6 ms·

Theoretically this should be good for OpenAI - in that they can reduce their costs by ~27x and pass that along to end users to get more adoption and more profit

Theoretically this should be good for OpenAI - in that they can reduce their costs by ~27x and pass that along to end users to get more adoption and more profit.

ceejayoz 2y ago
No; those costs were their moat.
- onlyrealcuzzo 2y ago
  You don't need a moat when you're in first place. Their moat is >1B people are already using ChatGPT monthly. They aren't going to switch unless something is substantially better.
  - ceejayoz 2y ago
    > You don't need a moat when you're in first place. Tell that to Friendster/MySpace and Facebook.
    - onlyrealcuzzo 2y ago
      Cute - but MySpace didn't have >1B users, it didn't even have 10M when Facebook launched. Try again.
      - cjbgkagh 2y ago
        It had more than Facebook when Facebook launched so I’m not sure what your point is
      - ceejayoz 2y ago
        Nothing had a billion users; the Internet didn't at the time. MySpace and Friendster both spent significant time as the #1 social sites. Facebook unseated them rapidly. The same is possible for OpenAI.
        onlyrealcuzzo 2y ago
        [flagged]
        ceejayoz 2y ago
        MySpace and Friendster both claimed ~115M peak users. > It's literally orders of magnitude. Sure, and the speed at which ChatGPT went from zero to a billion is precisely why they need a moat... because otherwise the next one can do it to them. Your argument is like a railroad company in 1905 scoffing at the idea that airliners will be a thing.
        onlyrealcuzzo 2y ago
        Peek users is not the amount of users they had when Facebook started. Facebook probably would've never became a thing if MySpace already had ~115M users when it started. MySpace had ~1M. That's why DeepSeek (or anyone else) is going to have an incredibly difficult time convincing ~1B to switch from ChatGPT to their tool instead. Can it happen? For sure. Will it happen? Less likely. If anyone unseats ChatGPT - it's much more likely to be a usual suspect like Google, Apple, or Microsoft - then some obscure company no one has ever heard of. Of course, anything is possible.
      - shmeeed 2y ago
        Dude, if you seriously believe OpenAI has 1B active users, you should go touch grass. Actual estimates are 100-200 million, about a magnitude lower.
    - kruxigt 2y ago
      [dead]
  - lm28469 2y ago
    > They aren't going to switch unless something is substantially better. Except one product is 100% free and the other is mostly locked behind paid subscriptions
    - scarface_74 2y ago
      How long can DeepSeek stay free? It’s already unable to keep up with demand, it will never be the default on mobile devices and businesses in the US will never trust it.
      - ceejayoz 2y ago
        That's not really the important question. The important question is "will this and similar optimizations to come permit local LLM use, cutting OpenAI out of the equation entirely?"
        scarface_74 2y ago
        Businesses don’t even want to maintain servers locally. They definitely aren’t going to start managing servers beefy enough to run LLMs and try to run then with the reliability, availability, etc of cloud services. This will make the cloud providers - especially AWS, GCP and to a lesser extent the also ran clouds more valuable. The other models hosted by AWS on Bedrock are already “good enough” for most business use cases. And then consumers are definitely not going to be running LLMs locally on their computers to replicate ChatGPT (the product) anymore than they are going to get an FTP account, mount it locally with curlftpfs, and then using SVN or CVS on the mounted filesystem and then from Windows or Mac, accessed the FTP account through built-in software instead of using cloud storage like Dropbox. [1] Whether someone comes up with a better product than ChatGPT and overcome the brand awareness is yet to be seen. [1] Also the iPod had no wireless, less space than the Nomad and was lame.
        ceejayoz 2y ago
