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I think you’re just describing how it’s circular. It’s like Toys R Us not having enough money to pay Mattel for Barbie dolls and telling Mattel they can have p

by dangus 8mo ago

I think you’re just describing how it’s circular. It’s like Toys R Us not having enough money to pay Mattel for Barbie dolls and telling Mattel they can have partial ownership of the company if they just supply them with some more toys. But the problem is that Toys R Us is spending $15, 20, or maybe even $50 (who knows?) to sell a $10 toy. Toys R Us continues selling toys faster and faster despite a lack of profit, making Mattel even more dependent on Toys R Us as a customer. It blows up the bubble where a more natural course of action would be for Toys R Us to go bankrupt or scale back ambitions earlier. Because it’s circular like this, it lends toward bigger crashing and burning. If OpenAI fails, all these investors that are deeply integrated into their supply chains lose both their investment and customer.

SV_BubbleTime 8mo ago
OK, so absolutely good faith here what is the end game? Obviously, there’s a scenario of super power AI and then it’s a matter of continuing course. Electricity and silicon. What if you are right, and the scaling doesn’t work. It is too much power, time, hardware to improve… does openAI fold? Do they just actual use the models they have? Does everyone just decide that AI didn’t work and go back 5 years like it didn’t happen? Does the price change so that they have to be profitable making AI services expensive and rare instead of today where they are everywhere pointlessly? Or does this insane valuation only make sense with information you don’t have like insider scaling or efficiency news? Does China’s strategy of undercutting US value of models pay off bigly?
- Flatterer3544 8mo ago
  Why so extreme, most likely just AI winter for a while, then when tech and societies has caught up, the advancements begins again. It is not like we threw away the dotcom advances, they were just put on hold for a while..
- underlipton 8mo ago
  The people running these companies have a perverse incentive to keep the ball rolling as long as possible so that they can extricate as much personal wealth and influence as possible. Maybe AGI makes all the problems go away. But, failing that, they get out relatively scot-free when it all collapses. And they don't owe anything to the public. And no one is going to bring them up on fraud charges or any other kind of criminal charges. So, while the world is burning around them (including their former companies), they have the money and connections to acquire property and businesses that are actually productive. It's the Russian oligarch playbook. They're the kings of a struggling society on the brink of failure, but they heard "kings" and said, "Let's go."
  - Muromec 8mo ago
    I generally agree with the sentiment, but it's not the russian oligarch playbook. The playbook is some kind of a variation of buying out a productive asset in a legacy industry under it's market price (because everything is on fire already), then using political or monopoly power to funnel (tax) money through it and into your pockets (the asset has to function, but doesn't have to provide a good quality of service due to not allocating proper maintenance). Sovereign AI fund and Microsoft are very close to that setup. If NYC subway would be sold to certain Elon and he will then jack up the prices and have the city hall to subsidize it still, but keep the quality of service the same, that would be more or less it. The other variation goes in reverse -- using the legacy asset and it's capture labor force to output some kind of a commodity that is sold below market price to a controlled company in a different jurisdiction, where it's resold at small discount of a market price. The company still has to function here too. Bonus points for not even owning the asset in question, but having effective control over it through the corrupt management, this way the government still pays the bills to keep it running at loss. What you are describing is actually very western thing, because it assumes you can exchange the asset into cash directly and then buy something with that liquidity, which assumes solid property rights. I'm not even talking about OpenAI being an actual tech company that just wasn't there before. It's not how oligarchy works in the places. Since the US is slowly moving in a direction of oligarchy, I think the actual reference will be helpful.
