We all just look at energy as a price. I think more people are concerned if our prices will go up, not how much energy it uses. The bigger question is water.
How much water do they use? Is it potable to begin with? Is it usable after? Will they drive prices up. These are one time builds with minimal jobs created after for a tech that could end my career. If I lose my job, I don’t also want to have no water and higher bills.
The talk about AI water usage exists because in Karen Hao’s book Empire of AI, she got water usage wrong by three orders of magnitude.[1] For data centers that use water cooling, it's almost always non-potable water, and it's usually returned to the body of water it was pumped out of (though slightly warmer).
If you're worried about water consumption, things like golf courses and farm subsidies for water-intensive crops are much bigger issues.
This is the venture model now though. Spend until profitable. Uber did it. It seems OpenAI could do it as well given we seem to be in a 2 horse race for foundation models and having capital to get better pushes them further ahead.
Uber’s situation was different, though. The reason Uber were bleeding money is because they purposefully made all their rides cheap to undercut the taxi businesses. People used Uber because it was cheaper than renting a taxi.
Now you can’t really find taxis anywhere, even at airports it’s a lot more difficult than it used to be.
Once the taxi business was disrupted enough, Uber’s pricing skyrocketed and customers had basically no other options for competition on pricing.
OpenAI basically created a new market. There is no AI chatbot incumbent to disrupt and swallow.
Uber/Lyft takeover had little to do with price (though, yes, they were cheaper) and everything to do with reliability and overall quality of service. Even though ride sharing industry lost money in subsidy arms race and side bets it was fundamentally sound in major metros since early on (similar to how Amazon was fundamentally sound from early on, despite not recognizing profit for a long time). Popular "analyses" kept equating Uber/Lyft with firms losing money on every sale with no path to fix it but the demand was always there as riders had already left taxis and transit on reliability and convenience grounds.
Some humans will need to interpret the thinking and apply it somewhere and take some responsibility for those decisions. If you think AI can do all that end to end it’s a different question but we’re nowhere near that right now.
Definitely, I’m not saying that AI can entirely replace humans. But AI is definitely replacing parts of many jobs. If AI companies raise their rates to be profitable, and it turns out that paying for profitable AI is not worth it vs paying for humans, that might be a sticky situation.
There will always be a competitor that can undercut the inference market. There is no "moat" given that you can self host decently capable LLM agents like Qwen3.6 on not super expensive hardware, like an AMD R9700, and still get competitive speeds to most cloud interfaces.
If you can self host it that easily, any Joe can scale it out much like shared web hosting, and shared web hosting or even dedicated rented boxes has always been cheaper than the big cloud providers.
I don't think OpenAI or Anthropic can reasonable compete in the long term if they can't achieve "AGI", and they won't, no matter what shareholders desire.
Actually the point is total cost wise outside of subsidy it is not cheaper than humans. the bigger problem is as the parent said open AI created a market. It is selling a commodity service with investor funds. There is no moat. your second sentence soon you won't be able to find human thinkers is on its face absurd, assuming the human race continues. Thinking is the human ecological niche.
For now, businesses are getting addicted to cheap tokens. As the screws get turned, business will debate whether they should spend budget on humans or tokens. What's further devastating is that humans are also becoming addicted to cheap tokens. Much human output is nowadays a token slopfest. People are becoming dumber too. So the real business question will be spending budget on token monkeys or tokens.
Which doesn't work the same way at all. With taxis, making them unprofitable leads to a long-lasting lack of taxis. When lots of jobs are lost, it actually becomes easier to hire someone with the right experience.
It might work very much the same. Discourage a cohort of CS grads into following another career path. Give businesses enough time to fully commit to “agentic workflows” such that they don’t have the expertise for in-house engineering anymore. Completely spaghettify every code base such that only AI would be willing and able to implement new features in it. Let customers lower their expectations of quality to meet what AI can product. By the time they crank up the token price, it may be hard or impossible for businesses just to switch back to human engineers.
It depends on how long you can keep those people un- or underemployed. I think engineers are rapidly bleeding experience even while being employed if all they do is prompting.
But when lots of jobs are lost, consumer spending is lost, and it becomes harder to sustain a business (whether B2C or B2B) and afford to hire someone...
If you knew about how much man power it takes to maintain, evaluate and improve agentic workflows, I don’t think you would write such a thing. In this context, AI is a jobs program for permanent employment.
Japan too. never thought I'd see it here but a taxi driver took the long way after a work drinking party. I guess he thought we were too drunk to notice. Well my boss sure did and lost his mind at the guy.
Likely the continued existence of taxis are keeping Uber's prices in check in the Australian market.