        > And then consumers are definitely not going to be running LLMs locally on their computers to replicate ChatGPT... Not personally. They'll let Apple handle it for them. (This is already a thing. https://machinelearning.apple.com/research/introducing-apple-foundation-models https://machinelearning.apple.com/research/introducing-apple...)
  - sandclock 2y ago
    That is exactly what a moat is. Keeping others out. moat noun a deep, wide ditch surrounding a castle, fort, or town, typically filled with water and intended as a defense against attack.
    - ceejayoz 2y ago
      Precisely. First place needs the moat. Second place just needs a catapult and a diseased cow.
  - like_any_other 2y ago
    > Their moat is >1B people are already using ChatGPT monthly. Unlike a social network, network effects won't help them - their users don't care how many other users they have, only about the AI output quality. > They aren't going to switch unless something is substantially better. Or approximately as good but cheaper.
    - onlyrealcuzzo 2y ago
      > Or approximately as good but cheaper. You're fooling yourself if you think OpenAI is going to pass up implementing the same strategies to get a ~27x cheaper model. > Unlike a social network, network effects won't help them - their users don't care how many other users they have, only about the AI output quality. Google Search doesn't have a network effect. Everyone on HN has been saying Google Search is complete garbage for a decade. It still has the same market share (roughly) as it did a decade ago.
      - like_any_other 2y ago
        > You're fooling yourself if you think OpenAI is going to pass up implementing the same strategies to get a ~27x cheaper model. But that would mean a 27x lower valuation.
        onlyrealcuzzo 2y ago
        > But that would mean a 27x lower valuation. No. Valuations are based on future profits. Not future revenues. You can theoretically lower your costs by 27x and end up with 2x more future profits - if you're actually 45x cheaper (which DeepSeek's method claims to be).
        ceejayoz 2y ago
        > Valuations are based on future profits. Which are estimated, in significant part, by the chance of a competitor arising. If the barriers of entry are much lower than originally thought, the potential profit margin plummets.
  - cogman10 2y ago
    Free that runs locally on consumer hardware sounds substantially better.
  - spinlock_ 2y ago
    I don't agree. You don't have moat if you are offering the same quality for a higher price.
  - flavius29663 2y ago
    just for the chatbot, it's trivial to switch, create a new account and start asking questions from deepseek instead. There is nothing holding the users in chatgpt.
    - ceejayoz 2y ago
      And the bigger risk is the big companies making deals - like Apple including ChatGPT access in iOS - canceling those to do it on-device or in-house. 1B MAUs doesn't look great if half of them come from one source that can easily change to a competitor.
  - JumpCrisscross 2y ago
    > You don't need a moat when you're in first place There are different moats [1]. You’re describing incumbency, an intangible moat. It’s nice, but it’s fickle. Particularly with something with low switching costs. OpenAI could argue, before, that it had a natural monopoly. More people use OpenAI so it gets more revenue and more data which lets it raise more capital to train these expensive models. That may not be true, which means it only has that first, shallow moat. It’s Nike. Not Google. [1] https://en.m.wikipedia.org/wiki/Economic_moat https://en.m.wikipedia.org/wiki/Economic_moat
    - onlyrealcuzzo 2y ago
      > There are different moats [1]. You’re describing incumbency, an intangible moat. It’s nice, but it’s fickle. Particularly with something with low switching costs. Google has a low switching cost, and hardly anyone switches. ChatGPT is quite similar to Google in this way.
      - JumpCrisscross 2y ago
        > Google has a low switching cost, and hardly anyone switches Google has massive network effects on its ad business and a natural monopoly on its search index. Crawling the web is expensive. It’s why Kagi has to pay Google (versus being able to pay them once and then stop).
      - scarface_74 2y ago
        Thought experiment: if tomorrow Apple changed the default search engine from Google to ChatGPT for iOS, how fast would Google’s dominance drop? iOS has 70% market share in the US