    - underlipton 8mo ago
      Please read Sarah Kendzior. What's happening under Trump is different from what's happened under other admins precisely because he's drawing from the Russian quasi-state/mob playbook, and not from the normal "socially-caustic Capitalism" one. The difference is that one seeks to maintain a state, and one seeks to dismantle it and replace it with a quasi-state, which exists mainly to interface with other the entities that are still playing in the nation-state system, but which internally functions almost completely as a projection of the power of the elites. You're conflating the assets the elites own before the state collapse with the ones they seek to acquire afterwards. The don't care if the ones from before function, because their only purpose is to be maximally extractive. Afterwards, there's no need to funnel tax money through the functional businesses they acquire; they are the company and state and the company is the service or product, so anyone interfacing with the product or service within the state is handing them their money. No laundering games necessary.
- arthurcolle 8mo ago
  Growth decoupled from labor costs
est31 8mo ago
> But the problem is that Toys R Us is spending $15, 20, or maybe even $50 (who knows?) to sell a $10 toy. It's like how Uber and Airbnb in the early days were burning loads of cash to build market share. People went to these services because they were cheaper. Then they would increase prices once they had a comfortable position. OpenAI is also in a rapidly transforming field where there are a lot of cost reductions happening, efficiency gains etc. Compared to say Uber which didn't provide a lot of efficiency gains.
- oblio 8mo ago
  > OpenAI is also in a rapidly transforming field where there are a lot of cost reductions happening, efficiency gains etc. But also ever increasing quality requirements. So we can't possibly know at this point if this is a market with high margins or not.
- tarsinge 8mo ago
  Uber and Airbnb have network effects. You cant increase price when there is no cost in switching.
  - cylemons 8mo ago
    I dont see how network effects applies to Uber/Airbnb because nothing stops drivers/hosts from listing their property in multiple such apps
    - matusp 8mo ago
      People continue using Airbnb because that's where the properties are listed. And owners keep listing properties because that's where the users are.
      - cylemons 8mo ago
        My point was that nothing stops hosts from listing their properties in AirBnb as well as a competitor. Unless AirBnb penalizes delisting or enforces price parity I guess?
Aditya_Garg 8mo ago
This is a common misconception OpenAI and others are already profitable on inference (inference is really really cheap) They are just heavily investing into the latest frontier The biggest risk is whether they can stay cutting edge, or if open source or others will catch up quickly.
- rasz 8mo ago
  >inference is really really cheap cough Sora cough
- parineum 8mo ago
  At the end of the day, they're still burning cash. Even if inference is cheap, it's also not hard to compete on. They aren't going to be a trillion dollar inference company. Eventually there will be a race to the bottom on inference price to the customer by companies that aren't trying to subsidize their GPU investments. OpenAI is spending money because they think they need to for their business to survive. They're hoping that the next big breakthrough just requires more compute and, somehow, that'll build them a moat.
  - zaphar 8mo ago
    OpenAI and quite honestly the others think they are in a race to AGI not the bottom. That's why they aren't concerning themselves with moats or cost. This is quite simply a massive bet that we've already cracked AGI and the rest is just funding the engineering to make it happen. I personally think we haven't cracked AGI yet but it doesn't change their calculus.
- vasco 8mo ago
  If you need to do the latter to be able to make money on the former, then you're not making money. Because if the latter requirement would disappear, inference margins would also drop.
- lelanthran 8mo ago
  > OpenAI and others are already profitable on inference (inference is really really cheap) If it's that cheap I'll soon be doing it self-hosted, or switching to a local provider. It's a race to the bottom for tokens-providers.

