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This is all a familiar pattern. In the early days of ride share it was an amazing advancement and very cheap, because it was highly subsidized. The quality was
by JCM9 1y ago
This is all a familiar pattern. In the early days of ride share it was an amazing advancement and very cheap, because it was highly subsidized. The quality was decent, and certainly better than taxi and car services in most cities. Tons of ride share app companies popped up.
Then reality set in. Costs were raised so they weren’t losing money anymore. Rideshare became more of a commodity and competitors got squeezed out as there wasn’t much room to compete and make money. Service quality went downhill. Uber is generally reliable but the quality has fallen off a cliff. My last car smelled bad and the rear axel sounded like was about to fall off the car. In most cities at the airport I just walk outside and get an old fashioned taxi at the rank vs dealing with all the nonsense regulations forcing one to walking to some remote corner of a parking garage for the “ride share pickup” zone.
GenAI is entering that pivot point. The products have plateaued. There’s pressure to stop the loss leaders and set prices to a more realistic level. Services are becoming commoditized. It’s not going away but we’re entering a period of rapid consolidation. GenAI will still be here in a few years and will be useful, but like rideshare the allure will wear old and we’ll look at these things like we do spell checkers today. Something everyone uses but ultimately boring commoditized tech where there’s not a lot of money to be made. A useful feature to add to actual products.
I do think there’s some good opportunity to shift to locally run small models, but that too will just become commoditized spell-checker level tech.
- JimDabell 1y ago> In the early days of ride share it was an amazing advancement and very cheap, because it was highly subsidized. This is not an analogous situation. Inference APIs aren’t subsidised, and I’m not sure the monthly plans are any more either. AI startups burn a huge amount of money on providing free service to drive growth. That’s something they can reduce at any time without raising costs for their customers at all. Not to mention the fact that the cost of providing inference is plummeting by several orders of magnitude. Uber weren’t providing free service to huge numbers of people, so when they wanted to turn a profit they couldn’t reduce there and had to raise prices for their customers. And the fees they pay to drivers didn’t drop a thousandfold so it wasn’t getting vastly cheaper to provide service.
- VerminOctopus1 1y agoWhat makes you think these things aren’t subsidized? It would be very impressive if Claude was making money off of their $20/month users that hit their weekly limits.
- grim_io 1y agoIt doesn't matter if they make any profit off those who hit the limits. It's about how many of the users hit those limits.
- JimDabell 1y ago> What makes you think these things aren’t subsidized? You can pay Amazon or a great many other hosting providers for inference for a wide variety of models. Do you think all of these hosting providers are burning money for you, when it’s not even their model and they have no lock-in? > It would be very impressive if Claude was making money off of their $20/month users that hit their weekly limits. They have been adjusting their limits frequently, and those whole point of those limits is to control the cost of servicing those users. Also: > Unit economics of LLM APIs > As of June 2024, OpenAI's API was very likely profitable, with surprisingly high margins. Our median estimate for gross margin (not including model training costs or employee salaries) was 75%. > Once all traffic switches over to the new August GPT-4o model and pricing, OpenAI plausibly still will have a healthy profit margin. Our median estimate for the profit margin is 55%. — https://www.lesswrong.com/posts/SJESBW9ezhT663Sjd/unit-economics-of-llm-apis https://www.lesswrong.com/posts/SJESBW9ezhT663Sjd/unit-econo... And more discussion on Hacker News here: https://news.ycombinator.com/item?id=44161270 https://news.ycombinator.com/item?id=44161270
- lelanthran 1y ago> As of June 2024, OpenAI's API was very likely profitable, with surprisingly high margins. Our median estimate for gross margin (not including model training costs or employee salaries) was 75%. > Once all traffic switches over to the new August GPT-4o model and pricing, OpenAI plausibly still will have a healthy profit margin. Our median estimate for the profit margin is 55%. "likely profitable", "median estimate"... that 75% gross margin is not based on hard numbers.
- jncfhnb 1y agoYour anecdata is bad though. Rideshare is doing fine.
- JCM9 1y agoWhat city? Most cities I’ve seen the majority of entrants have either gone bust or on a path to.
- simianwords 1y agoI thought Uber ridership has been increasing worldwide, if you have data that contradicts this please share it.
- JCM9 1y agoBecause most of the other entrants are going bust. Saw Revel is the latest to bite the dust and exit ridesharing.
- simianwords 1y agoCool but that just means Uber is hard to beat. I think Uber is doing just fine.
- jncfhnb 1y agoThat doesn’t matter. Were really just talking about uber and lyft.
- code_runner 1y agoI think you may be looking past the point they are making. Rideshare was better, it was cheaper, it was nice. Its no longer better, cheaper, or nicer. They're doing fine for sure.... like the AI companies will be doing fine... but once the prices go up the ROI for AI agents won't be as appealing to every company. It may raise the bar higher for new companies/products rather than lower it.
- thorncorona 1y ago
- simianwords 1y agoWhat does this mean? "Rideshare became more of a commodity"
- energy123 1y agoI can't agree there's a plateau just a few weeks after two companies got gold medals at IOI and IMO using natural language (no Lean). Seems like progress is continuing nicely.
- spreaditononon 1y agoThan propaganda is working nicely on you I am using the current models and they are still as useful as 6 or 12 months ago The deal is still about the same: if you bother to do most of the hard part (thinking it through) the code generators can just about generate all the boilerplate Yeah. Amazing.
- energy123 1y agoYou aren't using those models. They aren't released.
- mooxie 1y ago> In most cities at the airport I just walk outside and get an old fashioned taxi at the rank vs dealing with all the nonsense Not the primary point of your post, but I am always evangelizing to my friends about this 'hack.' I can't believe that people are willing to walk half a mile and queue up in the rain/sun/snow to be driven by some random person who will probably make them listen to their demo tape, instead of just taking the myriad taxis that are sitting right there. Takes probably 20-30 minutes off of my airport commute.
- rswail 1y agoUber have reinvented the bus stop.
- SR2Z 1y agoIs it fair to say that AI is continuously subsidized? Once a datacenter is built and becomes profitable, why would anyone just scrap it? Even if the owner goes into bankruptcy, that's a huge capital asset that evidently people can't get enough of. It's kind of undeniable at this point that at least some parts of the AI boom have been really good for society. It just took a while to realize exactly where this was useful.