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If Anthropic's compute is fully saturated then the Claude code power users do represent an opportunity cost to Anthropic much closer to $5,000 then $500. Anthr

If Anthropic's compute is fully saturated then the Claude code power users do represent an opportunity cost to Anthropic much closer to $5,000 then $500. Anthropic's models may be similar in parameter size to model's on open router, but none of the others are in the headlines nearly as much (especially recently) so the comparison is extremely flawed. The argument in this article is like comparing the cost of a Rolex to a random brand of mechanical watch based on gear count.

Aeolun 7mo ago
Opportunity cost is not the same thing as actual cost. They might have made more money if they were capable of selling the API instead of CC, but I would never tell my company to use CC all the time if I didn’t have a personal subscription.
- eaglelamp 7mo ago
  You’re looking through the wrong end of the telescope. An investor is buying opportunity and it is a real cost to them.
  - kaliqt 7mo ago
    Still makes no sense as they’d lose revenue, data, and scale if they don’t subsidize.
d1sxeyes 7mo ago
But opportunity cost is not actual cost. “If everyone just kept paying but used our service less we would be more profitable” is true, but not in any meaningful way. Are Anthropic currently unable to sell subscriptions because they don’t have capacity?
- eru 7mo ago
  Opportunity costs are real. In many cases they are more real than 'actual costs'. However, I otherwise agree with you.
- MaxikCZ 7mo ago
  > Are Anthropic currently unable to sell subscriptions because they don’t have capacity? Absolutely! Im currently paying $170 to google to use Opus in antigravity without limit in full agent mode, because I tried Anthropic $20 subscription and busted my limit within a single prompt. Im not gonna pay them $200 only to find out I hit the limit after 20 or even 50 prompts. And after 2 more months my price is going to double to over $300, and I still have no intention of even trying the 20x Max plan, if its really just 20x more prompts than Pro.
  - dtech 7mo ago
    This has a absolutely nothing to do with whether they're limited by available compute...
    - MaxikCZ 7mo ago
      What? Wouldn't they give me more than 1 prompt of compute for my $20, if they had spare?
      - esrauch 7mo ago
        I don't think that logically follows. They have a business model and are trying to capture more revenue, fully saturating your computer isn't obviously a good business strategy.
  - cicko 7mo ago
    If anything, you are confirming that $170 covers heavy Opus use profitably for the provider.
- mike_hearn 7mo ago
  The opportunity cost isn't selling subscriptions, the cost is the gap between what they could sell the GPU time for via their API vs what they're selling it for in a flat rate subscription. If you assume API demand is unlimited and GPU supply is fixed, then the opportunity cost is the 'real' loss of revenue that comes from redirecting supply away from customers willing to pay more to customers willing to pay less.
  - d1sxeyes 7mo ago
    > If you assume API demand is unlimited Doing a lot of heavy lifting here. Not everyone on a subscription plan would convert to a 200USD/mo API consumer.
    - mike_hearn 7mo ago
      No but demand comes from a lot of sources beyond vibe coders.
      - d1sxeyes 7mo ago
        True, but you need to run the optimisation function to calculate at what X does the increased revenue at lower margin from Pro Max subscribers outweigh the reduced revenue at higher margin for API consumers, and adjust your pricing to approach X. I'm sure that Anthropic have some very smart folks on that right now.
KronisLV 7mo ago
Don’t give them any ideas, please! I need my 100 USD subscription with generous Opus usage!
- eru 7mo ago
  Google's Antigravity has Opus access, and I suspect it's subsidised.
NooneAtAll3 7mo ago
> The argument in this article is like comparing the cost of a Rolex to a random brand of mechanical watch on gear count I mean... rolex is overpriced brand whose cost to consumers is mainly just marketting in itself. Its production cost is nowhere close to selling price and looking at gears is fair way of evaluating that
- fragmede 7mo ago
  > production cost is nowhere close to selling price When has production cost had anything to do with selling price?
  - eru 7mo ago
    Not directly. But if production cost is above selling price, you typically tend to get less production. And if production cost is (way) below selling price, that tends to invite competition.
YetAnotherNick 7mo ago
You can rent the GPUs and everything needed to run the model. Opportunity cost is not a real cost here. Only thing that matters is if the users would have paid $5000 if they don't have option to buy subscription. And I highly doubt they would have.
bob1029 7mo ago
> If Anthropic's compute is fully saturated then the Claude code power users do represent an opportunity cost to Anthropic much closer to $5,000 then $500. I think it's the other way around? Sparse use of GPU farms should be the more expensive thing. Full saturation means that we can exploit batching effects throughout.
- eaglelamp 7mo ago
  If they have spare capacity then there is no opportunity cost to selling $100 subscriptions for exactly that reason. If they don’t have spare capacity then, at the margin, they could replace a subscription user with API calls that make them $5000: that’s opportunity cost. If you own equity in Anthropic you should care about that cost. Maybe you are willing to tolerate it to win market share, but for you to make the most profit you need that cost to shrink.
nottorp 7mo ago
You know who also loves to use the term "opportunity cost"? The entertainment industry. They still tell you about how much money they're leaving on the table because people pirate stuff. What would happen in reality for entertainment is people would "consume" far less "content". And what would happen in reality for Anthropic is people would start asking themselves if the unpredictability is worth the price. Or at best switch to pay as you go and use the API far less.
the_gipsy 7mo ago
I prefer car analogies

