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Because typically one expect a return on investment with that level of spending. Not only have they run at a loss for years, their spending is expected to incre
by popalchemist 10mo ago
Because typically one expect a return on investment with that level of spending. Not only have they run at a loss for years, their spending is expected to increase, with no path to profitability in sight.
- bdangubic 10mo agonot that I disagree but would it be fair to say though that we have seen this before where it turned out OK? say Uber? Amazon?
- oh_my_goodness 10mo agoTo become the next Uber, do I just need to run huge losses?
- bdangubic 10mo agoI wouldn’t but path to success can clearly come from running 10-digit losses for a loooong time, no?
- oh_my_goodness 10mo agoI think you're saying that just running up huge losses is sufficient to create a successful company? But that you personally wouldn't want to run up huge losses? Not sure.
- bdangubic 10mo agonah, I am saying that many (super) successful businesses ran in red financially for a very long time. I would not run a business that way but I am also (fortunately) not a CEO of a multibillion dollar company
- jcranmer 10mo agoIIRC, current estimates are that OpenAI is losing as much money a year as Uber or Amazon lost in their entire lifetime of unprofitability. Also, both Uber and Amazon spent their unprofitable years having a clear roadmap to profitability. OpenAI's roadmap to profitability is "???"
- bdangubic 10mo agoI have lived through Amazon’s rags to riches and there was never a clear plan to profitability. Vast majority of people were questioning sanity of anyone investing in Amazon. I am not saying OpenAI is Amazon but am saying I have seen this before where masses are going “oh business is bad, losses are huge, where is path to profitability…”
- esafak 10mo agoYour recollection is hazy. Bezos chose not to be profitable in order to grow the company, and reap greater rewards in the future. https://www.youtube.com/shorts/wjLs22dNOCE https://www.youtube.com/shorts/wjLs22dNOCE
- tptacek 10mo agoI don't know either way but every company does this, it's not saying anything meaningful to say that a new company is taking an "investment year" or two or ten. I do know that in the late aughts, people were writing stories about how Amazon was a charity run on behalf of the American consumer by the finance industry.
- mrwrong 10mo agoand those stories were in the short run correct, since Amazon and Uber succeeded by massively undercutting existing businesses. reel customers in with charity, then turn the screws. what business is ChatGPT undercutting?
- 10mo ago
- toxic72 10mo agoTo my knowledge Amazon never debt financed their ops like this
- oh_my_goodness 10mo agoAmazon did borrow money, for a long time.
- dylan604 10mo agoWhere did their financing come from then?
- samx18 10mo agoThey had a cash-cow called AWS to keep the retail business afloat
- bdangubic 10mo agonot right away
- dylan604 10mo agoSomebody must not be old enough to remember Amazon before AWS. Maybe you also don’t remember that Amazon started selling books before becoming the world’s largest fencing for selling stolen merch. They used to be the butt of many jokes for losing so much money for so many years while they expanded warehouses.
- andy81 10mo agoAmazon paid no dividends, that's their big debt financing.
- throw1235435 10mo agoTbh this whole AI thing is probably a negative ROI but it will pay off. Even if the debt is written off the AI enhancements that this whole misallocation of capital created are now "sunk" and are here to stay - the assets and techniques have been built. There's an element of arms race between players, and the genie is out of the bottle now so have to move with it. Game theory is more driving this than economics in the short term. Marginal gains on top of these investments probably have a ROI now (i.e. new investments from this point).