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Warren Buffet way Revolutionary technology + massive adoption ≠ good investment Investors have poured money into a bottomless pit, attracted by the growth and

Warren Buffet way Revolutionary technology + massive adoption ≠ good investment Investors have poured money into a bottomless pit, attracted by the growth and glamour of the industry. The airline industry since its birth has had a collective net loss, in aggregate, despite moving hundreds of millions of people. Commodity Product, no switching costs. Infinite competition

aurareturn 2mo ago
It isn't a commodity product in my opinion. Far from it. I think it will ultimately be a monopoly or duopoly for SOTA. The mid to low end is commodity, yes. But SOTA models are not commodities. The number of competitors for SOTA drops by a few every year. The winners make more money, get more revenue, buy more compute, train better model with compute, buy best talent, and the cycle goes. I think it's easier to fall behind and never catch back up than people think. One disastrous training run can leave a lab months to a year behind. For example, Meta's disastrous LLAMA 4 models. Meta is lucky to have their ads business as a funding source. However, Anthropic's revenue is growing so fast, that ability to use ads as a funding source to stay in the race may not last much longer for Meta. To me, SOTA LLM training is very much like new chip fab nodes. One disastrous node can put you behind for many years or forever. The cost to build the next chip node doubles every every 4 years (Rock's law). The cost to train the next SOTA model likely has some similar power law which means over time, it's too costly for losers to keep up. The only reason TSMC isn't a defacto monopoly for advanced chip nodes is strictly due to geopolitics.
- orwin 2mo ago
  But who needs SOTA models, really? It was necessary 10 months ago, but now?
  - aurareturn 2mo ago
    All things equal, let's say your SaaS startup uses GPT 5.0 (release 10 months ago) and my business uses Fable 5. We have the same business goals, same talent level, same strategies. I think the chance of my business winning against yours is higher. I can't prove it. It's just my opinion.
    - abtinf 2mo ago
      Ceteris paribus, all other things are never equal.
      - 4fggfd 2mo ago
        [flagged]
      - shususjhs 2mo ago
        That’s nonsense and saying “nah-ah” with Latin won’t improve your argument. If we couldn’t isolate a variable we would never be able to argue. Using a better model is an advantage even if only for the coders. There are a million ways to turn that into profit, both proper and not so proper but that’s the beauty of ceteris paribus: the other factors do not matter now.
        dgellow 2mo ago
        > There are a million ways to turn that into profit Mind pointing where that profit for companies consuming AI is? I don’t mean hypotheticals. Where are the proof that current AI contributes positively to ROI?
    - 4fggfd 2mo ago
      [dead]
    - Valodim 2mo ago
      It's easy to agree to that, but you're disregarding that the resources you spend on the stronger model could be allocated elsewhere. Conversely, you're assuming that spending more on AI will always yield better results and be worth it, compared to spending the money on other things. This might actually still hold true now, or or at least many actors in the market behave that way. But I'm not so sure there isn't a cliff to that effect. At some point, if SOTA models remain expensive, it'll turn into a market advantage to figure out how to get things done without depending on the most expensive tooling available. Similar scenario, different phrasing: if your company relies on overqualified workers to deliver 100% quality, the market may still decide that it's fine to go with 90% quality for 50% the price.
- 4fggfd 2mo ago
  [dead]
- dgellow 2mo ago
  There is literally no moat…
  - aurareturn 2mo ago
    Then start your company and go compete against OpenAI and Anthropic then. Heck, just take Kimi K3 and start your training run from that.
    - dgellow 2mo ago
      thank you for that great contribution to the discussion...
onion2k 2mo ago
The airline industry since its birth has had a collective net loss, in aggregate, despite moving hundreds of millions of people. The industrialisation essentially socializes the cost across a lot more people though, so even though it doesn't make a profit it does mean people can have air travel without it costing millions per flight for the few people who can afford it. Essentially the economies of scale from having lots of flights isn't enough to make it profitable but they are enough to make it affordable. There's no spare money to extract from the airline industry but it's still very useful. The same could be true for AI in the long term. Sometimes the goal of an industry is to exist rather than to make a profit, because the benefit to society is more important than profit. People don't like that though so they do a bit of creative accounting or head-in-the-sand denial around it.
- tehjoker 2mo ago
  in the case of airplanes the only thing thats the private market is the planes and the ticket, the entire system of airports, safety, navigation is state subsidized and when the market fails it gets bailed out. the oil is subsidized by constant warfare. it's just an illusion for reganomics so a few rich ppl can make a buck off of a public utility.
  - eru 2mo ago
    How does constant warfare subsidise oil? In case you haven't noticed: both the latest US-vs-Iran war and Russia-vs-Ukraine war have made oil and gas a lot more expensive than the peaceful counterfactual.
    - tehjoker 2mo ago
      That's because they fucked up. I don't know where you've been but we have been dominating oil markets since the end of WW2. The dollar is sometimes called the "petrodollar" because we shifted from a gold basis to a petrol exchange basis. The latest fuck ups may signal the beginning of the end.
- cloudie78 2mo ago
worik 2mo ago
> The airline industry since its birth has had a collective net loss True. But it has added enormous benefits to many other parts of the economy. Airlines do not capture that value. That is where the AI companies are. Adding value they cannot capture
- dgellow 2mo ago
  Yep, and similar to airlines, the real money is in suppliers

