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This line: "this is my main argument against the valuation of frontier labs. It’s not that AI won’t create that much value, it’s that they won’t capture it." T
by SwellJoe 3mo ago
This line: "this is my main argument against the valuation of frontier labs. It’s not that AI won’t create that much value, it’s that they won’t capture it."
That is a very astute and concise way to explain everything about how the frontier labs are behaving and how they're trying to push more people to pay token rates for the best models. At the current subscription prices ($100 or $200 a month for a generous, though bounded, amount of tokens), frontier models are a no-brainer, most folks and companies will use them. But, at token rates, 10x or 100x the cost of open models or what I was spending on the frontier models a month ago? That is a harder question to answer "yes" to. I certainly wouldn't spend $1000 a month for the best model, much less $10,000; my employer might pay $1000/month, but definitely not $10,000. The frontier labs need everyone to answer "yes" to spending 100x what they currently spend to justify the valuations, and it's just not going to happen as long as everyone knows how to make these models.
Both OpenAI and Anthropic are trying to figure that out now. Anthropic, in particular, has their finger on the trigger...they want to push people to usage-based billing for Fable. But, OpenAI released 5.6 Sol, competitive with Fable (or close enough), and it's available via subscription (even the $20 subscription!), and there's no moat keeping someone from switching. If Anthropic really does end Fable access on the subscription plans in a few days, I predict a large market move back toward OpenAI.
The market isn't going to bear the cost of making the frontiers investment make sense.
- arscan 3mo agoWho is going to end up capturing all this value being generated is going to be very interesting. Back in 1980, who’d have thought MS would capture the majority of the value from PCs over the next 3 decades, and not IBM?
- SwellJoe 3mo agoSo far, it seems to be the reverse of that disruption. Hardware companies, Nvidia, Apple, AMD, Intel, ARM, memory companies, are all having record-setting quarters, and it's actual profits, not subsidized by investors and circular investments (though the hardware companies are investing in the AI companies to keep the hype train rolling).
- deleted 3mo ago[deleted]
- BatFastard 3mo agoI miss OS2
- asdff 3mo agoWas ms even making that much money compared to actual hardware manufacturers? Ms is licensing the os sure but I mean most of the spend was going to the actual workstation hardware and periphery I’d expect. Including stuff not directly tech like herman miller chairs.
- SwellJoe 3mo agoYes! Microsoft made buckets and buckets of money on products with a unit cost that approaches zero. Hardware was vastly less profitable and there's a graveyard full of PC and server makers that didn't survive. Even the most profitable PC makers (Dell and Compaq during the rise of Microsoft) didn't make anything like Microsoft money. I don't know how to apply those lessons to AI, as long as AI requires so much hardware to operate. If small models actually get capable enough, the shape of the industry changes drastically.
- fragmede 3mo agoHow capable do they need to be? You can run distillations on a Pixel 10 Pro today, it's just not packaged up neatly yet.
- SwellJoe 3mo agoI'm super enthusiastic about small models, but let's be realistic. A distillation is not the whole model (and, in fact, a lot of the small distillations on HuggingFace are worse than the base model...most of the Qwen 3.6 Opus/Fable/whatever distillations get weirder on some dimensions than Qwen 3.6 alone, as I understand it). There are little models that are very good for their size. I say nice things about Gemma 4 damned near every day. But, I'm not writing code with it. I am using it for finding security bugs, though, as the 31b variant is outrageously good at it for its size: https://swelljoe.com/post/gemma-4-exceeds-expectations/ https://swelljoe.com/post/gemma-4-exceeds-expectations/ and I'm also using it as a base for my own training experiments, specifically the 12b which is small enough to train a LoRA for on my local hardware so I don't have to rent cloud GPUs. The 12b QAT can run on your Pixel 10 Pro today and is frightfully smart for its size, and has great vision capabilities. But, I keep saying "for its size". You have to be realistic about what tasks these self-hosted models can do. They are getting better though. Gemma 4 31b is competitive with models 10 times its size from a year ago. That's remarkable, and indicates where things are going.