Uber will be running an optimisation model and be charging the maximum market can sustain, with additional goals such as eliminating competition and not being shut down by regulators.
My family and I have gone back to using car services for rides to the airport b/c "Uber XL" seems to include a WIDE variety of vehicles in terms of size and cleanliness.
A car service is about the same cost, the car looks brand new and clean and the driver is helpful.
Uber's situation is exactly the same. OpenAI is offering inference for a bunch of industries at prices that make it more competitive than hiring humans to do the same work.
If the break-even price to actually provide the service wasn't actually economic compared to humans, would there be nearly as much of a market? That's the real question. OpenAI is basically betting that they can live long enough that AI systems get built around them, which creates enough of a lock-in that they still have customers when prices increase by a lot.
I think you underestimate the price by a few orders of magnitude where it makes sense to pay a model instead of a human. If someone earning 200,000 a year gets replaced by paying 500 a day to Anthropic or OpenAI their employer comes out ahead.
There's likely always going to be value in limiting the number of $200k+ SWEs you have to pay. But that's not the interesting case.
What about the $10k/year offshored employees that are getting replaced by AI call centers? If that were the break even, then once you close down the whole building and develop the systems to not need them, then how much would inference costs have to go up before all that gets unwound and handed back to humans? It's more than you think - there's real margin there.
The uber situation was even more insidious than that. It wasn't like college students were calling cabs to go to bars in 2013. Uber created a market. It was essentially a mind virus. Gee now I can go to this place all for $7. Chum the water, establish the new pattern of living that people won't ever back away from, then twist the knife and raise prices knowing they won't revert back to whatever Old Way now long forgotten or not even engaged with by the upcoming generation.
Before Uber did it, Amazon had been doing it for almost two decades. It's nothing new. There is a difference between 1 billion and 20 billion in losses, though. Amazon in, I forget, 2014? Ran a profitable quarter with I think $1 in profits, simply to prove they were in control of their finances, and "we can stop any time we want". Sam gets a lot of shade, but he's been around the YC block once or twice, I suspect whatever risk they're taking on is at least somewhat measured.
Amazon structured their entire operation to look like this but as you indicated, could have switched to a porfit-making, dividen-paying company more than a decade ago, that just wasn't their strategy. The same can not be said for OpenAI. Even if they slashed their R&D, their marketing and sales costs are extremely high for a tech company. On paper they look more like a utility and those are not worth double-digit multiples; they compete with t-bills and GICs
Looking at the fact that third parties are making a profit offering XYZ third party open models on OpenRouter, it stands to reason that OpenAI could turn off their R&D, marketing, hype jedi, legal departments and just sell GPT9.999 and turn a profit.
Again like in the Amazon analogy, I don't think they're done growing, and unfortunately, I think they've positioned themselves (perhaps intentionally) as too big to fail, and need to continue growth at all costs.
I'm glad I'm not OAI's CFO sounds like a stressful job trying to justify/account for whatever Sam says to the board, or whatever the board demands. Sam hasn't said hardly anything since about February so I'm guessing the CFO simply bends to the will of the board these days. But that's speculation.
it stands to reason that OpenAI could turn off their R&D, marketing, hype jedi, legal departments and just sell GPT9.999 and turn a profit.
That rests on 2 assumptions:
1) That inference on OpenAI's frontier models is actually cost competitive with open models. Their high SG&A suggests otherwise.
2) That slashing R&D won't lead to a marketshare collapse when everyone (remaining) moves to Anthropic to get on their frontier models. All evidence suggests otherwise again, with Anthropic already exerting enormous competitive pressure on OpenAI's marketshare.
I think OpenAI is in a terribly tenuous position: they're getting squeezed from Anthropic (on the high end) and open models on the low end. A lot of companies in a lot of industries suffered this fate. Getting stuck in the middle is not a good thing!
It wouldn't surprise me if they have an unadvertised model router. Like, it's extremely clear you're chatting with a lobotomized model if you use voice mode in their app. Wild speculation here but I'm reasonably confident that as a $20/mo user I am not getting the same level of max thinking model that my enterprise account gets for the same question, despite both being labeled as the same model. Nowhere in their literature does it say $20/mo users get the exact same model/thinking effort, either
I’m not sure Sam is actually well-regarded around the YC block? Didn’t he lie about being the chairman of the board of YC? That’s what it says on his Wikipedia page.
Let’s not forget the whole fiasco where he was already almost fired from OpenAI.
His business track record is basically one failed location-based social media company.
I think it’s starting to become clear that OpenAI is going to be the first casualty of the AI race, and I think these undisciplined operations are a big part of the reason.
A major tell is how Apple Intelligence is seemingly steering away from OpenAI and is embracing Google instead.
