7 ms·

You are making the assumption that the models are only used / paid for by 2.5% of the population (your knowledge workers value). There will be new value created

• specproc 4mo ago
  I'm sorry, what the feck does "value creation" mean here? I live in a place where people are so, insanely squeezed from every angle. Wages are stagnant, prices rocketing. Where is the money to pay for this value going to come from? No one I know feels richer than they did a decade back. I've not been able to meaningfully put up my prices for a decade. People are tired and stressed and scared, particularly scared of a technology everyone keeps telling them will make them redundant. There is no rising tide lifting all boats, just most of us drowning whilst a few whizz past in their yachts. I honestly hope these guys faceplant ASAP. Couldn't happen to a nicer bunch of people.
  • dirck-norman 4mo ago
    Feelings aren’t fact. A lot of data shows the doomerism is not reflected in the actual numbers and much of it has to do with rapid inflation and continued vibes. Consumption has risen, inflation adjusted wages have risen for blue collar and white collar alike. Most social mobility has been the middle class moving into the upper middle class, not moving to the lower class. The main thing holding people back is the housing crisis. This is orthogonal to the value creation of businesses. Value creation is growth. If it didn’t exist the S&P would still be 42.55$.
    • jacobgkau 4mo ago
      > Consumption has risen, inflation adjusted wages have risen for blue collar and white collar alike. My wages haven't risen for nearly 5 years, while inflation has occurred over the past 5 years. Why the blanket statements? > The main thing holding people back is the housing crisis. This is orthogonal to the value creation of businesses. Are you suggesting a "housing crisis," in your words, wouldn't impact consumption? I'm watching my spending (and living like a child in his parent's house, except it's not my parent and I have to pay for it) in the hopes that in about a decade, I'll have saved up enough of a down payment for a home somewhere in my state that I could actually afford the mortgage on the remaining amount. There are plenty of things I'd potentially spend money on but won't as long as I feel like I'm economically stuck and have a chance in hell of saving my way out of it. So this feeling translates to fact. If you think my personal experience is just an anecdote and doesn't count because it's not being told through the lens of large-scale numbers, fine. But I really agree with the person you replied to that you're gonna have to be a whole lot more specific than "value creation" if you want people to spend money on your AI products "in this economy," whether it's because they're actually strapped for cash or just pretending like you seem to think they are.
    • geraneum 4mo ago
      > Feelings aren’t fact... much of it has to do with rapid inflation and "continued vibes". Oh the lost irony.
      • dirck-norman 4mo ago
        Is it ironic? Or did you just read the comment incorrectly?
    • everforward 4mo ago
      > The main thing holding people back is the housing crisis. This is orthogonal to the value creation of businesses. This feels wholly at odds with saying most social mobility is upwards. So most of the social movement is into a class where a home and vacations are a given, but we also have a growing class of people who can't afford a home? Per BLS, average real wages are down 0.3% YoY https://www.bls.gov/news.release/realer.nr0.htm https://www.bls.gov/news.release/realer.nr0.htm . > Value creation is growth. If it didn’t exist the S&P would still be 42.55$. This reductively assumes "value creation" is the only effect on the S&P pricing. You'll note a ton of graphs correlate with it, e.g. https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi is the US inflation rate, which also tracks the S&P pricing. Ie if a company is worth $100 a year ago and inflation was 4%, I'd expect to pay $104 for their stock with 0 value creation whatsoever.
      • dirck-norman 4mo ago
        Home ownership is not the definition of economic class. The s&p has vastly outstripped inflation, this isn’t even an argument. It’s a very bizarre and uninformed opinion to say “inflation is correlated with s&p value”. In economics, you deduct the inflation rate from growth to get the real rate of return. I wonder why so many people with such little understanding of financial markets make comments like these. https://www.multpl.com/inflation-adjusted-s-p-500 https://www.multpl.com/inflation-adjusted-s-p-500
        • everforward 4mo ago
          > Home ownership is not the definition of economic class. It was at one point, so if you're saying it doesn't now then your "social movement" is really just goalpost moving. I'm sure the upper class does grow if you just declare that the boundaries of it are now lower. We're all millionaires if we just redefine millionaire to mean "not currently overdrafted". > In economics, you deduct the inflation rate from growth to get the real rate of return. Which neglects the impact of inflation on the principal. If I put $100k into the S&P in 2016 I'd have 303k now (303% value). Cumulative inflation during that period was 38.8%, so your metric says I'm at 164% rate of return. $303k today is only worth $218k in 2016 dollars though, so I'm really only up 118% in absolute value. That's also only using the CPI, and neglecting asset inflation which impacts stock prices outside of actual value creation. More money floating around means more gets parked in index funds, regardless of whether the company is actually doing anything better.