  - kgwgk 2y ago
    https://archive.is/c6cn9 https://archive.is/c6cn9 « The thing I noticed right away when Claude came out is how little lock-in ChatGPT had established. This was very different to my experience when I first ran a search on Google, sometime in the year 2000. After the first time I used Google, I literally never used another search engine again; it was just light years ahead of its competitors in terms of the quality of its results, and the clarity of its presentation. This week I added a third chatbot to the mix: DeepSeek » Follow up: https://x.com/TheStalwart/status/1884606421225848889 https://x.com/TheStalwart/status/1884606421225848889
    - mohsen1 2y ago
      My guess is that OS vendors are the real winners in the long run. If Siri/Goolge can access my stuff and core of LLMs is this replicable then I don't see anyone downloading any apps for their typical AI usage. Specially that users have to go out of their way to allow a 3rd party to access all their data. This is why OpenAI is so deep in the product development phase right now. They have to become the OS to be successful but I don't see that happening
  - Sateeshm 2y ago
    There is no network effect (amazon, instagram, etc.) not an enterprise vendor lock-in (Microsoft Office/AD, Apple Appstore, etc.) In fact, it's quite the opposite, the way these companies deliver ouput is damn near identical. Switching between them is pretty painless.
  - meiraleal 2y ago
    oh well, I switched yesterday from a paid plan to a free one and I'm quite happy with the quality improvement.
- whatshisface 2y ago
  I wish more people had understood that spending a lot of money processing publicly available commodities with techniques available in the published literature is the business model of a steel mill.
  - JumpCrisscross 2y ago
    > is the business model of a steel mill It’s the business of commodities. The magic is in tiny incremental improvements and distribution. DeepSeek forces us to question if AI—possibly intelligence—is a commodity.
    - sebzim4500 2y ago
      Surely that would be amazing for NVDA? If the only 'hard' part of making AI is making/buying/smuggling the hardware then nvidia should expect to capture most of the value.
      - ceejayoz 2y ago
        DeepSeek revealed it's not as hard as previously thought; a much smaller number of less sophisticated chips was sufficient.
      - JumpCrisscross 2y ago
        > that would be amazing for NVDA? It’s good for Nvidia. It’s not as good as it was before. (Assuming DeepSeek’s claims are replicable.)
      - JoshTko 2y ago
        No. Before Deepseek R1, Nvidia was charging $100 for a $20 shovel in the gold rush. Now, every Fortune 100 can build an O1-level model with currently existing (and soon to be online) infra. Healthy demand for H100 and Blackwell will remain, but paying $100 for a $20 shovel is unlikely. Nvidia will definitely stay profitable for now though, as long as Deepseek’s breakthroughs are not further improved upon. But if others find additional compression gains, Nvidia won’t recapture its old premium. Its stock hinged on 80% margins and 75% annual growth, Deepseek broke that premise.
- cjbgkagh 2y ago
  But have you heard of Jevons Paradon…… /s OMG, it seems tech has been invaded by baaing crypto bros
- scotty79 2y ago
  Maybe they even suppressed algorithmic improvements in their company to preserve moat. Something akin to Kodak suppressing internal research on digital cameras because they were world leading company that produced photo film.
wturner 2y ago
Capitalism - a system where rational actors make informed decisions.
blantonl 2y ago
Nah, those costs were for their doomsday bunkers and crypto purchases, and maybe a house or 3
askl 2y ago
They could pivot to being a wrapper around DeepSeek. That would also save a lot of R&D costs.
mirzap 2y ago
Training costs are not the same as inference costs. DeepSeek (or anyone hosting DS largest model) will still need a lot of money and a bunch of GPU clusters to serve the customers.
btbuildem 2y ago
> pass that along to end users I don't think that's at all likely in the current economic system

