Comment by jeffreyrogers
1 day ago
> free and low-end eventually wins
Not in SaaS which is what LLMs are. You can get VMs for much cheaper than AWS, Microsoft, and Google offer them but large companies (and startups) are happy to pay a premium for the support, reputation, and reliability that they perceive those companies as offering. Same thing for some of the managed database providers who are effectively selling a very heavily marked up version of postgres.
> The high price, and social pushback, mean that the American companies producing these models are precarious
I doubt it. The models really aren't that expensive when you look at what they can do. Fable is probably at least as good as the average software engineer and costs $50/wk on the max plan vs a software engineer who would cost closer to $4000 a week. The real money is probably in selling to enterprise vs consumers (Google has best route to making money from consumers since they can do what they did with ads and search to LLM queries).
It seems unlikely to me that US companies will send important corporate data to models controlled by a Chinese company as well.
> Fable is probably at least as good as the average software engineer and costs $50/wk on the max plan vs a software engineer who would cost closer to $4000 a week.
That's because the max plans are _massively_ subsidized. At API pricing the kind of usage to replace the value of a SWE is going to be way, WAY more than $50/wk. Orders of magnitude more. And to remain a frontier model org that kind of pricing has to continue in perpetuity.
There will always be a space for perforce in a world of git.
Doesn’t mean perforce is worth trillions.
That's not really my argument. It's that companies seem happy to pay a premium for a large company to provide complicated software services to them even when there are cheaper competitors.
Yes, as I pointed out, mainframes are still a thing. But the vast bulk of the market has moved on.
But aren’t the frontier models heavily subsidized? That’s not sustainable.
This really depends what you mean. If you spend $5.00 on anthropic tokens does that cost Anthropic more than $5.00 to serve? No.
If you amortize all of their training and salaries over that $5.00 then yes.
If you only amortize the training costs of that specific model then again we're back to no.
LLMs are not SaaS. Some LLM are delivered as SaaS. Anyone who has a machine big enough to run a frontier model can launch their own LLM SaaS tomorrow and it would be functionality indistinguishable from any other which is running a similar model...
Also, big companies can choose to run their own models on their own hardware and get better security and privacy as the data doesn't need to leave their own premises.
> Also, big companies can choose to run their own models on their own hardware and get better security and privacy as the data doesn't need to leave their own premises.
Yes, and then they would be reinventing the company owned data center that most big companies have just spent over a decade moving away from. I don't think companies will do that when there are multiple vendors competing to provide that service at what are quite reasonable prices when you consider what paying a human for similar output would cost.