tart by Hunter S Thompson: https://pastebin.com/q0bVWpSG https://pastebin.com/q0bVWpSG OpenAI is a Bacon-Wrapped Hotdog Left Out in the Sun Too Long by Papa Smurf: https://pastebin.com/CDYcnRpS https://pastebin.com/CDYcnRpS Someone should make a Custom GPT.

dosinga 2y ago

The thing that made Lehman Brothers Lehman Brothers was not that they had a bad business model (the article says so much). It was that they were a central player in a network of financial products that were poorly understood that redistributed risk in a way even less understood. So when the music stopped markets froze because nobody knew who was solvent and who wasn't. Hard to see what the equivalent in the OpenAI scenario is. Presumably when the music stops a bunch of VCs lose their shirts, the three trillion companies become ordinary trillion dollar companies and silicon valley moves on to look for the next big thing. Probably way more comparable to the dotcom bust.

jmclnx 2y ago

I do not think an AI crash will come close to the damage the mortgage crisis of 2008 did. But, I agree a crash is coming and it will probably mirror the dot-com crash. The only question is Nvidia, I think Nvidia has potential to cause a lot of pain.

fnord77 2y ago
Nvidia is 6.73% of the S&P 500
wmf 2y ago
If Nvidia goes back to "only" the size it was before AI it would still be a great company. But the market will probably overreact and crush it 95%.

vanrysss 2y ago

People said the same thing about Uber, but they're still running

bdangubic 2y ago
in the United States, any business which can pull of scenario where a small group of rich people is exploiting large group of poor people is never going to fail - hence Uber is not a good comparison :)
- DamnYuppie 2y ago
  Is this something specific to the United States, isn't this how most of the world works?