by dangus 8mo ago

SV_BubbleTime 8mo ago

OK, so absolutely good faith here what is the end game? Obviously, there’s a scenario of super power AI and then it’s a matter of continuing course. Electricity and silicon. What if you are right, and the scaling doesn’t work. It is too much power, time, hardware to improve… does openAI fold? Do they just actual use the models they have? Does everyone just decide that AI didn’t work and go back 5 years like it didn’t happen? Does the price change so that they have to be profitable making AI services expensive and rare instead of today where they are everywhere pointlessly? Or does this insane valuation only make sense with information you don’t have like insider scaling or efficiency news? Does China’s strategy of undercutting US value of models pay off bigly?

Flatterer3544 8mo ago
Why so extreme, most likely just AI winter for a while, then when tech and societies has caught up, the advancements begins again. It is not like we threw away the dotcom advances, they were just put on hold for a while..
underlipton 8mo ago
The people running these companies have a perverse incentive to keep the ball rolling as long as possible so that they can extricate as much personal wealth and influence as possible. Maybe AGI makes all the problems go away. But, failing that, they get out relatively scot-free when it all collapses. And they don't owe anything to the public. And no one is going to bring them up on fraud charges or any other kind of criminal charges. So, while the world is burning around them (including their former companies), they have the money and connections to acquire property and businesses that are actually productive. It's the Russian oligarch playbook. They're the kings of a struggling society on the brink of failure, but they heard "kings" and said, "Let's go."
- Muromec 8mo ago
  I generally agree with the sentiment, but it's not the russian oligarch playbook. The playbook is some kind of a variation of buying out a productive asset in a legacy industry under it's market price (because everything is on fire already), then using political or monopoly power to funnel (tax) money through it and into your pockets (the asset has to function, but doesn't have to provide a good quality of service due to not allocating proper maintenance). Sovereign AI fund and Microsoft are very close to that setup. If NYC subway would be sold to certain Elon and he will then jack up the prices and have the city hall to subsidize it still, but keep the quality of service the same, that would be more or less it. The other variation goes in reverse -- using the legacy asset and it's capture labor force to output some kind of a commodity that is sold below market price to a controlled company in a different jurisdiction, where it's resold at small discount of a market price. The company still has to function here too. Bonus points for not even owning the asset in question, but having effective control over it through the corrupt management, this way the government still pays the bills to keep it running at loss. What you are describing is actually very western thing, because it assumes you can exchange the asset into cash directly and then buy something with that liquidity, which assumes solid property rights. I'm not even talking about OpenAI being an actual tech company that just wasn't there before. It's not how oligarchy works in the places. Since the US is slowly moving in a direction of oligarchy, I think the actual reference will be helpful.
  - underlipton 8mo ago
    Please read Sarah Kendzior. What's happening under Trump is different from what's happened under other admins precisely because he's drawing from the Russian quasi-state/mob playbook, and not from the normal "socially-caustic Capitalism" one. The difference is that one seeks to maintain a state, and one seeks to dismantle it and replace it with a quasi-state, which exists mainly to interface with other the entities that are still playing in the nation-state system, but which internally functions almost completely as a projection of the power of the elites. You're conflating the assets the elites own before the state collapse with the ones they seek to acquire afterwards. The don't care if the ones from before function, because their only purpose is to be maximally extractive. Afterwards, there's no need to funnel tax money through the functional businesses they acquire; they are the company and state and the company is the service or product, so anyone interfacing with the product or service within the state is handing them their money. No laundering games necessary.
arthurcolle 8mo ago
Growth decoupled from labor costs

est31 8mo ago

> But the problem is that Toys R Us is spending $15, 20, or maybe even $50 (who knows?) to sell a $10 toy. It's like how Uber and Airbnb in the early days were burning loads of cash to build market share. People went to these services because they were cheaper. Then they would increase prices once they had a comfortable position. OpenAI is also in a rapidly transforming field where there are a lot of cost reductions happening, efficiency gains etc. Compared to say Uber which didn't provide a lot of efficiency gains.

oblio 8mo ago
> OpenAI is also in a rapidly transforming field where there are a lot of cost reductions happening, efficiency gains etc. But also ever increasing quality requirements. So we can't possibly know at this point if this is a market with high margins or not.
tarsinge 8mo ago
Uber and Airbnb have network effects. You cant increase price when there is no cost in switching.
- cylemons 8mo ago
  I dont see how network effects applies to Uber/Airbnb because nothing stops drivers/hosts from listing their property in multiple such apps
  - matusp 8mo ago
    People continue using Airbnb because that's where the properties are listed. And owners keep listing properties because that's where the users are.
    - cylemons 8mo ago
      My point was that nothing stops hosts from listing their properties in AirBnb as well as a competitor. Unless AirBnb penalizes delisting or enforces price parity I guess?

Aditya_Garg 8mo ago

This is a common misconception OpenAI and others are already profitable on inference (inference is really really cheap) They are just heavily investing into the latest frontier The biggest risk is whether they can stay cutting edge, or if open source or others will catch up quickly.

rasz 8mo ago
>inference is really really cheap cough Sora cough
parineum 8mo ago
At the end of the day, they're still burning cash. Even if inference is cheap, it's also not hard to compete on. They aren't going to be a trillion dollar inference company. Eventually there will be a race to the bottom on inference price to the customer by companies that aren't trying to subsidize their GPU investments. OpenAI is spending money because they think they need to for their business to survive. They're hoping that the next big breakthrough just requires more compute and, somehow, that'll build them a moat.
- zaphar 8mo ago
  OpenAI and quite honestly the others think they are in a race to AGI not the bottom. That's why they aren't concerning themselves with moats or cost. This is quite simply a massive bet that we've already cracked AGI and the rest is just funding the engineering to make it happen. I personally think we haven't cracked AGI yet but it doesn't change their calculus.
vasco 8mo ago
If you need to do the latter to be able to make money on the former, then you're not making money. Because if the latter requirement would disappear, inference margins would also drop.
lelanthran 8mo ago
> OpenAI and others are already profitable on inference (inference is really really cheap) If it's that cheap I'll soon be doing it self-hosted, or switching to a local provider. It's a race to the bottom for tokens-providers.