Anthropic has the most useful B2B tooling and found their product niche, and they have the model leads in that niche.
xAI gets financially shielded by being a part of a gigantic financial instrument and the Elon Musk reality distortion field. Cursor has a similar product market fit as Anthropic and gets to consolidate with xAI.
Google and Microsoft get to use AI within their highly profitable ecosystems.
Apple gets to mostly sit out but act as one of the biggest toll booths for everyone else.
You've seen Sam Altman's interviews, yet you still think him a competent man? I think he's rather the embodiment of the death of meritocracy as an idea.
The problem here is that open weight models are already good enough for a majority of process automation and intelligence tasks and that is where a good chunk of efficiency corporate dollars are. So there's an ever shrinking slice of inference that will hit the frontier models and inference is where the insane margins are. Now to be fair, Claude co-work and Claude code/Codex do seem magical today and these potentially will continue to be high margin/leverage plays. Frontier models are also likely to push towards decision making - so we'll have to see how it shakes out but the bottom end is already commoditized and it is getting bigger and bigger.
I think about Bluey a lot in these situations. Fantastic show but because of the contract the Australian entity has sold licensing for everything. I wish they didn’t do sugary foods and a few other items. But it would be hard to turn down generational wealth
Buying Tesla is just buying SpaceX. When they roll up Tesla, it will be in a stock deal not real money. None of this is real money and I would argue that Musk is not the world's first trillionaire because there is no reality in which he could get that money out of SpaceX
I mean, if he wanted to sell tomorrow, who COULD spend $2-3 Trillion to buy it, and who WOULD? Anyone with that kind of money to spend today knows what a scam it is
Sure, it's reasonably likely they merge at some point but the ratio between the prices at that time will be different than the current ratio, so it still matters which share you buy today.
Especially since Musk is heavily incentivised to merge them at a price favourable to spacex since he has a much larger share
Musk may not have a few billions liquid on his cashing account, but he have something better: collateral to raise a few billions for everything he may want.
I mean as far as I know no human being is even a billionaire anyway if you only count cash. It's one of the things the "eat the rich" crowd is particularly bad at internalizing, that there's a difference between value and money that can be spent on food or hospitals.
It is much more feasible for Jeff Bezos to sell a billion dollars worth of Amazon tomorrow or Bill Gates to sell a billion dollars worth of MSFT tomorrow than it is for Elon to sell a trillion dollars of SPCX even over a year's time
I get that net worth is more than just cash, and that is not what I meant and it's pretty obvious that isn't what I meant. It may not just be cash on hand but if an asset is completely illiquid at it's purported value, is it actually worth that?
It is, because of the time component of money. Money is a way of storing the value of labor in a manner less affected by time. If you sell it all at once, its value is greatly reduced. All investments include that time component. Point-in-time net worth doesn't have much value as a measurement in part because of this.
Somewhat doubtful. (The first part of your statement, anyway. Of course the difference between abstract "value" and hard, spendable "money" is a thing.)
Like Mr. Hanson said in my sibling comment, some rulers are (or were!) bound to have amassed incredible amounts of resources. For historical/non-present-day examples, consider looking into figures like Jakob Fugger or Mansa Musa.
I have no idea why the adjusted net worth of people who died centuries ago would have anything to do with money in the modern day. And at a glance, neither of your examples had billions of dollars in cash, which is the point I was making. They may have had a lot of value tied up in illiquid investments, which is exactly like Musk's valuation.
(This isn't a dig on managers; I've been one. But if a situation doesn't naturally escalate, that usually means a manager in the chain chose not to escalate it, and their reports have to go around them.)
Perhaps those are your greatest memories because that is what you were doing as a child. Would your greatest memories of you grow up now be playing Minecraft online?
I don’t really know the answer. I grew up in the early 2000s with a mix of video games and ‘outside with friends on the woods’ time. I have many great memories of playing games, but by far my best are always the ones, in person, out in the woods. Even my best gaming memories were at lan parties. Being in-person with friends is just better.
I think part of it depends on what kinds of friendships you have.
Some kids have major problems finding healthy, positive relationships with other kids in real life, often for very arbitrary reasons. For a subset of those, interacting through screens eliminates a ton (if not the entirety) of the friction of IRL interaction.
What it really all boils down to for me is that relationships are deeply important. Once upon a time, I thought I could be an island. I was wrong. Maybe there are a few who can do it, but not me, and probably not most of us.
How much water do they use? Is it potable to begin with? Is it usable after? Will they drive prices up. These are one time builds with minimal jobs created after for a tech that could end my career. If I lose my job, I don’t also want to have no water and higher bills.
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