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Seeing a lot of tricks similar to how ridesharing companies tried to be "profitable" before going to IPO. Caveat: Thing have materially improved but really Uber

Seeing a lot of tricks similar to how ridesharing companies tried to be "profitable" before going to IPO. Caveat: Thing have materially improved but really Uber is carried by its insane Ads margins The idea of removing model training from your costs is a little wild tbh. The profitability of being able to serve a query wasn't really under question (nor is the margin expected to be anything less than 80%+) I think.

sphinxterai 12d ago
Well then you haven't listened to Ed Zitron or any of the other AI bubble doomers. His contention is that its worthless and they lose money on every query.
- embedding-shape 12d ago
  But isn't he taking all the costs into account, that created the experience? Rather than just literally the inference/serving infrastructure? Bananas way of calculating things if so, doesn't match reality at all.
- JumpCrisscross 12d ago
  Zitron is worthless–lying about numbers and not correcting the record when you're called out means you aren't trustworthy. Worse than that if you directionally agree with him, which I do.
  - rowanG077 12d ago
    He makes his money and fame by spewing bulshit as many grifters before him. Which unfortunately probably hides the real truth. That large labs do have potential problems with long term profitability.
- freejazz 12d ago
  isn't that when the training costs are actually accounted for?
  - dwaltrip 12d ago
    Not for operating profit. Training is a one-time cost that gets amortized across every query. And either way, the training of new base models will eventually slow from the current frantic pace.
    - freejazz 11d ago
      >Not for operating profit. Training is a one-time cost that gets amortized across every query. But people are saying its not part of the calculation to generate the cost of a query... >And either way, the training of new base models will eventually slow from the current frantic pace. Sure, maybe.
      - deleted 11d ago
        [deleted]
embedding-shape 12d ago
> The idea of removing model training from your costs is a little wild tbh. Yeah, I didn't believe they'd claim something like that. But yes indeed, from the article: > Anthropic's gross margins are above 80% before accounting for revenue shared with distribution partners, including Amazon (AMZN.O), opens new tab, and the cost of training its model, Is this how all AI companies calculate if they're profitable or not, by removing the highest costs? What a circus.
- SlightlyLeftPad 12d ago
  I believe this is a new accounting method called “phantasmagorical accounting.”
- sandeepkd 12d ago
  The way I read it, they are convincing the investors that they can fool the larger population convincingly. At the end of the day the investor term is misnomer for big institutional investors, given that these people are managing other people money where they always make out a certain percentage of fees despite the outcome.
- _diyar 12d ago
  > Anthropic has told shareholders that its adjusted operating income will be positive for a second straight quarter, the Financial Times reported on Sunday, citing multiple people with knowledge of the matter. Note this claim is about „operating profit“, which commonly is the revenue - operating expenses (COGS, rent, payroll). This does not include RnD cost. >Anthropic's gross margins are above 80% before accounting for revenue shared with distribution partners, including Amazon (AMZN.O), and the cost of training its model, the newspaper said. Gross margin is typically (revenue - COGS) / revenue. Thus, both statements above seem generally in line with commonly accepted accounting standards.
  - yread 12d ago
    If you are sharing revenue (royalties, licenses based on revenue, costs that scale directly with revenue) doesnt that count as cost of goods sold?
aesthesia 12d ago
> The profitability of being able to serve a query wasn't really under question In one sense, yes, but I do see people question it regularly.
- surgical_fire 12d ago
  I still question it. It's very light on details by just casually dropping they have 80% margins. I smell bullshit on this. It is certainly not above them to play accounting tricks to pretend to be anywhere near profitable. If you create a machine that can turn a dollar into 5, you don't dillute ownership of the machine, you use your fabulous profits to expand production. Anthropic, on the other hand, raises money like crazy, and seems desperate to IPO.
throwawaysleep 12d ago
> The profitability of being able to serve a query wasn't really under question (nor is the margin expected to be anything less than 80%+) I think. HN had long debates about whether AI inference could even be affordable from a compute perspective.
JumpCrisscross 12d ago
> idea of removing model training from your costs is a little wild tbh It's one of several metrics and tries to estimate steady-state profitability. It's the only one being leaked because it's the most sensational one. But don't assume cash-flow profitability is negative just because you don't know it.
awongh 12d ago
I didn't realize how much money Uber makes from ads.... Why does every business devolve into an ad platform?
- agentultra 12d ago
  Might be because most hit their maximum growth but need to keep growing indefinitely or risk becoming a “mature” company?
- s1artibartfast 12d ago
  Because consumers don't care much about ads and prefer them to even minor cost differences.
- throwawaysleep 12d ago
  Any business where people are looking at a screen should probably sell ads.
  - dwaltrip 12d ago
    Vomit. We should ban 90% of ads. They are mostly net negative on society.
TSiege 12d ago
I think part of the big push to "slow down AI development" is to add some sort of regulatory pressure that will give them sort cover to train less models and slow their burn rates
itkovian_ 12d ago
I can’t count the number of times I’ve heard variants of ‘they’re losing money on every query’ and ‘I’m getting 10k worth of tokens for $200’ over the last year. People clearly believed serving margins were -ve
- gcr 12d ago
  I think the latter half of your post is missing
  - kubelsmieci 12d ago
    Hehe, he reached limit of his tokens /s
s1artibartfast 12d ago
Who do you think is being tricked exactly? I can guarantee it isn't the team of lawyers and analysts at their investors firms.

