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> Inference APIs aren’t subsidised This made me laugh. Thanks for making my Friday a little bit better.

simianwords 1y ago
Almost no business works like this - every additional request does not make OpenAI lose money but rather gain it. The fixed cause due to R&D is what makes it unprofitable but not each request. Your line of thinking is bit ridiculous because OpenAI is never going to lose money per request.
- Spooky23 1y ago
  You are describing a subsidy. If your kid makes $50 with a lemonade stand, she thinks she made $50, because she doesn't account for the cost of the lemonade, table, lawn, etc. You're subsidizing your child.
  - simianwords 1y ago
    I agree its subsidised but crucial point being that each API doesn't cost them but gives them profit. If R&D were to be stopped now they would be profitable.
    - 1718627440 1y ago
      No it gives them income. Profit is when all costs are subtracted.
      - simianwords 1y ago
        Correct, I misspoke.
    - lelanthran 1y ago
      > If R&D were to be stopped now they would be profitable. Not until the cost of the previous training has been completed amortised. Even if some company did immediately stop all training, they would only show a profit until the next SOTA model is released by a competitor, and then they would would go out of business. None of them have any moat, other than large amounts of venture capital. Even if there is a single winner at the end of all of this, all it would take is a much smaller amount of capital to catch up.
- disgruntledphd2 1y ago
  > The fixed cause due to R&D is what makes it unprofitable but not each request. Your line of thinking is bit ridiculous because OpenAI is never going to lose money per request. We don't know this for sure. I agree that it would be insane from a business perspective, but I've seen so many SV startups make insane business decisions that I tend to lean towards this being quite possible.
- hoppp 1y ago
  Nope, it costs billions to train and run those models, they are operating at a loss.
- lelanthran 1y ago
  > The fixed cause due to R&D is what makes it unprofitable but not each request. If the amortisation period is too short (what is it now? 8 months? 6 months?) that "profit" from each inference token has to cover the training costs before the amortisation schedule ends. In short, if you're making a profit of $1 on each unit sold, but require a capex of $10 in order to provide the unit sold, you need to sell at least 10 of those units to break even. The training is the capex, the inference profit is the profit/unit sold. When a SOTA model lasts only 8 months, the inference has to make all that back in 8 months in order to be considered profitable.

Almost no business works like this - every additional request does not make OpenAI lose money but rather gain it. The fixed cause due to R&D is what makes it unprofitable but not each request. Your line of thinking is bit ridiculous because OpenAI is never going to lose money per request.

Spooky23 1y ago
You are describing a subsidy. If your kid makes $50 with a lemonade stand, she thinks she made $50, because she doesn't account for the cost of the lemonade, table, lawn, etc. You're subsidizing your child.
- simianwords 1y ago
  I agree its subsidised but crucial point being that each API doesn't cost them but gives them profit. If R&D were to be stopped now they would be profitable.
  - 1718627440 1y ago
    No it gives them income. Profit is when all costs are subtracted.
    - simianwords 1y ago
      Correct, I misspoke.
  - lelanthran 1y ago
    > If R&D were to be stopped now they would be profitable. Not until the cost of the previous training has been completed amortised. Even if some company did immediately stop all training, they would only show a profit until the next SOTA model is released by a competitor, and then they would would go out of business. None of them have any moat, other than large amounts of venture capital. Even if there is a single winner at the end of all of this, all it would take is a much smaller amount of capital to catch up.
disgruntledphd2 1y ago
> The fixed cause due to R&D is what makes it unprofitable but not each request. Your line of thinking is bit ridiculous because OpenAI is never going to lose money per request. We don't know this for sure. I agree that it would be insane from a business perspective, but I've seen so many SV startups make insane business decisions that I tend to lean towards this being quite possible.
hoppp 1y ago
Nope, it costs billions to train and run those models, they are operating at a loss.
lelanthran 1y ago
> The fixed cause due to R&D is what makes it unprofitable but not each request. If the amortisation period is too short (what is it now? 8 months? 6 months?) that "profit" from each inference token has to cover the training costs before the amortisation schedule ends. In short, if you're making a profit of $1 on each unit sold, but require a capex of $10 in order to provide the unit sold, you need to sell at least 10 of those units to break even. The training is the capex, the inference profit is the profit/unit sold. When a SOTA model lasts only 8 months, the inference has to make all that back in 8 months in order to be considered profitable.