5 ms·

The article is about how the economics of the LLM market is making all tech look bad. They need trillions of dollars in returns. VC's won't finance tech startu

The article is about how the economics of the LLM market is making all tech look bad. They need trillions of dollars in returns. VC's won't finance tech startups for decades. I use Cursor sometimes, and VSCode + Continue with llama.cpp, and it's great. That's not worth billions. It's definitely not worth trillions.

automatic6131 2y ago
This is the crux. A cool thing has been invented, with real usages. Unfortunately, it's cost hundreds of billions of dollars and it has absolutely zero hope of making the trillions needed to justify that. Now someone will respond about how it's just a stepping stone, and how the billions are justified by _something completely imaginary, and not invented yet, and maybe not ever_ e.g. agents.
- trhway 2y ago
  >it's cost hundreds of billions of dollars and it has absolutely zero hope of making the trillions needed to justify that. The BigTech companies have been flush with liquidity and poured those hundreds of billions into the promising tech, and as result we got a wonderful new technology. There is not much need for those trillions in return - just look at liquidity positions of those companies, they are just fine. If those trillions come in eventually - even better.
  - automatic6131 2y ago
    >There is not much need for those trillions in return Whilst you are correct that big tech cos do not need the return to survive, that's not how public markets work at all, and thus not how the incentives for those in charge of the companies work, and so making you actually wrong.
    - trhway 2y ago
      If i were wrong, those companies would be distributing that cash to shareholders instead of chasing any promise of any big chance. If investment in AI don't pan out (i do think that it will pan out, and those trillions will come) then those companies would just pour even more billions into whatever big thing/promise would come next. Rinse and repeat. Because some of those things do generate tremendous returns, and thus not playing that game is what really constitute true loss of money.
      - ben_w 2y ago
        Markets are funny things. US right now is run by someone whose explicit promises, if actually implemented, have an obvious immedidiate 13-14% reduction in GDP — literally, never mind side effects, I'm not counting any businesses losing confidence in the idea that America is a place to invest, this is just direct impact. DOGE + deportation by themselves do most of that percentage. The tariffs are a rounding error in comparison, but still bad on the kind of scale that gets normal politicians kicked out. And yet, the markets are up.
        whatshisface 2y ago
        If you factor in the inflation and the worldwide trade crisis, trading dollars for shares that will lose 10% real value doesn't sound so bad.
        leovingi 2y ago
        What timeframe are you working with, as in, when do you expect to see this reduction in GDP? I just want to know so that I can set a reminder and check back on your comment when the time arrives.
  - krainboltgreene 2y ago
    Funny, I had been told we had to lay off all those workers because they weren’t flush with cash.
    - trhway 2y ago
      cash on hands GOOG - 100B, AMZN - 80B, FB - 70B, and their core businesses are basically printing money, so they pretty much do have to invest into new things. If somebody sees a multi-billion dollar sink better than AI right now ...
      - Hasu 2y ago
        > If somebody sees a multi-billion dollar sink better than AI right now ... I think if they could find a way to make their software good, instead of bad, like it increasingly is, that would be a good use of that money.
      - krainboltgreene 2y ago
        Workers, infrastructure, taxes…
    - TheOtherHobbes 2y ago
      They're convinced they no longer need them. Just as they were convinced after Covid that they needed to put hiring into overdrive. Tech management has the collective IQ of a flock of sheep.
      - Aeolun 2y ago
        Nobody has ever been punished for choosing IBM. It’s the same story here. Nobody is going to blame them for following the zeitgeist, but you bet they’d be punished if they didn’t and it doesn’t pan out. The whole thing is like bitcoin. There’s too many people that benefit from maintaining the collective illusion.
  - SZJX 2y ago
    They’ll be fine and will survive regardless, but their current astronomical valuations probably won’t be.
- hoseja 2y ago
  I see it a little differently. What was the direct economic return of the Manhattan Project?
  - whatshisface 2y ago
    Ideally it was thought to have shortened a very expensive war, and may have prevented the USSR from taking over Europe by leveraging its unquestioned postwar conventional forces advantage.
    - hoseja 2y ago
      Well sure but how much cash did the MaPr corp. make selling their new and improved model implosion-type-u-235?
      - whatshisface 2y ago
        The profit was made by the private sector in supplying goods to the program. Today, private companies do a lot and earn a lot of money from stockpile maintenance.
      - godelski 2y ago
        I don't know how to tell you this, but the government isn't a business and has completely different objectives and operating conditions
        mostlysimilar 2y ago
        If more people understood this we might have avoided the carnage happening in the US right now.
        godelski 2y ago
        I don't know why it is so hard to understand. I mean money doesn't really exist without a government[0] and while government plays a role in the market and economy, this role is VERY different than that of a business. A government isn't trying to "make money", is isn't trying to make investors happy, and it certainty can't take existential risks that could make "the company" go bankrupt (or it shouldn't lol). But I do think (and better understand) there is a failure to understand this at a higher abstraction. One part is simply "money is a proxy." This is an uncontestable fact. But one must ask "proxy for what?" and I think people only accept the naive simple answer. Unfortunately, this "is a proxy" concept is extremely generalization. Everything is an estimation, everything is an approximation, and most things are realistically intractable. We use sibling problems or similar problems to work with that are concrete, but there are always assumptions made and ignoring these can have disastrous consequences. Approximations are good (they're necessary