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Why would revenue continue to grow at this rate? Enterprises are becoming increasingly aware that the best models can be used for planning and then cheaper mod

Why would revenue continue to grow at this rate? Enterprises are becoming increasingly aware that the best models can be used for planning and then cheaper models for execution - all the way to local models for some tasks. Add in increasing competition from Chinese models… I’m not convinced this revenue growth is guaranteed.

danielmarkbruce 4mo ago
global gdp is over 100 trillion. Something like 50-60% is paid to labor. If you assume AI takes a good chunk of labor, the market is gigantic. Really really really gigantic.
- margalabargala 4mo ago
  Most labor by any measurement is not knowledge work like software engineering.
  - danielmarkbruce 4mo ago
    If by most, you literally mean > 50%, sure. But I've heard it quoted that knowledge work in advanced economies is something like 40%. So, we are still talking extremely large numbers.
    - dofm 4mo ago
      They are also the higher earners who buy more of the things. Henry Ford said he needed to pay his workers enough that they could afford his cars.
      - danielmarkbruce 4mo ago
        I meant by dollar amount, not headcount.
        dofm 4mo ago
        OK, but look, again, if you take away a good chunk of the money that goes to employing people — that is what you mean, right? This money is lost to the labour market one way or another — then don't they buy less stuff because they have less money? It's the same as if you had taken half their jobs and forced everyone into underemployment through job sharing. Your formulation forswears them finding replacement jobs because the money will have gone to AI companies instead, and it necessarily implies people having less money to spend.
        danielmarkbruce 4mo ago
        No, it doesn't. The economy can grow. Money isn't some fixed amount thing.
- bayarearefugee 4mo ago
  > If you assume AI takes a good chunk of labor, the market is gigantic. Really really really gigantic. But without labor the entire economy also collapses into a singularity beyond which nothing really makes sense anymore, so there's that.
  - dofm 4mo ago
    And it possibly does not take eliminating much of the labour over the span of less than a lifetime to fundamentally break economic signalling. Much smaller rates of unemployment have worsened stagflation cycles due to various policy traps we are certainly not immune to repeating.
- dofm 4mo ago
  AI bots don’t buy consumer goods and other services. If people don’t get work they stop buying things. If people don’t buy things, companies don’t make money. If companies don’t make money they won’t buy — or have a reason to buy —- AI companies’ services. You cannot eliminate a significant chunk of labour cost without causing demand collapse. People saying that there is money in eliminating labour costs at that scale are not doing the whole of the calculation.
  - danielmarkbruce 4mo ago
    I'm not suggesting the people then sit idle. The economy can grow, services can be added, the % done by AI drops, but the raw value of it doesn't. It's just to show that the market is extremely large. Like agriculture. That market has grown significantly through time, even though it's shrunk dramatically as a % of GDP.
    - dofm 4mo ago
      How can people be economically active if their jobs are eliminated from the economy? At best they job-share, and demand still collapses, just in slightly different ways. AI cannot make money as an alternative to large scale employment, because essentially all the clients of those AI businesses will see demand for their products and services collapse. AI bots don’t go to In-N-Out Burger or Disneyland. Anything else is fantasy maths, albeit commonplace fantasy in the AI industry at the moment.