- havercosine 3mo agoIt is honestly hard to predict. We are currently in everyone is building website/mobile app/gadget era of AI. Very few places are questioning what is worth building. Short term, we can compare this to 2-3 recent (mini) revolutions: internet, mobile, cloud. Then the answer is somewhat predictable and (somewhat sad personally). Companies owning the main distribution of intelligence (big labs) or distribution of the app/cloud layer (Google, MSFT, AWS) will make most of the money. In fact Google looks well positioned that way with owning intelligence, cloud (and even hardware, if they can get TPUs right as commercial product). Long term view is interesting and somewhat satisfying (again, personally). We can compare this to industrial revolution, but for intelligence instead of physical labour. I hope, to borrow from Alan Kay's words, the total value generated will be more than what few big labs can capture. Though we will also see normal market dynamics of boom and bust in play. Companies building something useful, patiently will keep winning the markets. But only to get challenged by newer modes of the technology emerging. In this long term view, the technology per se doesn't offer monopolistic profits to big labs. I think Anthropic is well aware of this and they are trying to extract as much cash from white collar work automation as they can before things are democratised. Contrary to popular opinion, they are also trying to seek a regulatory capture here by to maintain monopolistic position in the US market by scare mongering about China and open source. Its a case study how they managed to keep the good boy image of themselves while doing this. In the end, I hope the technology emerges as electricity or combustion engine cars. Yes early pioneers (e.g. Ford) were perhaps able to make lot of money. But eventually, the technology was too important to allow one party to have monopoly and we had an abundance market which enabled jobs and money for a lot more people. Edit, postscript : Dario, Sam and even Jensen will end up looking like the new the John D. Rockefeller's of this era. I'm personally hoping Demis Hassabis actually solves something much more important (problems in diseases, biology etc) with AI.
- darkwater 3mo ago> we can compare this to 2-3 recent (mini) revolutions: internet, mobile, cloud. I would not put "cloud" at the same level as Internet and mobile. Cloud is just a layer on top of hardware that in the end makes almost no difference for Internet to exist and operates. Said differently: I doubt the world would be different nowadays without "the cloud". But it would definitely be different without Internet or mobile (smart)phones.
- bluegatty 3mo agoFrontier labs will figure out all sorts of ways to wiggle into the value chain beyond being commodities.
- SwellJoe 3mo agoWhen do you reckon they'll start doing that?
- bluegatty 3mo agoThey are raking in 10's of billions, growing revenues astronomically as we speak. That's not sign of commodity actor, just the opposite.
- SwellJoe 3mo agoBut, that's not what you said they'd do. I can switch to a different model with almost zero cost. That's the definition of a commodity.
- fc417fc802 3mo agoThey can do both things at once (and appear to be doing so).
- bluegatty 3mo agoNo, you switched to another SOTA model. You didn't switch to 'Random Corner Store Token Seller' down the street, did you? There 2-3 top players, that is not commodity. Commodity is when there are enough that none of them have market power or can set prices. 'Commodity' means you buy your tokens from the Grocery Store on their loan plan. Like consumer credit is a commodity. FYI predict this is roughly the way it will stay. We will develop a lot of use for Chinese Open-ish models etc. but the SOTA's will maintain their place for a lot of things.
- bluefirebrand 3mo ago
- overgard 3mo agoYeah, I've started reaching for local models more. I'll use frontier models at the current cost for tasks that the local ones aren't great at, but when the rug pull inevitably comes, to me they're not worth 1000-2000 a month. And honestly, for my purposes I don't really need models to advance a lot. Like, I tried fable a couple of times and there just wasn't much there to justify its use to me. Opus did the same thing much cheaper. I think an interesting question is going to be, if models are a commodity, who is going to want to foot the very expensive bill to train them? I'm sure training cost will drop.. eventually, but I doubt it will happen fast enough for any of these companies.
- goolz 3mo agoYep, at those prices points I am most certainly just going to do whatever is in my power to run local. And to be honest, I think in the near future, we will get to a point where local models will be just good enough that it will not matter.
- QuantumGood 3mo agoJust to clarify your implication: Fable subscription usage was just (re)extended to July 19
- datadrivenangel 3mo agoAnd now their comment is good next week! The rug pull getting extended doesn't mean it won't come.
- QuantumGood 3mo agoTheir comment was good as is because of the extension (not a nitpick, a clarification)
- maxgashkov 3mo agoIf they haven't relaxed the classifier this makes little to no difference as the model is essentially unusable no matter the token quotas.
- anuramat 3mo agowhat are you working on? I only hit the guardrails twice after burning through two weeks of 20x max plan, both times on ML stuff; still more than I'd want to, but not unusable
- vardalab 3mo agoA lot of stuff that has to do with VLLM and troubleshooting and compiling and building VLLM, compiling kernel, or just dealing with setting up eval for local models, it punts to Opus 4.8 on a regular basis. To the point that I have given up on using it for that purpose.