    • decidu0us9034 4mo ago
      The upper decile of income earners account for more than half of all consumption in the US. Household balance sheets and wealth have never looked stronger, again when you account for all the appreciated stocks and properties owned by the upper quartile. True incomes for the lowest decile rose significantly for the first time since 1970 in 2022 and then sort of stayed flat again. Sure, statistically significantly, not "significantly" as in personally meaningful after figuring in rising consumer costs. There is a narrative where you can see all this as hugely positive but this is also largely a "vibes" based narrative. I don't know why you'd expect most people to care about what the "vibes" are like for the best off in society, that's a bit removed from their daily concerns.
  • deaton 4mo ago
    Thats the thing; the "increase in productivity" isn't being felt by the general public, the end user. If your "increase in productivity" just means more money being shifted around at the corporate level then it is meaningless.
  • jgbuddy 4mo ago
    A literal example is that I can use AI to file my taxes instead of spending a weekend and hundreds of dollars to have an accountant do it for me. It costs me like $5. that 245$ delta is the value of that output to me, as long as I am confident it is correct.
    • smnc 4mo ago
      > as long as I am confident it is correct Are you? Does it cost you extra (time or money) to be?
      • jgbuddy 4mo ago
        Yes, and they were accepted. A year or two ago I would have been less confident but now almost UX is happy to cite sources.
        • redfern314 4mo ago
          Not speaking to the wisdom of filing taxes using LLMs, but just FYI (assuming US here) taxes being accepted doesn't mean they were correct. It just means the IRS hasn't found anything major wrong (e.g. SSN used on multiple returns). Even being approved isn't a guarantee, an audit could come later.
          • topaz0 4mo ago
            Even if an audit never comes they could be incorrect.
            • redfern314 4mo ago
              For sure.
            • bluGill 4mo ago
              Audits often find incorrect in favor of the person audited as well. If you are not audited that is a bad thing as you have no idea if things are wrong, and it could be costing you a lot of they are wrong.
  • WarmWash 4mo ago
    Sounds like internet sentiment and not research data. It's kind of become socially taboo to not be suffering "in this economy", but on paper it's hard to see weakness in places that there isn't always weakness. As long as the 65-95% are doing well, there isn't going to be a collapse.
    • forlorn_mammoth 4mo ago
      The most recent U Michigan 'Survey of Consumer Sentiment', which is THE authorative source in the US, shows consumer sentiment at the lowest levels since the survey started in 1977 From the U Michigan page: https://www.sca.isr.umich.edu/ https://www.sca.isr.umich.edu/ or from the FED https://fred.stlouisfed.org/series/UMCSENT https://fred.stlouisfed.org/series/UMCSENT
      • WarmWash 4mo ago
        Sentiment is just vibes though. Everyone hates Walmart but they still do gangbusters numbers. So people may be hating, but they sure as hell are also still spending https://fred.stlouisfed.org/series/PCEC96 https://fred.stlouisfed.org/series/PCEC96
• Planktonne 4mo ago
  > There will be new value created by these models which people are happy to pay for which simply did not exist at all before What sort of new value, and why will people pay for it from someone else rather than prompting for it themselves?
• mrandish 4mo ago
  > There will be new value created by these models which people are happy to pay for which simply did not exist at all before. True, but I think the GP's point was that what consumers will pay won't be nearly as profitable as what enterprises will pay to increase the output of their developers and knowledge workers. ChatGPT is currently the overwhelming leader in consumer AI usage but only ~5% pay $20/mo. As a recently retired serial tech founder, I'm now one of those consumers. I use AI webchat daily for general search, Q&A and even to write little automation scripts for myself, yet I haven't paid anyone anything for AI yet. Even after being heavily restricted and performance nerfed to hell in recent months, free webchat AI is still fine for everything I do, and I'm not remotely price sensitive. Even as AI compute costs fall over time, I doubt serving ads against AI webchat to consumers will generate the kind of high-margin, sustainable growth VCs get excited about. It's so undifferentiated I bounce around between all four leading providers because there's virtually no moat locking casual consumers to any chatbot beyond a single question thread. I guess if it had a nearly infinite context window seamlessly integrated across all sessions, that might be somewhat sticky for some consumers but it could also get creepy for some others - and it would devour gobs of the scarcest resource in AI. Beyond Maslow's Hierarchy of Needs, the mobile phone is the largest revenue, long-term mass consumer product ever but I just got a new flagship phone from a top-tier provider for $30/mo over 3 yrs. IMHO, even an all-you-can-eat, infinite context window, next-gen Mythos couldn't reach and sustain mobile phone levels of global consumer adoption at ~$20/mo. Unlike professional developers and knowledge workers, consumers don't have any "job to be done" big enough for an LLM to command that much of their zero-sum discretionary spend.
