4 ms·

I.e., the demand for programming tokens turns out to be quite elastic.

by piker 4mo ago

steveBK123 4mo ago
I would imagine it only gets worse in the face of good-enough open/chinese/local models too right? Microsoft adding Deepseek support already as I recall? That is - for any definition of "they are behind X months" then eventually they get to the point Claude was in January when the world freaked out, but at 1/10th the cost. A lot of firms are going to mandate that is good enough for their developers.
- sdesol 4mo ago
  > Microsoft adding Deepseek support I believe this hasn't been confirmed yet but I think it speaks to a bigger problem for the AI companies which is, if you give capable developers a good reasoning LLM, they can make it work like it was a really expensive model. I believe we are 100% at the stage of good enough for the vast majority of tech companines. Fable and others will be more valuable for non-traditional tech companies. I read somewhere that the chinese AI companies are sharing knowledge and it would not surprise me if the government is applying pressure by saying work together or else. If they work together, they can truly commoditize LLMs and with China ramping up hardware support for AI, I see the future being inference speed and hardware being the moat.
  - thewebguyd 4mo ago
    If hardware becomes the moat, the US frontier labs are screwed. We have AWS, Azure, GCP. All three have or are making inference silicon. LLMs become just another service in the public cloud's large service catalog, and open weight wins. Which makes sense to me. Selling a chatbot interface/model access to the general public was never going to be a viable long term play. You still need developers to wrap the models into specialized tools. Queue the Jobs quote "It's a feature, not a product."
    - sdesol 4mo ago
      The big thing is, the western world has moved so much of the manufacturing to China and think a lot of people will not forgive Samsung and others, so I can see China owning a good portion of the supply chain.
      - johnvanommen 4mo ago
        > The big thing is, the western world has moved so much of the manufacturing to China I built my career on Solaris and it got rugpulled by Linux. That wasn’t because of software, it was because of hardware. Linux’s cost advantage existed because Sun hardware had huge margins, because their software was basically free. AI will probably be a repeat of this. Whoever can come up with the hardware solution that minimizes the cost per token will win. I believe the 5090 still holds this crown, but someone certainly knows better than I do.
        fragmede 4mo ago
        but not all tokens are equal and vertical integration is the name of the game. Solaris did not lose to Linux, it lost to the LAMP stack on commodity x86 hardware. without the "AMP" part, Linux would've been dead in the water.
        fluoridation 4mo ago
        The L part of LAMP is kinda irrelevant at the application level, though. From the point of view of running the software, SAMP or LAMP doesn't make any difference. So yes, Solaris lost the competition with Linux to be the first letter of the acronym.
        rescbr 4mo ago
        While people fly to the US to buy Macs at a lower price and bring them back in their backpacks, I guess I'll be flying to HK to buy a Chinese GPU rather sooner than later...
        trollbridge 4mo ago
- CuriouslyC 4mo ago
  100%. There will be strict quotas on the expensive models and day to day work will be done on the cheap models that are "good enough" with escalation to the metered models when the cheaper options are spinning their wheels. Eventually the US frontier lab APIs will only get the most heavily triaged work that multiple tiers of cheaper Chinese open weight models have failed on. And of course the C-suite will have unlimited access to Mythos tier models, which they'll use to summarize reports, while passing down mandates to rank and file to increase usage of less expensive models.
- verdverm 4mo ago
  Yup, we are in the process of getting access to US hosted Chinese models. I've been petitioning Google and our rep, we will see but I suspect they will cave eventually. Gemini sucks and if they don't sell what their customers want, we go shopping around.
  - bloppe 4mo ago
    What you want is already available on OpenRouter and a million other services, but sure, you can wait 18 months for it to be on GCP.
    - verdverm 4mo ago
      > We are in the process... OpenRouter charges an extra 5.5%, Fireworks does not, Google is separate, but I doubt it will take 18 months. They are already aware they are losing business. OpenRouter is the wrong abstraction for enterprise, we only need one model provider, not everyone in the world. Nor do we want to have to worry about failover going to providers we don't want.
- michaelchisari 4mo ago
  I'm set up to use Qwen 3.6 locally if needed. It's solid, it does what I need, it runs on my laptop and it's free. But that's because I never got on the "run three dozen agents in a ralph loop" trend or other high-token usage methods. The way I use AI is discrete and targeted and it seems that's how it will be for everyone once the economics settle.
- Gigachad 4mo ago
  Our org straight up turned off our AI access after the GitHub copilot price increase blew right through the budget. At least on a personal I feel like I’ve been getting the same amount of work done but I have to think harder rather than sitting back and prompting and waiting.
- wookmaster 4mo ago
  My company banned Chinese models but I’ve got opencode setup with some open source coding models just in case. Luckily our laptops have some RAM (Mac)
jayd16 4mo ago
If folks won't pay a higher price, doesn't that mean it's inelastic?
- steveBK123 4mo ago
  Elastic demand means buyers are highly sensitive; a price hike causes a massive drop in purchases. Inelastic demand means buyers aren’t very sensitive; they keep buying regardless of price
  - jayd16 4mo ago
    Ah alright I have it backwards then.
- unholiness 4mo ago
  "Elastic" in economics happens to refers to how elastic the supply/demand is when the price changes (not vice versa, as you're describing). So e.g. an inelastic demand means the quantity demanded changes very little when the price doubles.