      - danielmarkbruce 4mo ago
        Look at the history of farming. Tractors also don't go to disneyland.
        dofm 4mo ago
        Right, but at best (putting aside the tractor's magnifying effect in the Great Depression) you would be looking at employment displacement from one sector to another. Those people went on to other jobs. Here you are talking about a shift taking employment out of the economy full stop — taking the money that would have gone to "a good chunk of labor", to use your words, and giving it to AI firms. You are necessarily talking about job elimination en masse — it's the only way this hypothetical source of money is available. If you take labour out of the market, en masse, you cause demand to collapse. Because they won't be economically active!
- JSR_FDED 4mo ago
  That’s a good way of looking at it, I appreciate the different perspective. From your headline number you’d have to deduct non-knowledge work though. You’d also have to take into account the fact that while AI can often replace some tasks, it’s often not enough to replace the entire worker. For the high end knowledge worker jobs the corresponding token costs could be higher than the cost of wages. Given the demand you describe, would it even make a difference whether you invested in OpenAI or Anthropic?
spongebobstoes 4mo ago
because they have more research and better models coming building a Rube Goldberg machine on Chinese models might work okay, but it will be brittle, and is unlikely to work as well as the latest and greatest model from OpenAI the demand for intelligence is nearly limitless
- niemandhier 4mo ago
  Did you read the code dump Anthropic involuntary gifted us?
- JSR_FDED 4mo ago
  Why would it be a Rube Goldberg machine? You talk to the Chinese models through the exact same API as OpenAI. They do tool calling in the same way. They deliver 90% of the leading benchmarks at less than one tenth the cost. There’s also no reason to think they’ll always be lagging the US. At some point the scarcity of GPUs will be resolved, or they’ll brute-force the problem using less capable chips but leveraging their much lower energy costs to make this viable.
ted_dunning 4mo ago
Add in the fact that they claim 900 million weekly uniques. Pretending the growth and cost rates compound as described in the article, they will need to generate about 100x current revenue to growth out of their current hole. That sort of implies that they will have 10x the entire world's population as weekly uniques at that time. That seems unlikely.
- necovek 4mo ago
  They could have 2x customers spend 50x as much money too. I think it's more about contrasting it with world economy as a whole for a reality check.
- pu_pe 4mo ago
  It's not like their 10x revenue growth year-to-year was based on expanding their customer base 10x though. The vast majority of weekly users are not paying, so they are actually a cost right now, but could be converted into paying users or audience for ads in the future.
  - ted_dunning 4mo ago
    That's a fair point. My own experience with converting unpaid customers is that it is really hard.
ZaoLahma 4mo ago
> all the way to local models for some tasks. I think this is the key takeaway for the future of AI. Give tech a few years to catch up and we will likely have the functionally equivalent to today's models running on consumer grade hardware. From there it will explode, where "it" is how we use and interact with computers. AI will be integrated into just about every workflow. The business case in this future would be to sell the trained models to end users. The investment would be shifted towards the training of models and delivering updates, with revenue coming from model licenses, upgrades and cloud services for tasks that exceed the local capabilities.