even) but the more advanced a {topic,field,civilization,etc} gets, the more important it is to include higher order terms. Frankly, I don't think humans were built for that (though by some miracle we have the capacity to deal with it). My partner and her dad are both economists, and one thing I've learned is that what many people think are "economics questions" are actually "business questions". I think a story from her dad makes this extremely clear. A government agency hired him to look at the cost benefit analysis of some stuff (like building a few hospitals and some other unambiguously beneficial institutions), and when he presented everyone was happy but had a final question "should we build them?" The answer? "That's not the role of an economist." The reason for this is because money can't actually be accurately attributed to these things. You can project monetary costs for construction, staffing, and bills, and you can make projections about how many people this will benefit, how it can reduce burdens elsewhere, and as well as make /some/ projections about potential cost savings. But you can't answer "should you." Because the weight of these values is not something that can be codified with any data. It is an importance determined by the public and more realistically their representatives. Very few times can you give a strong answer to a question like "should we build a new hospital" and essentially in only the extreme cases. I'll give another example. In my town there was an ER that was closed due to budget constraints. This ER was across the street to the local university, which students represent ~15% of the population. The next nearest ER? A 15 minute ambulance ride away and in the next town over. Did the city save money? Yes. Did the sister city's ER become even busier? Also yes. Did people lose access to medicine? Yes. Did people die? Also yes. Have economists put a price on human life? Also yes, but they are very clear that this is not a real life and a very naive assumptions[1]. It is helpful in the same way drawing random squiggles on a board can help a conversation. Any squiggles can really be drawn but the existence of _something_ helps create some point to start from. [0] okay crypto bros, you're not wrong but low volatility is critical as well as some other aspects. Let's not get off topic [1] https://www.npr.org/2020/04/23/843310123/how-government-agencies-determine-the-dollar-value-of-human-life https://www.npr.org/2020/04/23/843310123/how-government-agen...
- SubiculumCode 2y ago
  To train. Inference is much cheaper...and getting cheaper by the day
roenxi 2y ago
> I use Cursor sometimes, and VSCode + Continue with llama.cpp, and it's great. That's not worth billions. It's definitely not worth trillions. That seems like a suspect claim. If you're saying that you, personally, cannot create billions of dollars in value with Cursor & friends that is certainly true - but you are in no position to make a judgement call about where the cap on value creation is for the LLM market is worth based on your personal use cases. LLMs don't just do code completion. We really can't estimate how much potential value is being created without doing some serious data diving and studying of cases. A better argument would be that the DeepSeek experience suggests these companies have no moat and therefore no way to earn a return on capital. But LLMs are probably going to generate at least trillions of dollars in value because they're on par or ahead of Wikipedia and Google for answering many queries then they also have hundreds of ancillary uses like answering medical questions at weird hours or creative/professional writing.
- ben_w 2y ago
  It's possible to grow an economy by trillions of real value without any actor being able to extract that as a profit or it even showing up in the books as money. Consider that Wikipedia is much bigger than Encyclopedia Britanica, but because it is given away to everyone for free, it is not counted as E.B.'s max sale price ($2900 in 1989?) times the world's internet connected population (5.6e9?) — $16 trillion. AI, regardless of value, are priced at the marginal cost to reproduce weights or run inference depending on which you care about. But I do mean "reproduce" not "invent" — it doesn't matter if DeepSeek's "a few million" was only possible because they benefited from published research, it just matters that they could. And if the hardware is the bottleneck for inference, that profit goes to the hardware manufacturer, not to the top ten companies who made models.
Aeolun 2y ago
> That's not worth billions. It's definitely not worth trillions. That is a problem for the VC’s that bet wrong, not for the world at large. The models exist now and they’ll keep being used, regardless of whether a bunch of rich guys lost a bunch of money.
- adamc 2y ago
  Their ongoing operation is quite expensive, so even that is not assured.
  - LPisGood 2y ago
    My ongoing operation is a MacBook pro that costs pennies worth of electricity.
  - square_usual 2y ago
    Where are you getting this from? Outside of o3, every AI provider's API is super cheap, with most productive queries I do coming in under 2c. We have no reason to believe any of them are selling API requests at a loss. I think <2c per query hardly counts as "quite expensive".
    - nostrademons 2y ago
      The reasoning people have for them selling API requests at a loss is simply their financial statements. Anthropic burned $3B this year. ChatGPT lost $5B. Microsoft has spent $19B on AI and Google has spent close to $50B. Given that revenue for the market leader ChatGPT is $3.7B, it's safe to say that they're losing massive amounts of money. These companies are heavily subsidized by investors and their cloud service providers (like Microsoft and Google) in an attempt to gain market share. It might actually work - but this situation, where a product is sold under cost to drum up usage and build market share, with the intent to gain a monopoly and raise prices later on - is sort of the definition of a bubble, and is exactly how the mobile app bubble, the dot-com bubble, and previous AI bubbles have played out.
      - 2y ago
nprateem 2y ago
Yeah whatever. VCs will keep backing entrepreneurs, that's their job. Until there's a better way to get 10-100x returns, we're fine.
edanm 2y ago
> The article is about how the economics of the LLM market is making all tech look bad. No, it's not. The first half of the article talks about how useless the actual product is, how the only reason we hear about it is because the media loves to talk about it.

