4 ms·

"profitable without COGS" doesn't actually mean anything at all does it?

by nemomarx 12d ago

JumpCrisscross 12d ago
Profitable without Capex, i.e. gross margin. Inference is included in COGS. Capex (training) is not. That's reasonable.
- cmdli 12d ago
  This also includes revenue sharing with distribution partners, which should probably be in COGS.
- freejazz 12d ago
  Isn't training necessary for the end-product? How is it not a cost to generate the output if you can't generate the output without having done the training? Seems more like saying that a car is profitable product when you don't have to account for the steel that its made from. Seems completely disingenuous.
  - icedchai 12d ago
    It's an accounting trick.
  - seizethecheese 12d ago
    In what case is capex (for any company) not required for the end product? Are you arguing capex is disingenuos as a concept? In your car example the training is much like setting up the manufacturing line. I think the issue here is that the capex depreciates super fast since the models obsolete really fast.
    - freejazz 12d ago
      If my company sells widgets and dongles, capex for the dongle line does not figure into widget COGS
- icedchai 12d ago
  Is it really capex though? New models are being constantly trained, released at least quarterly, while old ones become obsolete. Training costs vary, but never disappear.
  - famouswaffles 12d ago
    New models are constantly being trained, but they don't have to be constanatly trained. If OpenAI or Anthropic 'just' wanted to be a profitable business, they could ease up on that, but they're both racing to create a machine to can automate all or most human labour.
    - jlorentz1 12d ago
      If they stop racing, the wave of open models will pass them and their inference margins will drop to zero. A realistic model of their operating costs surely must include ongoing training.
      - famouswaffles 12d ago
        >If they stop racing, the wave of open models will pass them and their inference margins will drop to zero. 1. ChatGPT's ~billion weekly active users aren't going to give a shit about some open source model, and neither would most of Anthropic's Enterprise cutomers. 2. Open AI and Anthropic are in a race between themselves, not open source model trainers. There's a reason those models are consistently several months behind and often perform much worse than benchmarks indicate. In the first place, they're only as close as they currently are from the distillation attacks on Anthropic and OpenAI. If they slowed down, they would slow down too.
        jlorentz1 12d ago
        1. They absolutely would, eventually, if open models surpassed Ant & OAI's flagships. Keep in mind "surpassed" encompasses both output quality and cost-saving architecture innovations like DSA, which may not be possible to apply to old models (and may take advantage of new hardware!) 2. "They're only as close..." is not natural law. You really think open weights couldn't catch up to a fixed target if Beijing makes it a priority? And what happens to their valuations if they abandon the goal of building AGI? There is no strategic alternative to constant training for these companies, which is why they're, uh, constantly training.
mrweasel 12d ago
Is that basically: We'd be making money, if we didn't have to build the product?

"profitable without COGS" doesn't actually mean anything at all does it?

JumpCrisscross 12d ago

Profitable without Capex, i.e. gross margin. Inference is included in COGS. Capex (training) is not. That's reasonable.

cmdli 12d ago
This also includes revenue sharing with distribution partners, which should probably be in COGS.
freejazz 12d ago
Isn't training necessary for the end-product? How is it not a cost to generate the output if you can't generate the output without having done the training? Seems more like saying that a car is profitable product when you don't have to account for the steel that its made from. Seems completely disingenuous.
- icedchai 12d ago
  It's an accounting trick.
- seizethecheese 12d ago
  In what case is capex (for any company) not required for the end product? Are you arguing capex is disingenuos as a concept? In your car example the training is much like setting up the manufacturing line. I think the issue here is that the capex depreciates super fast since the models obsolete really fast.
  - freejazz 12d ago
    If my company sells widgets and dongles, capex for the dongle line does not figure into widget COGS
icedchai 12d ago
Is it really capex though? New models are being constantly trained, released at least quarterly, while old ones become obsolete. Training costs vary, but never disappear.
- famouswaffles 12d ago
  New models are constantly being trained, but they don't have to be constanatly trained. If OpenAI or Anthropic 'just' wanted to be a profitable business, they could ease up on that, but they're both racing to create a machine to can automate all or most human labour.
  - jlorentz1 12d ago
    If they stop racing, the wave of open models will pass them and their inference margins will drop to zero. A realistic model of their operating costs surely must include ongoing training.
    - famouswaffles 12d ago
      >If they stop racing, the wave of open models will pass them and their inference margins will drop to zero. 1. ChatGPT's ~billion weekly active users aren't going to give a shit about some open source model, and neither would most of Anthropic's Enterprise cutomers. 2. Open AI and Anthropic are in a race between themselves, not open source model trainers. There's a reason those models are consistently several months behind and often perform much worse than benchmarks indicate. In the first place, they're only as close as they currently are from the distillation attacks on Anthropic and OpenAI. If they slowed down, they would slow down too.
      - jlorentz1 12d ago
        1. They absolutely would, eventually, if open models surpassed Ant & OAI's flagships. Keep in mind "surpassed" encompasses both output quality and cost-saving architecture innovations like DSA, which may not be possible to apply to old models (and may take advantage of new hardware!) 2. "They're only as close..." is not natural law. You really think open weights couldn't catch up to a fixed target if Beijing makes it a priority? And what happens to their valuations if they abandon the goal of building AGI? There is no strategic alternative to constant training for these companies, which is why they're, uh, constantly training.

mrweasel 12d ago

Is that basically: We'd be making money, if we didn't have to build the product?