Aeolun 7mo ago

Opportunity cost is not the same thing as actual cost. They might have made more money if they were capable of selling the API instead of CC, but I would never tell my company to use CC all the time if I didn’t have a personal subscription.

eaglelamp 7mo ago
You’re looking through the wrong end of the telescope. An investor is buying opportunity and it is a real cost to them.
- kaliqt 7mo ago
  Still makes no sense as they’d lose revenue, data, and scale if they don’t subsidize.

d1sxeyes 7mo ago

But opportunity cost is not actual cost. “If everyone just kept paying but used our service less we would be more profitable” is true, but not in any meaningful way. Are Anthropic currently unable to sell subscriptions because they don’t have capacity?

eru 7mo ago
Opportunity costs are real. In many cases they are more real than 'actual costs'. However, I otherwise agree with you.
MaxikCZ 7mo ago
> Are Anthropic currently unable to sell subscriptions because they don’t have capacity? Absolutely! Im currently paying $170 to google to use Opus in antigravity without limit in full agent mode, because I tried Anthropic $20 subscription and busted my limit within a single prompt. Im not gonna pay them $200 only to find out I hit the limit after 20 or even 50 prompts. And after 2 more months my price is going to double to over $300, and I still have no intention of even trying the 20x Max plan, if its really just 20x more prompts than Pro.
- dtech 7mo ago
  This has a absolutely nothing to do with whether they're limited by available compute...
  - MaxikCZ 7mo ago
    What? Wouldn't they give me more than 1 prompt of compute for my $20, if they had spare?
    - esrauch 7mo ago
      I don't think that logically follows. They have a business model and are trying to capture more revenue, fully saturating your computer isn't obviously a good business strategy.
- cicko 7mo ago
  If anything, you are confirming that $170 covers heavy Opus use profitably for the provider.
mike_hearn 7mo ago
The opportunity cost isn't selling subscriptions, the cost is the gap between what they could sell the GPU time for via their API vs what they're selling it for in a flat rate subscription. If you assume API demand is unlimited and GPU supply is fixed, then the opportunity cost is the 'real' loss of revenue that comes from redirecting supply away from customers willing to pay more to customers willing to pay less.
- d1sxeyes 7mo ago
  > If you assume API demand is unlimited Doing a lot of heavy lifting here. Not everyone on a subscription plan would convert to a 200USD/mo API consumer.
  - mike_hearn 7mo ago
    No but demand comes from a lot of sources beyond vibe coders.
    - d1sxeyes 7mo ago
      True, but you need to run the optimisation function to calculate at what X does the increased revenue at lower margin from Pro Max subscribers outweigh the reduced revenue at higher margin for API consumers, and adjust your pricing to approach X. I'm sure that Anthropic have some very smart folks on that right now.

KronisLV 7mo ago

Don’t give them any ideas, please! I need my 100 USD subscription with generous Opus usage!

eru 7mo ago
Google's Antigravity has Opus access, and I suspect it's subsidised.

NooneAtAll3 7mo ago

> The argument in this article is like comparing the cost of a Rolex to a random brand of mechanical watch on gear count I mean... rolex is overpriced brand whose cost to consumers is mainly just marketting in itself. Its production cost is nowhere close to selling price and looking at gears is fair way of evaluating that

fragmede 7mo ago
> production cost is nowhere close to selling price When has production cost had anything to do with selling price?
- eru 7mo ago
  Not directly. But if production cost is above selling price, you typically tend to get less production. And if production cost is (way) below selling price, that tends to invite competition.

YetAnotherNick 7mo ago

You can rent the GPUs and everything needed to run the model. Opportunity cost is not a real cost here. Only thing that matters is if the users would have paid $5000 if they don't have option to buy subscription. And I highly doubt they would have.

bob1029 7mo ago

> If Anthropic's compute is fully saturated then the Claude code power users do represent an opportunity cost to Anthropic much closer to $5,000 then $500. I think it's the other way around? Sparse use of GPU farms should be the more expensive thing. Full saturation means that we can exploit batching effects throughout.

eaglelamp 7mo ago
If they have spare capacity then there is no opportunity cost to selling $100 subscriptions for exactly that reason. If they don’t have spare capacity then, at the margin, they could replace a subscription user with API calls that make them $5000: that’s opportunity cost. If you own equity in Anthropic you should care about that cost. Maybe you are willing to tolerate it to win market share, but for you to make the most profit you need that cost to shrink.

nottorp 7mo ago

You know who also loves to use the term "opportunity cost"? The entertainment industry. They still tell you about how much money they're leaving on the table because people pirate stuff. What would happen in reality for entertainment is people would "consume" far less "content". And what would happen in reality for Anthropic is people would start asking themselves if the unpredictability is worth the price. Or at best switch to pay as you go and use the API far less.

the_gipsy 7mo ago

I prefer car analogies