Theoretically this should be good for OpenAI - in that they can reduce their costs by ~27x and pass that along to end users to get more adoption and more profit.

ceejayoz 2y ago

No; those costs were their moat.

onlyrealcuzzo 2y ago
You don't need a moat when you're in first place. Their moat is >1B people are already using ChatGPT monthly. They aren't going to switch unless something is substantially better.
- ceejayoz 2y ago
  > You don't need a moat when you're in first place. Tell that to Friendster/MySpace and Facebook.
  - onlyrealcuzzo 2y ago
    Cute - but MySpace didn't have >1B users, it didn't even have 10M when Facebook launched. Try again.
    - cjbgkagh 2y ago
      It had more than Facebook when Facebook launched so I’m not sure what your point is
    - ceejayoz 2y ago
      Nothing had a billion users; the Internet didn't at the time. MySpace and Friendster both spent significant time as the #1 social sites. Facebook unseated them rapidly. The same is possible for OpenAI.
      - onlyrealcuzzo 2y ago
        [flagged]
        ceejayoz 2y ago
        MySpace and Friendster both claimed ~115M peak users. > It's literally orders of magnitude. Sure, and the speed at which ChatGPT went from zero to a billion is precisely why they need a moat... because otherwise the next one can do it to them. Your argument is like a railroad company in 1905 scoffing at the idea that airliners will be a thing.
        onlyrealcuzzo 2y ago
        Peek users is not the amount of users they had when Facebook started. Facebook probably would've never became a thing if MySpace already had ~115M users when it started. MySpace had ~1M. That's why DeepSeek (or anyone else) is going to have an incredibly difficult time convincing ~1B to switch from ChatGPT to their tool instead. Can it happen? For sure. Will it happen? Less likely. If anyone unseats ChatGPT - it's much more likely to be a usual suspect like Google, Apple, or Microsoft - then some obscure company no one has ever heard of. Of course, anything is possible.
    - shmeeed 2y ago
      Dude, if you seriously believe OpenAI has 1B active users, you should go touch grass. Actual estimates are 100-200 million, about a magnitude lower.
  - kruxigt 2y ago
    [dead]
- lm28469 2y ago
  > They aren't going to switch unless something is substantially better. Except one product is 100% free and the other is mostly locked behind paid subscriptions
  - scarface_74 2y ago
    How long can DeepSeek stay free? It’s already unable to keep up with demand, it will never be the default on mobile devices and businesses in the US will never trust it.
    - ceejayoz 2y ago
      That's not really the important question. The important question is "will this and similar optimizations to come permit local LLM use, cutting OpenAI out of the equation entirely?"
      - scarface_74 2y ago
        Businesses don’t even want to maintain servers locally. They definitely aren’t going to start managing servers beefy enough to run LLMs and try to run then with the reliability, availability, etc of cloud services. This will make the cloud providers - especially AWS, GCP and to a lesser extent the also ran clouds more valuable. The other models hosted by AWS on Bedrock are already “good enough” for most business use cases. And then consumers are definitely not going to be running LLMs locally on their computers to replicate ChatGPT (the product) anymore than they are going to get an FTP account, mount it locally with curlftpfs, and then using SVN or CVS on the mounted filesystem and then from Windows or Mac, accessed the FTP account through built-in software instead of using cloud storage like Dropbox. [1] Whether someone comes up with a better product than ChatGPT and overcome the brand awareness is yet to be seen. [1] Also the iPod had no wireless, less space than the Nomad and was lame.
        ceejayoz 2y ago
        > And then consumers are definitely not going to be running LLMs locally on their computers to replicate ChatGPT... Not personally. They'll let Apple handle it for them. (This is already a thing. https://machinelearning.apple.com/research/introducing-apple-foundation-models https://machinelearning.apple.com/research/introducing-apple...)
- sandclock 2y ago
  That is exactly what a moat is. Keeping others out. moat noun a deep, wide ditch surrounding a castle, fort, or town, typically filled with water and intended as a defense against attack.
  - ceejayoz 2y ago
    Precisely. First place needs the moat. Second place just needs a catapult and a diseased cow.
- like_any_other 2y ago
  > Their moat is >1B people are already using ChatGPT monthly. Unlike a social network, network effects won't help them - their users don't care how many other users they have, only about the AI output quality. > They aren't going to switch unless something is substantially better. Or approximately as good but cheaper.
  - onlyrealcuzzo 2y ago
    > Or approximately as good but cheaper. You're fooling yourself if you think OpenAI is going to pass up implementing the same strategies to get a ~27x cheaper model. > Unlike a social network, network effects won't help them - their users don't care how many other users they have, only about the AI output quality. Google Search doesn't have a network effect. Everyone on HN has been saying Google Search is complete garbage for a decade. It still has the same market share (roughly) as it did a decade ago.
    - like_any_other 2y ago
      > You're fooling yourself if you think OpenAI is going to pass up implementing the same strategies to get a ~27x cheaper model. But that would mean a 27x lower valuation.
      - onlyrealcuzzo 2y ago
        > But that would mean a 27x lower valuation. No. Valuations are based on future profits. Not future revenues. You can theoretically lower your costs by 27x and end up with 2x more future profits - if you're actually 45x cheaper (which DeepSeek's method claims to be).
        ceejayoz 2y ago
        > Valuations are based on future profits. Which are estimated, in significant part, by the chance of a competitor arising. If the barriers of entry are much lower than originally thought, the potential profit margin plummets.