  • jgbuddy 4mo ago
    100%, a driving factor will likely be how good we can make models that are so small they use almost no compute. Until then it is a race for adoption and moat-building (or screwing people over?) once you have users
    • mrandish 4mo ago
      > a driving factor will likely be how good we can make models that are so small they use almost no compute. That will certainly help but it doesn't move the fundamental limit because resource efficiency is a cost driver not a demand driver - and my argument is against the thesis that lying beyond professional devs and knowledge workers, there's an untapped trillion dollar industry serving LLMs to mass global consumers. Using Simon's cost estimates, I agree that halving the current $1,000 - $1,200/mo MSRP to profitably serve frontier inference to professional developers and knowledge workers (PD&K) will help Vendor A steal share from Vendor B or C. It will also increase LLM sales penetration into the segments of the global PD&K TAM which can't afford ~$1K/mo for every seat. A fair chunk of the PD&K workers in many SMEs aren't included in today's ~$1K/mo per seat license pool, especially in 2nd and 3rd world geos. When the price falls to $500 and $250 most will but that's still just saturating the existing PD&K TAM - not pushing into mass consumers. While the PD&K TAM is big, justifying Trillion+ dollar capex spend requires believing the TAM is much more than PD&K and eventually grows into converting a couple billion non-PD&K consumers into ~$20/mo subscribers. I don't buy it for two reasons: 1) The Comps: There are vanishingly few examples of long-term, mass consumer adoption of a discretionary technology at that scale. Mobile phones at ~$15 to $30/mo are the obvious one but LLMs are nowhere near being that valuable to the average plumber in Des Moines, baker in Jakarta or retired nurse in Hamburg. Pondering it, I just imagined forcing any of those people to choose between their mobile phone and an LLM chatbot. Sure, some who are flush with cash might choose both but for most consumers in the world ~$20/mo is big enough they'd have to pick one and ~zero percent would choose the LLM over their phone. After mobile phones, the second comp for discretionary tech spend I thought about was XBox and Playstation monthly gaming subscriptions but combined they have less than 90M paying subscribers and the ARR is just under $10/mo. As an industry, "Big LLM" is spending well over a trillion dollars every five years. XBox and PS ARR doesn't even cover paying the interest on that capital, much less the 3 to 5x returns hedge fund investors are betting on. 2) The Alternative: It's useful to doubt my own intuitions and one counter to my skepticism is to assume "But LLMs aren't finished yet, they're going to get much better." How much better could an LLM which can be profitable at ~$20/mo get than Claude Mythos in the next five years? Instead of debating future unknowables with myself, I've found it's better to just imagine the most perfect future product I can that's still realistically plausible. So, let's imagine we're willing to spend a million dollars a month to very unprofitably deploy a prototype to test the consumer demand for "Tomorrow's Awesomest $20/mo LLM" today. So we gather a few hundred super smart, broadly knowledgeable intellectuals together at one top-tier university research library, where they'll have access to every commercial database and unlimited Claude Mythos 2.0 and ChatGPT 6.0. Since our experimental budget is $1M/mo we can afford to add in several Nobel prize and Fields Medal winners too. They'll work together manually reviewing and improving not only every LLM answer but also our test user's prompts - and of course our test chatbot will have human-level real-time speech recognition and vision (via Zoom and screen-sharing with actual genius-level humans), making this truly a test of the "smartest, most accurate, best consumer chatbot" we can imagine. Now, let's run the test by having one thousand mass consumers try it out and see how many Des Moines plumbers, Jakarta bakers and Hamburg retired nurses we can convert to a 1 year @ $20/mo subscription for our $1M/mo ultimate chatbot simulation. Playing this thought experiment out in a bunch of ways, I find some percentage of outliers, iconoclasts and closet intellectuals would go for it but... the vast majority just don't find it enough better than "free" chatbot alternatives AT&T includes with their phone subscription or Samsung bundles with Galaxy phones - despite only being ChatGPT 5.4-level. It turns out, most plumbers, bakers and ex-nurses don't have a compelling "job to be done" in their daily lives that even an MoE panel of actual Nobel and Field's medalists with ivy league professors can make enough more valuable than an inferior but free-to-me chatbot, in the judgement of our Des Moines plumber. While the world's smartest chatbot is nice, when it comes time to pay, he prefers having one additional premium football match on TV and a six pack of cold beers every month.
• PunchyHamster 4mo ago
  But will they pay big actors running top end models for that? You don't need latest openai or anthropic model to go thru your mails, get summary of the some products from web, or to do your to-do list. The AI might very well be used by noticeable % of population daily, but that doesn't mean they will be paying trillion dollars to the leading US AI companies