Give me a billion and I'll have 500M of revenue in no time by selling dollars at 50 cents.
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Why are we treating OpenAI and Anthropic differently than say, Amazon or Uber? Both companies invested in growth for many years before making a profit. Most tech companies in the last 2-3 decades lost money for years before making a profit.
Why are we saying that OpenAI and Anthropic can't do the same?
Two reasons. They somewhat broke even, and kept getting investment. The potential for quasi monopoly was obvious.
Openai can't claim either.
How did Uber somewhat break even? They lost $34b before making a profit.
Uber was only on a path to monopoly in the US, not world wide. It’s lost to local competitors in most countries. And it can get disrupted by self driving cars soon.
OpenAI’s SOTA LLM training smells like a natural monopoly or duopoly to me. The cost to train the smartest models keep increasing. Most competitors will bow out as they do not have the revenue to keep competing. You can already see this with a few labs looking for a niche instead of competing head on with Anthropic and OpenAI.
The cost of copying SOTA models though is super cheap and doesn’t take super long.
How do you distill when OpenAI and Anthropic inevitably move to tasks running in the cloud? IE. Go buy this extremely hard to get concert ticket for me.
Distilling might only be effective in the chat bot dominant era. We are about to move to an agents era.
Furthermore, I’m guessing distilling will get harder and harder. Claude Code leak shows some primitive anti distilling methods already. There’s research showing that models know when it’s being benchmarked. Who’s to say Anthropic and OpenAI aren’t able to detect when their models are being distilled?
even ignoring distillation, so long as hardware or ml get better over time, training a new model from scratch is cheaper the later you do it
If hardware gets better over time, they also get better for OpenAI.
Yep the poster is assuming efficiencies will not come.
Absolutely they will. And this is a huge problem for OAI - given Google is targeting vertical integration, they will acquire a cost-advantage. As long as the model performance is good enough, they will kick OAI and Anthropic out in the long-run.
The valuations of OAI and Anthropic are nonsense. A true valuation would incorporate failure risk, which is natural for startups/fast growing and money losing firms. Anyone who takes them serious is incredibly delusional.
> How did Uber somewhat break even? They lost $34b before making a profit.
It took them ~14 years to lose that $34 billion. Some projections suggest that OpenAI has lost a third of that in a single quarter. Even the most optimistic projections indicate that they're losing that much every 2-3 years. There's talk that they might lose ~$150B before profitability.
These are just numbers on a page to regular people, but $34 billion and $150 billion are very different numbers.
Uber is a taxi company hoping for a monopoly in the US. OpenAI is a software company hoping for a monopoly in many counties.
Worse, Google can afford to outspend them in this game and basically run them both out of money.
Amazon had a clear business model. They had positive gross margin from, if not day 1, then pretty close to it.
I remain skeptical of Uber.
Sure, maybe OpenAI and Anthropic will make it work. It's not impossible. But it's far from guaranteed.
OpenAI and Anthropic have positive gross margins for inference.
Uber generates about $1b in profit yearly now.
> OpenAI and Anthropic have positive gross margins for inference.
Maybe, if you take their word for it, and treat the models as capital assets rather than part of the COGS for the inference product. That's pretty far off from where Amazon was at.
>Most tech companies in the last 2-3 decades lost money for years
Yes
>before making a profit.
No
It's not even remotely comparable. Uber burnt some $30B over a decade or so.
It seems like it is comparable based on what you just said.
OpenAI have burned nearly 25 times what Uber did, it has more competitors, billions of dollars in obligations and no clear way to profitability.
The problem for OpenAI is that the cost of getting them where they are now has been to high and competitors can now establish themselves for much less money.
> Why are we treating OpenAI and Anthropic differently than say, Amazon or Uber?
The dame Uber that lost close to 30 billion dollars over 10 years to subsidize its price dumping?
No, no we are not treating OpenAI differently than Uber