aurareturn 2mo ago

It isn't a commodity product in my opinion. Far from it. I think it will ultimately be a monopoly or duopoly for SOTA. The mid to low end is commodity, yes. But SOTA models are not commodities. The number of competitors for SOTA drops by a few every year. The winners make more money, get more revenue, buy more compute, train better model with compute, buy best talent, and the cycle goes. I think it's easier to fall behind and never catch back up than people think. One disastrous training run can leave a lab months to a year behind. For example, Meta's disastrous LLAMA 4 models. Meta is lucky to have their ads business as a funding source. However, Anthropic's revenue is growing so fast, that ability to use ads as a funding source to stay in the race may not last much longer for Meta. To me, SOTA LLM training is very much like new chip fab nodes. One disastrous node can put you behind for many years or forever. The cost to build the next chip node doubles every every 4 years (Rock's law). The cost to train the next SOTA model likely has some similar power law which means over time, it's too costly for losers to keep up. The only reason TSMC isn't a defacto monopoly for advanced chip nodes is strictly due to geopolitics.

orwin 2mo ago
But who needs SOTA models, really? It was necessary 10 months ago, but now?
- aurareturn 2mo ago
  All things equal, let's say your SaaS startup uses GPT 5.0 (release 10 months ago) and my business uses Fable 5. We have the same business goals, same talent level, same strategies. I think the chance of my business winning against yours is higher. I can't prove it. It's just my opinion.
  - abtinf 2mo ago
    Ceteris paribus, all other things are never equal.
    - 4fggfd 2mo ago
      [flagged]
    - shususjhs 2mo ago
      That’s nonsense and saying “nah-ah” with Latin won’t improve your argument. If we couldn’t isolate a variable we would never be able to argue. Using a better model is an advantage even if only for the coders. There are a million ways to turn that into profit, both proper and not so proper but that’s the beauty of ceteris paribus: the other factors do not matter now.
      - dgellow 2mo ago
        > There are a million ways to turn that into profit Mind pointing where that profit for companies consuming AI is? I don’t mean hypotheticals. Where are the proof that current AI contributes positively to ROI?
  - 4fggfd 2mo ago
    [dead]
  - Valodim 2mo ago
    It's easy to agree to that, but you're disregarding that the resources you spend on the stronger model could be allocated elsewhere. Conversely, you're assuming that spending more on AI will always yield better results and be worth it, compared to spending the money on other things. This might actually still hold true now, or or at least many actors in the market behave that way. But I'm not so sure there isn't a cliff to that effect. At some point, if SOTA models remain expensive, it'll turn into a market advantage to figure out how to get things done without depending on the most expensive tooling available. Similar scenario, different phrasing: if your company relies on overqualified workers to deliver 100% quality, the market may still decide that it's fine to go with 90% quality for 50% the price.
4fggfd 2mo ago
[dead]
dgellow 2mo ago
There is literally no moat…
- aurareturn 2mo ago
  Then start your company and go compete against OpenAI and Anthropic then. Heck, just take Kimi K3 and start your training run from that.
  - dgellow 2mo ago
    thank you for that great contribution to the discussion...

onion2k 2mo ago

The airline industry since its birth has had a collective net loss, in aggregate, despite moving hundreds of millions of people. The industrialisation essentially socializes the cost across a lot more people though, so even though it doesn't make a profit it does mean people can have air travel without it costing millions per flight for the few people who can afford it. Essentially the economies of scale from having lots of flights isn't enough to make it profitable but they are enough to make it affordable. There's no spare money to extract from the airline industry but it's still very useful. The same could be true for AI in the long term. Sometimes the goal of an industry is to exist rather than to make a profit, because the benefit to society is more important than profit. People don't like that though so they do a bit of creative accounting or head-in-the-sand denial around it.

tehjoker 2mo ago
in the case of airplanes the only thing thats the private market is the planes and the ticket, the entire system of airports, safety, navigation is state subsidized and when the market fails it gets bailed out. the oil is subsidized by constant warfare. it's just an illusion for reganomics so a few rich ppl can make a buck off of a public utility.
- eru 2mo ago
  How does constant warfare subsidise oil? In case you haven't noticed: both the latest US-vs-Iran war and Russia-vs-Ukraine war have made oil and gas a lot more expensive than the peaceful counterfactual.
  - tehjoker 2mo ago
    That's because they fucked up. I don't know where you've been but we have been dominating oil markets since the end of WW2. The dollar is sometimes called the "petrodollar" because we shifted from a gold basis to a petrol exchange basis. The latest fuck ups may signal the beginning of the end.
cloudie78 2mo ago

worik 2mo ago

> The airline industry since its birth has had a collective net loss True. But it has added enormous benefits to many other parts of the economy. Airlines do not capture that value. That is where the AI companies are. Adding value they cannot capture

dgellow 2mo ago
Yep, and similar to airlines, the real money is in suppliers