automatic6131 2y ago

This is the crux. A cool thing has been invented, with real usages. Unfortunately, it's cost hundreds of billions of dollars and it has absolutely zero hope of making the trillions needed to justify that. Now someone will respond about how it's just a stepping stone, and how the billions are justified by _something completely imaginary, and not invented yet, and maybe not ever_ e.g. agents.

trhway 2y ago
>it's cost hundreds of billions of dollars and it has absolutely zero hope of making the trillions needed to justify that. The BigTech companies have been flush with liquidity and poured those hundreds of billions into the promising tech, and as result we got a wonderful new technology. There is not much need for those trillions in return - just look at liquidity positions of those companies, they are just fine. If those trillions come in eventually - even better.
- automatic6131 2y ago
  >There is not much need for those trillions in return Whilst you are correct that big tech cos do not need the return to survive, that's not how public markets work at all, and thus not how the incentives for those in charge of the companies work, and so making you actually wrong.
  - trhway 2y ago
    If i were wrong, those companies would be distributing that cash to shareholders instead of chasing any promise of any big chance. If investment in AI don't pan out (i do think that it will pan out, and those trillions will come) then those companies would just pour even more billions into whatever big thing/promise would come next. Rinse and repeat. Because some of those things do generate tremendous returns, and thus not playing that game is what really constitute true loss of money.
    - ben_w 2y ago
      Markets are funny things. US right now is run by someone whose explicit promises, if actually implemented, have an obvious immedidiate 13-14% reduction in GDP — literally, never mind side effects, I'm not counting any businesses losing confidence in the idea that America is a place to invest, this is just direct impact. DOGE + deportation by themselves do most of that percentage. The tariffs are a rounding error in comparison, but still bad on the kind of scale that gets normal politicians kicked out. And yet, the markets are up.
      - whatshisface 2y ago
        If you factor in the inflation and the worldwide trade crisis, trading dollars for shares that will lose 10% real value doesn't sound so bad.
      - leovingi 2y ago
        What timeframe are you working with, as in, when do you expect to see this reduction in GDP? I just want to know so that I can set a reminder and check back on your comment when the time arrives.
- krainboltgreene 2y ago
  Funny, I had been told we had to lay off all those workers because they weren’t flush with cash.
  - trhway 2y ago
    cash on hands GOOG - 100B, AMZN - 80B, FB - 70B, and their core businesses are basically printing money, so they pretty much do have to invest into new things. If somebody sees a multi-billion dollar sink better than AI right now ...
    - Hasu 2y ago
      > If somebody sees a multi-billion dollar sink better than AI right now ... I think if they could find a way to make their software good, instead of bad, like it increasingly is, that would be a good use of that money.
    - krainboltgreene 2y ago
      Workers, infrastructure, taxes…
  - TheOtherHobbes 2y ago
    They're convinced they no longer need them. Just as they were convinced after Covid that they needed to put hiring into overdrive. Tech management has the collective IQ of a flock of sheep.
    - Aeolun 2y ago
      Nobody has ever been punished for choosing IBM. It’s the same story here. Nobody is going to blame them for following the zeitgeist, but you bet they’d be punished if they didn’t and it doesn’t pan out. The whole thing is like bitcoin. There’s too many people that benefit from maintaining the collective illusion.
- SZJX 2y ago
  They’ll be fine and will survive regardless, but their current astronomical valuations probably won’t be.
hoseja 2y ago
I see it a little differently. What was the direct economic return of the Manhattan Project?
- whatshisface 2y ago
  Ideally it was thought to have shortened a very expensive war, and may have prevented the USSR from taking over Europe by leveraging its unquestioned postwar conventional forces advantage.