- dannyw 3mo agoHey, at least you’re not being silently nerfed or sabotaged by Fable’s PEFTs or steering vectors instead. Those classifiers are only meant to target DeepSeek et al, not routine LLM or ML work /s.
- Lt_Riza_Hawkeye 3mo agoWhile I do agree there will be disruption we haven't seen yet, my company is already spending >$40k/day for a "frontier model", so who knows. Then again, they're not using that for coding
- edot 3mo agoWhat are they / you using it for in such quantities?
- stavros 3mo agoI know that some companies are spending around that much per day per engineer. They just want to go as fast as possible.
- seattle_spring 3mo agoThey're spending $10 million USD per engineer on LLMs?
- stavros 3mo agoSorry, I meant per month, not per day.
- datadrivenangel 3mo ago40k per engineer per month? ~1.3k per day?
- hintymad 3mo ago> But, at token rates, 10x or 100x the cost of open models or what I was spending on the frontier models a month ago And we can't ignore the power of "good enough". GLM5.2 may not be as good as the SOTA models, but it can be good enough for most, of not all, of our needs.
- andy99 3mo agoThe funny thing about Fable, is we all but know it will be obsolete in a month or two. Between their embargo shenanigans (which IMO they could have avoided just by not pretending it was dangerous) and continuing to give access, whatever marginal advantage it had was essentially wasted. It would have been an interesting experiment to charge more for it right away and see what the market would bear, rather than tease it for long enough for it to be presumably superseded any time now by whatever is next.
- Giefo6ah 3mo agoThey clearly didn't have the compute capacity ready to release Fable at any price that would have seemed "worth it".
- fc417fc802 3mo agoI don't see how that matters? It's a treadmill. Sure Fable-v1 will be obsolete but the shiny new Fable-v2 won't. Don't view their shenanigans as regarding Fable but rather their current cutting edge model.
- fragmede 3mo agoMythos was first publicly known via a leak at the end of March, 2026. Given that Fable is the public version of Mythos, six months gets us September for when the next big leap will happen.
- SV_BubbleTime 3mo agoI love that we can rely on the past being prologue!! It’s super helpful for everyone to have become ridiculously wealthy.
- SV_BubbleTime 3mo ago>(which IMO they could have avoided just by not pretending it was dangerous) Best marketing in a long time though. They fucking called it Mythos and built mythical claims about it. I mean… really hats off to the PR team.
- matwood 3mo ago> It’s not that AI won’t create that much value, it’s that they won’t capture it. Think airlines - both passenger and freight. They have never come close to capturing all the economic value they enable.
- pyrophane 3mo agoAnd airline stocks are typically a bad investment and Delta has been called a bank that operates an airline due the the amount of their revenue that comes from credit card fees.
- gyomu 3mo agoIn 5-10 years an Apple Watch will run a Fable level model locally. I don’t think we (hackers) should worry too much about token cost inflation. The current wave of providers, that’s another story.
- anuramat 3mo agowhy would you need a local fable at that point? AGI will surely solve all the problems in the world at that point
- epicureanideal 3mo agoI’m kidding but.. it’ll be great if in 10 years we look back on this and your joke has become a prophecy.
- worik 3mo agogreat???
- anuramat 3mo agoI'm somewhat serious -- if you think AI will scale that well, you can't really make predictions like that I personally don't think the weight efficiency will improve that much; if anything big does happen, I expect it to be about scalable architectures and continual learning
- slopinthebag 3mo agoYou can’t seriously think an Apple Watch will have hundreds of gigs of vram in 10 years?
- sejje 3mo agoMaybe he thinks the model will be smaller.
- slopinthebag 3mo ago
- roncesvalles 3mo ago>5.6 Sol, competitive with Fable (or close enough), and it's available via subscription (even the $20 subscription!) It's not comparable because OpenAI caps thinking to High in the ChatGPT "Chat" interface (and the "Work" thing where it actually does let us use Extra or Max is fucking shit). GPT 5.6 Sol (High) is almost certainly worse than Opus 4.8 (Extra), and nowhere close to Fable (Extra). I literally got a refund for my $20 OpenAI subscription after playing around with 5.6 Sol for a couple of hours (yes even on Codex) because it's so unusable and I'd rather just use Fable today and 4.8 Extra starting tomorrow, still within my $20 Anthropic plan. And I'm not even poor.
- vardalab 3mo agoI don't know what your evals are, but you need to reevaluate them.
- fragmede 3mo ago5.6 Sol isn't Fable, but calling it unusable is a bit much.