- cogman10 2y ago
  Free that runs locally on consumer hardware sounds substantially better.
- spinlock_ 2y ago
  I don't agree. You don't have moat if you are offering the same quality for a higher price.
- flavius29663 2y ago
  just for the chatbot, it's trivial to switch, create a new account and start asking questions from deepseek instead. There is nothing holding the users in chatgpt.
  - ceejayoz 2y ago
    And the bigger risk is the big companies making deals - like Apple including ChatGPT access in iOS - canceling those to do it on-device or in-house. 1B MAUs doesn't look great if half of them come from one source that can easily change to a competitor.
- JumpCrisscross 2y ago
  > You don't need a moat when you're in first place There are different moats [1]. You’re describing incumbency, an intangible moat. It’s nice, but it’s fickle. Particularly with something with low switching costs. OpenAI could argue, before, that it had a natural monopoly. More people use OpenAI so it gets more revenue and more data which lets it raise more capital to train these expensive models. That may not be true, which means it only has that first, shallow moat. It’s Nike. Not Google. [1] https://en.m.wikipedia.org/wiki/Economic_moat https://en.m.wikipedia.org/wiki/Economic_moat
  - onlyrealcuzzo 2y ago
    > There are different moats [1]. You’re describing incumbency, an intangible moat. It’s nice, but it’s fickle. Particularly with something with low switching costs. Google has a low switching cost, and hardly anyone switches. ChatGPT is quite similar to Google in this way.
    - JumpCrisscross 2y ago
      > Google has a low switching cost, and hardly anyone switches Google has massive network effects on its ad business and a natural monopoly on its search index. Crawling the web is expensive. It’s why Kagi has to pay Google (versus being able to pay them once and then stop).
    - scarface_74 2y ago
      Thought experiment: if tomorrow Apple changed the default search engine from Google to ChatGPT for iOS, how fast would Google’s dominance drop? iOS has 70% market share in the US
- kgwgk 2y ago
  https://archive.is/c6cn9 https://archive.is/c6cn9 « The thing I noticed right away when Claude came out is how little lock-in ChatGPT had established. This was very different to my experience when I first ran a search on Google, sometime in the year 2000. After the first time I used Google, I literally never used another search engine again; it was just light years ahead of its competitors in terms of the quality of its results, and the clarity of its presentation. This week I added a third chatbot to the mix: DeepSeek » Follow up: https://x.com/TheStalwart/status/1884606421225848889 https://x.com/TheStalwart/status/1884606421225848889
  - mohsen1 2y ago
    My guess is that OS vendors are the real winners in the long run. If Siri/Goolge can access my stuff and core of LLMs is this replicable then I don't see anyone downloading any apps for their typical AI usage. Specially that users have to go out of their way to allow a 3rd party to access all their data. This is why OpenAI is so deep in the product development phase right now. They have to become the OS to be successful but I don't see that happening
- Sateeshm 2y ago
  There is no network effect (amazon, instagram, etc.) not an enterprise vendor lock-in (Microsoft Office/AD, Apple Appstore, etc.) In fact, it's quite the opposite, the way these companies deliver ouput is damn near identical. Switching between them is pretty painless.
- meiraleal 2y ago
  oh well, I switched yesterday from a paid plan to a free one and I'm quite happy with the quality improvement.
whatshisface 2y ago
I wish more people had understood that spending a lot of money processing publicly available commodities with techniques available in the published literature is the business model of a steel mill.
- JumpCrisscross 2y ago
  > is the business model of a steel mill It’s the business of commodities. The magic is in tiny incremental improvements and distribution. DeepSeek forces us to question if AI—possibly intelligence—is a commodity.
  - sebzim4500 2y ago
    Surely that would be amazing for NVDA? If the only 'hard' part of making AI is making/buying/smuggling the hardware then nvidia should expect to capture most of the value.
    - ceejayoz 2y ago
      DeepSeek revealed it's not as hard as previously thought; a much smaller number of less sophisticated chips was sufficient.
    - JumpCrisscross 2y ago
      > that would be amazing for NVDA? It’s good for Nvidia. It’s not as good as it was before. (Assuming DeepSeek’s claims are replicable.)
    - JoshTko 2y ago
      No. Before Deepseek R1, Nvidia was charging $100 for a $20 shovel in the gold rush. Now, every Fortune 100 can build an O1-level model with currently existing (and soon to be online) infra. Healthy demand for H100 and Blackwell will remain, but paying $100 for a $20 shovel is unlikely. Nvidia will definitely stay profitable for now though, as long as Deepseek’s breakthroughs are not further improved upon. But if others find additional compression gains, Nvidia won’t recapture its old premium. Its stock hinged on 80% margins and 75% annual growth, Deepseek broke that premise.
cjbgkagh 2y ago
But have you heard of Jevons Paradon…… /s OMG, it seems tech has been invaded by baaing crypto bros
scotty79 2y ago
Maybe they even suppressed algorithmic improvements in their company to preserve moat. Something akin to Kodak suppressing internal research on digital cameras because they were world leading company that produced photo film.

wturner 2y ago

Capitalism - a system where rational actors make informed decisions.

blantonl 2y ago

Nah, those costs were for their doomsday bunkers and crypto purchases, and maybe a house or 3

askl 2y ago

They could pivot to being a wrapper around DeepSeek. That would also save a lot of R&D costs.

mirzap 2y ago

Training costs are not the same as inference costs. DeepSeek (or anyone hosting DS largest model) will still need a lot of money and a bunch of GPU clusters to serve the customers.

btbuildem 2y ago

> pass that along to end users I don't think that's at all likely in the current economic system