  - hoseja 2y ago
    Well sure but how much cash did the MaPr corp. make selling their new and improved model implosion-type-u-235?
    - whatshisface 2y ago
      The profit was made by the private sector in supplying goods to the program. Today, private companies do a lot and earn a lot of money from stockpile maintenance.
    - godelski 2y ago
      I don't know how to tell you this, but the government isn't a business and has completely different objectives and operating conditions
      - mostlysimilar 2y ago
        If more people understood this we might have avoided the carnage happening in the US right now.
        godelski 2y ago
        I don't know why it is so hard to understand. I mean money doesn't really exist without a government[0] and while government plays a role in the market and economy, this role is VERY different than that of a business. A government isn't trying to "make money", is isn't trying to make investors happy, and it certainty can't take existential risks that could make "the company" go bankrupt (or it shouldn't lol). But I do think (and better understand) there is a failure to understand this at a higher abstraction. One part is simply "money is a proxy." This is an uncontestable fact. But one must ask "proxy for what?" and I think people only accept the naive simple answer. Unfortunately, this "is a proxy" concept is extremely generalization. Everything is an estimation, everything is an approximation, and most things are realistically intractable. We use sibling problems or similar problems to work with that are concrete, but there are always assumptions made and ignoring these can have disastrous consequences. Approximations are good (they're necessary even) but the more advanced a {topic,field,civilization,etc} gets, the more important it is to include higher order terms. Frankly, I don't think humans were built for that (though by some miracle we have the capacity to deal with it). My partner and her dad are both economists, and one thing I've learned is that what many people think are "economics questions" are actually "business questions". I think a story from her dad makes this extremely clear. A government agency hired him to look at the cost benefit analysis of some stuff (like building a few hospitals and some other unambiguously beneficial institutions), and when he presented everyone was happy but had a final question "should we build them?" The answer? "That's not the role of an economist." The reason for this is because money can't actually be accurately attributed to these things. You can project monetary costs for construction, staffing, and bills, and you can make projections about how many people this will benefit, how it can reduce burdens elsewhere, and as well as make /some/ projections about potential cost savings. But you can't answer "should you." Because the weight of these values is not something that can be codified with any data. It is an importance determined by the public and more realistically their representatives. Very few times can you give a strong answer to a question like "should we build a new hospital" and essentially in only the extreme cases. I'll give another example. In my town there was an ER that was closed due to budget constraints. This ER was across the street to the local university, which students represent ~15% of the population. The next nearest ER? A 15 minute ambulance ride away and in the next town over. Did the city save money? Yes. Did the sister city's ER become even busier? Also yes. Did people lose access to medicine? Yes. Did people die? Also yes. Have economists put a price on human life? Also yes, but they are very clear that this is not a real life and a very naive assumptions[1]. It is helpful in the same way drawing random squiggles on a board can help a conversation. Any squiggles can really be drawn but the existence of _something_ helps create some point to start from. [0] okay crypto bros, you're not wrong but low volatility is critical as well as some other aspects. Let's not get off topic [1] https://www.npr.org/2020/04/23/843310123/how-government-agencies-determine-the-dollar-value-of-human-life https://www.npr.org/2020/04/23/843310123/how-government-agen...
SubiculumCode 2y ago
To train. Inference is much cheaper...and getting cheaper by the day