- roncesvalles 3mo agoIt's unusable only because I can't set 5.6 to Extra thinking in the "Chat" tab, and the "Work" feature that does let me use Extra is totally gimped for coding tasks. I'd rather use Opus 4.8 Extra/Max instead of Sol High (look up the benchmarks, thinking level is everything). It is quite literally unusable to me.
- fragmede 3mo agoOh so you used it but the results were sub par, not that you were unable to use it.
- blovescoffee 3mo ago> I'd rather use Is different than > quite literally unusable
- intothemild 3mo ago> That is a very astute and concise way to explain everything about how the frontier labs are behaving and how they're trying to push more people to pay token rates for the best models. Are they really the best models? Like take anthropic. Without mythos, it's the what? Third best? Sure openAI just leapfrogged them but .. seriously to get there it's a giant model that costs insane per token. Nobody needs that, it's like NVIDIA or Intel claiming they have the best gaming performance, but to achieve that they are using more power per frame than anything else.
- Capricorn2481 3mo ago> Are they really the best models? Like take anthropic. Without mythos, it's the what? Third best? Everybody is just judging all of this by vibes anyway. Every week, a new model comes out and there's 500 comments simping for it within the first hour of its release. Both OpenAI and Anthropic have been practically indistinguishable to me.
- SwellJoe 3mo ago"Are they really the best models?" Yes. I mean, most people agree they are. I've used all of the serious contenders (well not Grok 4.5, because Musk, and not Meta Spark because Zuck, but everything else I've used on at least a couple of projects to get a feel for them). My experience roughly matches the vibes. But, Fable is remarkable when it doesn't refuse to do the work (which it does, quite a lot, since my areas of interest are security and training specialist models). Anyway, the vibes strongly indicate Fable is the best model, but not by an amount that is noticeable to most people. You could pick any of the top 10 models on this chart and do most of the tasks most people are doing with models: https://artificialanalysis.ai/#intelligence https://artificialanalysis.ai/#intelligence
- lubujackson 3mo agoBest comparison is Anthropic/OpenAI are AOL/Prodigy. Massive market capture, no moat. Little by little, the convenience and weight will be scraped off, but they (probably) won't roll over and die for quite a while. By the same measure, NVDA is Cisco, providing the backbone and capturing a ton of the early benefits, but soon becomes furniture while the excitement moves further up the chain.
- somenameforme 3mo agoI think a contemporary comparison is OpenAI's DALL-E. Predating but foreshadowing LLMs they went closed source and tried to monetize it, but within a few years the entire concept just fell apart. Now you can download free open source software, that works better than DALL-E and runs fine on a plain old video card, and for orders of magnitude lower cost. I think we can start to see the outlines of this happening with LLMs as well. Local models have gone from being proofs of concept to something that is at least remotely comparable to contemporary models, and the gap there is closing faster than SOTA models are pushing it forward. Local models still suffer from high hardware requirements, but so did early image gen models where typical consumer hardware was insufficient for efficiently running them.
- darkwater 3mo ago> Now you can download free open source software, that works better than DALL-E and runs fine on a plain old video card, and for orders of magnitude lower cost. Ok, I completely missed that one. Can you point me in the right direction?
- somenameforme 3mo agoSure, for a balance between usability and power I'd recommend fooocus. [1] AmuseAI [2] is an alternative that is extremely plug-and-play which can be especially handy with AMD hardware, but is a bit less powerful and also censored by default. ComfyUI [3] is an advanced tool for rich customization and what not. However it's anything but comfy if you're not already quite knowledgeable in this domain - I would not recommend it for a first tool. [1] - https://github.com/lllyasviel/Fooocus https://github.com/lllyasviel/Fooocus [2] - https://github.com/saddam213/AmuseAI https://github.com/saddam213/AmuseAI [3] - https://github.com/comfy-org/comfyui https://github.com/comfy-org/comfyui
- zombot 3mo ago> Both OpenAI and Anthropic are trying to figure that out now. That's a little late now, they should have tried to figure that out at the beginning. But then, it wasn't their own money they were burning in the meantime.
- madaxe_again 3mo agoI’d pay $1,000/mo for the best model - but it would have to be good enough that I could reliably concierge out my existence to it. I spend way too much of my time wading through a diffuse mire of admin, and if I could farm that out for that little, and have it done and done well, I’d do it in a heartbeat.
- bauldursdev 3mo agoWhy wouldn't inference get less expensive? The frontier will probably always be expensive but imagine if in 5-10 years Fable 5 is considered a low tier antiquated model, it is still somewhat capable.