I.e., the demand for programming tokens turns out to be quite elastic.

by piker 4mo ago

I.e., the demand for programming tokens turns out to be quite elastic.

I would imagine it only gets worse in the face of good-enough open/chinese/local models too right? Microsoft adding Deepseek support already as I recall? That is - for any definition of "they are behind X months" then eventually they get to the point Claude was in January when the world freaked out, but at 1/10th the cost. A lot of firms are going to mandate that is good enough for their developers.

sdesol 4mo ago
> Microsoft adding Deepseek support I believe this hasn't been confirmed yet but I think it speaks to a bigger problem for the AI companies which is, if you give capable developers a good reasoning LLM, they can make it work like it was a really expensive model. I believe we are 100% at the stage of good enough for the vast majority of tech companines. Fable and others will be more valuable for non-traditional tech companies. I read somewhere that the chinese AI companies are sharing knowledge and it would not surprise me if the government is applying pressure by saying work together or else. If they work together, they can truly commoditize LLMs and with China ramping up hardware support for AI, I see the future being inference speed and hardware being the moat.
- thewebguyd 4mo ago
  If hardware becomes the moat, the US frontier labs are screwed. We have AWS, Azure, GCP. All three have or are making inference silicon. LLMs become just another service in the public cloud's large service catalog, and open weight wins. Which makes sense to me. Selling a chatbot interface/model access to the general public was never going to be a viable long term play. You still need developers to wrap the models into specialized tools. Queue the Jobs quote "It's a feature, not a product."
  - sdesol 4mo ago
    The big thing is, the western world has moved so much of the manufacturing to China and think a lot of people will not forgive Samsung and others, so I can see China owning a good portion of the supply chain.
    - johnvanommen 4mo ago
      > The big thing is, the western world has moved so much of the manufacturing to China I built my career on Solaris and it got rugpulled by Linux. That wasn’t because of software, it was because of hardware. Linux’s cost advantage existed because Sun hardware had huge margins, because their software was basically free. AI will probably be a repeat of this. Whoever can come up with the hardware solution that minimizes the cost per token will win. I believe the 5090 still holds this crown, but someone certainly knows better than I do.
      - fragmede 4mo ago
        but not all tokens are equal and vertical integration is the name of the game. Solaris did not lose to Linux, it lost to the LAMP stack on commodity x86 hardware. without the "AMP" part, Linux would've been dead in the water.
        fluoridation 4mo ago
        The L part of LAMP is kinda irrelevant at the application level, though. From the point of view of running the software, SAMP or LAMP doesn't make any difference. So yes, Solaris lost the competition with Linux to be the first letter of the acronym.
      - rescbr 4mo ago
        While people fly to the US to buy Macs at a lower price and bring them back in their backpacks, I guess I'll be flying to HK to buy a Chinese GPU rather sooner than later...
      - trollbridge 4mo ago
CuriouslyC 4mo ago
100%. There will be strict quotas on the expensive models and day to day work will be done on the cheap models that are "good enough" with escalation to the metered models when the cheaper options are spinning their wheels. Eventually the US frontier lab APIs will only get the most heavily triaged work that multiple tiers of cheaper Chinese open weight models have failed on. And of course the C-suite will have unlimited access to Mythos tier models, which they'll use to summarize reports, while passing down mandates to rank and file to increase usage of less expensive models.
verdverm 4mo ago
Yup, we are in the process of getting access to US hosted Chinese models. I've been petitioning Google and our rep, we will see but I suspect they will cave eventually. Gemini sucks and if they don't sell what their customers want, we go shopping around.
- bloppe 4mo ago
  What you want is already available on OpenRouter and a million other services, but sure, you can wait 18 months for it to be on GCP.
  - verdverm 4mo ago
    > We are in the process... OpenRouter charges an extra 5.5%, Fireworks does not, Google is separate, but I doubt it will take 18 months. They are already aware they are losing business. OpenRouter is the wrong abstraction for enterprise, we only need one model provider, not everyone in the world. Nor do we want to have to worry about failover going to providers we don't want.
michaelchisari 4mo ago
I'm set up to use Qwen 3.6 locally if needed. It's solid, it does what I need, it runs on my laptop and it's free. But that's because I never got on the "run three dozen agents in a ralph loop" trend or other high-token usage methods. The way I use AI is discrete and targeted and it seems that's how it will be for everyone once the economics settle.
Gigachad 4mo ago
Our org straight up turned off our AI access after the GitHub copilot price increase blew right through the budget. At least on a personal I feel like I’ve been getting the same amount of work done but I have to think harder rather than sitting back and prompting and waiting.
wookmaster 4mo ago
My company banned Chinese models but I’ve got opencode setup with some open source coding models just in case. Luckily our laptops have some RAM (Mac)

jayd16 4mo ago

If folks won't pay a higher price, doesn't that mean it's inelastic?

steveBK123 4mo ago
Elastic demand means buyers are highly sensitive; a price hike causes a massive drop in purchases. Inelastic demand means buyers aren’t very sensitive; they keep buying regardless of price
- jayd16 4mo ago
  Ah alright I have it backwards then.
unholiness 4mo ago
"Elastic" in economics happens to refers to how elastic the supply/demand is when the price changes (not vice versa, as you're describing). So e.g. an inelastic demand means the quantity demanded changes very little when the price doubles.