sphinxterai 12d ago

Well then you haven't listened to Ed Zitron or any of the other AI bubble doomers. His contention is that its worthless and they lose money on every query.

embedding-shape 12d ago
But isn't he taking all the costs into account, that created the experience? Rather than just literally the inference/serving infrastructure? Bananas way of calculating things if so, doesn't match reality at all.
JumpCrisscross 12d ago
Zitron is worthless–lying about numbers and not correcting the record when you're called out means you aren't trustworthy. Worse than that if you directionally agree with him, which I do.
- rowanG077 12d ago
  He makes his money and fame by spewing bulshit as many grifters before him. Which unfortunately probably hides the real truth. That large labs do have potential problems with long term profitability.
freejazz 12d ago
isn't that when the training costs are actually accounted for?
- dwaltrip 12d ago
  Not for operating profit. Training is a one-time cost that gets amortized across every query. And either way, the training of new base models will eventually slow from the current frantic pace.
  - freejazz 11d ago
    >Not for operating profit. Training is a one-time cost that gets amortized across every query. But people are saying its not part of the calculation to generate the cost of a query... >And either way, the training of new base models will eventually slow from the current frantic pace. Sure, maybe.
    - deleted 11d ago
      [deleted]

embedding-shape 12d ago

> The idea of removing model training from your costs is a little wild tbh. Yeah, I didn't believe they'd claim something like that. But yes indeed, from the article: > Anthropic's gross margins are above 80% before accounting for revenue shared with distribution partners, including Amazon (AMZN.O), opens new tab, and the cost of training its model, Is this how all AI companies calculate if they're profitable or not, by removing the highest costs? What a circus.

SlightlyLeftPad 12d ago
I believe this is a new accounting method called “phantasmagorical accounting.”
sandeepkd 12d ago
The way I read it, they are convincing the investors that they can fool the larger population convincingly. At the end of the day the investor term is misnomer for big institutional investors, given that these people are managing other people money where they always make out a certain percentage of fees despite the outcome.
_diyar 12d ago
> Anthropic has told shareholders that its adjusted operating income will be positive for a second straight quarter, the Financial Times reported on Sunday, citing multiple people with knowledge of the matter. Note this claim is about „operating profit“, which commonly is the revenue - operating expenses (COGS, rent, payroll). This does not include RnD cost. >Anthropic's gross margins are above 80% before accounting for revenue shared with distribution partners, including Amazon (AMZN.O), and the cost of training its model, the newspaper said. Gross margin is typically (revenue - COGS) / revenue. Thus, both statements above seem generally in line with commonly accepted accounting standards.
- yread 12d ago
  If you are sharing revenue (royalties, licenses based on revenue, costs that scale directly with revenue) doesnt that count as cost of goods sold?

aesthesia 12d ago

> The profitability of being able to serve a query wasn't really under question In one sense, yes, but I do see people question it regularly.

surgical_fire 12d ago
I still question it. It's very light on details by just casually dropping they have 80% margins. I smell bullshit on this. It is certainly not above them to play accounting tricks to pretend to be anywhere near profitable. If you create a machine that can turn a dollar into 5, you don't dillute ownership of the machine, you use your fabulous profits to expand production. Anthropic, on the other hand, raises money like crazy, and seems desperate to IPO.

throwawaysleep 12d ago

> The profitability of being able to serve a query wasn't really under question (nor is the margin expected to be anything less than 80%+) I think. HN had long debates about whether AI inference could even be affordable from a compute perspective.

JumpCrisscross 12d ago

> idea of removing model training from your costs is a little wild tbh It's one of several metrics and tries to estimate steady-state profitability. It's the only one being leaked because it's the most sensational one. But don't assume cash-flow profitability is negative just because you don't know it.

awongh 12d ago

I didn't realize how much money Uber makes from ads.... Why does every business devolve into an ad platform?

agentultra 12d ago
Might be because most hit their maximum growth but need to keep growing indefinitely or risk becoming a “mature” company?
s1artibartfast 12d ago
Because consumers don't care much about ads and prefer them to even minor cost differences.
throwawaysleep 12d ago
Any business where people are looking at a screen should probably sell ads.
- dwaltrip 12d ago
  Vomit. We should ban 90% of ads. They are mostly net negative on society.

TSiege 12d ago

I think part of the big push to "slow down AI development" is to add some sort of regulatory pressure that will give them sort cover to train less models and slow their burn rates

itkovian_ 12d ago

I can’t count the number of times I’ve heard variants of ‘they’re losing money on every query’ and ‘I’m getting 10k worth of tokens for $200’ over the last year. People clearly believed serving margins were -ve

gcr 12d ago
I think the latter half of your post is missing
- kubelsmieci 12d ago
  Hehe, he reached limit of his tokens /s

s1artibartfast 12d ago

Who do you think is being tricked exactly? I can guarantee it isn't the team of lawyers and analysts at their investors firms.