roenxi 2y ago

> I use Cursor sometimes, and VSCode + Continue with llama.cpp, and it's great. That's not worth billions. It's definitely not worth trillions. That seems like a suspect claim. If you're saying that you, personally, cannot create billions of dollars in value with Cursor & friends that is certainly true - but you are in no position to make a judgement call about where the cap on value creation is for the LLM market is worth based on your personal use cases. LLMs don't just do code completion. We really can't estimate how much potential value is being created without doing some serious data diving and studying of cases. A better argument would be that the DeepSeek experience suggests these companies have no moat and therefore no way to earn a return on capital. But LLMs are probably going to generate at least trillions of dollars in value because they're on par or ahead of Wikipedia and Google for answering many queries then they also have hundreds of ancillary uses like answering medical questions at weird hours or creative/professional writing.

ben_w 2y ago
It's possible to grow an economy by trillions of real value without any actor being able to extract that as a profit or it even showing up in the books as money. Consider that Wikipedia is much bigger than Encyclopedia Britanica, but because it is given away to everyone for free, it is not counted as E.B.'s max sale price ($2900 in 1989?) times the world's internet connected population (5.6e9?) — $16 trillion. AI, regardless of value, are priced at the marginal cost to reproduce weights or run inference depending on which you care about. But I do mean "reproduce" not "invent" — it doesn't matter if DeepSeek's "a few million" was only possible because they benefited from published research, it just matters that they could. And if the hardware is the bottleneck for inference, that profit goes to the hardware manufacturer, not to the top ten companies who made models.

Aeolun 2y ago

> That's not worth billions. It's definitely not worth trillions. That is a problem for the VC’s that bet wrong, not for the world at large. The models exist now and they’ll keep being used, regardless of whether a bunch of rich guys lost a bunch of money.

adamc 2y ago
Their ongoing operation is quite expensive, so even that is not assured.
- LPisGood 2y ago
  My ongoing operation is a MacBook pro that costs pennies worth of electricity.
- square_usual 2y ago
  Where are you getting this from? Outside of o3, every AI provider's API is super cheap, with most productive queries I do coming in under 2c. We have no reason to believe any of them are selling API requests at a loss. I think <2c per query hardly counts as "quite expensive".
  - nostrademons 2y ago
    The reasoning people have for them selling API requests at a loss is simply their financial statements. Anthropic burned $3B this year. ChatGPT lost $5B. Microsoft has spent $19B on AI and Google has spent close to $50B. Given that revenue for the market leader ChatGPT is $3.7B, it's safe to say that they're losing massive amounts of money. These companies are heavily subsidized by investors and their cloud service providers (like Microsoft and Google) in an attempt to gain market share. It might actually work - but this situation, where a product is sold under cost to drum up usage and build market share, with the intent to gain a monopoly and raise prices later on - is sort of the definition of a bubble, and is exactly how the mobile app bubble, the dot-com bubble, and previous AI bubbles have played out.
    - 2y ago

nprateem 2y ago

Yeah whatever. VCs will keep backing entrepreneurs, that's their job. Until there's a better way to get 10-100x returns, we're fine.

edanm 2y ago

> The article is about how the economics of the LLM market is making all tech look bad. No, it's not. The first half of the article talks about how useless the actual product is, how the only reason we hear about it is because the media loves to talk about it.