danielmarkbruce 4mo ago

global gdp is over 100 trillion. Something like 50-60% is paid to labor. If you assume AI takes a good chunk of labor, the market is gigantic. Really really really gigantic.

margalabargala 4mo ago
Most labor by any measurement is not knowledge work like software engineering.
- danielmarkbruce 4mo ago
  If by most, you literally mean > 50%, sure. But I've heard it quoted that knowledge work in advanced economies is something like 40%. So, we are still talking extremely large numbers.
  - dofm 4mo ago
    They are also the higher earners who buy more of the things. Henry Ford said he needed to pay his workers enough that they could afford his cars.
    - danielmarkbruce 4mo ago
      I meant by dollar amount, not headcount.
      - dofm 4mo ago
        OK, but look, again, if you take away a good chunk of the money that goes to employing people — that is what you mean, right? This money is lost to the labour market one way or another — then don't they buy less stuff because they have less money? It's the same as if you had taken half their jobs and forced everyone into underemployment through job sharing. Your formulation forswears them finding replacement jobs because the money will have gone to AI companies instead, and it necessarily implies people having less money to spend.
        danielmarkbruce 4mo ago
        No, it doesn't. The economy can grow. Money isn't some fixed amount thing.
bayarearefugee 4mo ago
> If you assume AI takes a good chunk of labor, the market is gigantic. Really really really gigantic. But without labor the entire economy also collapses into a singularity beyond which nothing really makes sense anymore, so there's that.
- dofm 4mo ago
  And it possibly does not take eliminating much of the labour over the span of less than a lifetime to fundamentally break economic signalling. Much smaller rates of unemployment have worsened stagflation cycles due to various policy traps we are certainly not immune to repeating.
dofm 4mo ago
AI bots don’t buy consumer goods and other services. If people don’t get work they stop buying things. If people don’t buy things, companies don’t make money. If companies don’t make money they won’t buy — or have a reason to buy —- AI companies’ services. You cannot eliminate a significant chunk of labour cost without causing demand collapse. People saying that there is money in eliminating labour costs at that scale are not doing the whole of the calculation.
- danielmarkbruce 4mo ago
  I'm not suggesting the people then sit idle. The economy can grow, services can be added, the % done by AI drops, but the raw value of it doesn't. It's just to show that the market is extremely large. Like agriculture. That market has grown significantly through time, even though it's shrunk dramatically as a % of GDP.
  - dofm 4mo ago
    How can people be economically active if their jobs are eliminated from the economy? At best they job-share, and demand still collapses, just in slightly different ways. AI cannot make money as an alternative to large scale employment, because essentially all the clients of those AI businesses will see demand for their products and services collapse. AI bots don’t go to In-N-Out Burger or Disneyland. Anything else is fantasy maths, albeit commonplace fantasy in the AI industry at the moment.
    - danielmarkbruce 4mo ago
      Look at the history of farming. Tractors also don't go to disneyland.
      - dofm 4mo ago
        Right, but at best (putting aside the tractor's magnifying effect in the Great Depression) you would be looking at employment displacement from one sector to another. Those people went on to other jobs. Here you are talking about a shift taking employment out of the economy full stop — taking the money that would have gone to "a good chunk of labor", to use your words, and giving it to AI firms. You are necessarily talking about job elimination en masse — it's the only way this hypothetical source of money is available. If you take labour out of the market, en masse, you cause demand to collapse. Because they won't be economically active!
JSR_FDED 4mo ago
That’s a good way of looking at it, I appreciate the different perspective. From your headline number you’d have to deduct non-knowledge work though. You’d also have to take into account the fact that while AI can often replace some tasks, it’s often not enough to replace the entire worker. For the high end knowledge worker jobs the corresponding token costs could be higher than the cost of wages. Given the demand you describe, would it even make a difference whether you invested in OpenAI or Anthropic?

spongebobstoes 4mo ago

because they have more research and better models coming building a Rube Goldberg machine on Chinese models might work okay, but it will be brittle, and is unlikely to work as well as the latest and greatest model from OpenAI the demand for intelligence is nearly limitless

niemandhier 4mo ago
Did you read the code dump Anthropic involuntary gifted us?
JSR_FDED 4mo ago
Why would it be a Rube Goldberg machine? You talk to the Chinese models through the exact same API as OpenAI. They do tool calling in the same way. They deliver 90% of the leading benchmarks at less than one tenth the cost. There’s also no reason to think they’ll always be lagging the US. At some point the scarcity of GPUs will be resolved, or they’ll brute-force the problem using less capable chips but leveraging their much lower energy costs to make this viable.

ted_dunning 4mo ago

Add in the fact that they claim 900 million weekly uniques. Pretending the growth and cost rates compound as described in the article, they will need to generate about 100x current revenue to growth out of their current hole. That sort of implies that they will have 10x the entire world's population as weekly uniques at that time. That seems unlikely.

necovek 4mo ago
They could have 2x customers spend 50x as much money too. I think it's more about contrasting it with world economy as a whole for a reality check.
pu_pe 4mo ago
It's not like their 10x revenue growth year-to-year was based on expanding their customer base 10x though. The vast majority of weekly users are not paying, so they are actually a cost right now, but could be converted into paying users or audience for ads in the future.
- ted_dunning 4mo ago
  That's a fair point. My own experience with converting unpaid customers is that it is really hard.

ZaoLahma 4mo ago

> all the way to local models for some tasks. I think this is the key takeaway for the future of AI. Give tech a few years to catch up and we will likely have the functionally equivalent to today's models running on consumer grade hardware. From there it will explode, where "it" is how we use and interact with computers. AI will be integrated into just about every workflow. The business case in this future would be to sell the trained models to end users. The investment would be shifted towards the training of models and delivering updates, with revenue coming from model licenses, upgrades and cloud services for tasks that exceed the local capabilities.