I found the OP insightful and worth a read. Thank you for sharing it on HN.
The only aspect that is poorly analyzed by the OP is business model viability. All players are investing insane amounts of money in infrastructure with the expectation that their future profits will justify all that investment. The winner or winners in the AGI race, they believe, will find the proverbial "pot of gold at the end of the rainbow."
The OP glosses over questions of business model viability with a brief qualitative discussion and very little hard data. For example, to earn an annual return > 10% on every trillion dollars of capital sunk into infrastructure, the owners of that infrastructure must earn free cash flow (operating profit less investment) in excess of $100 billion per year in perpetuity. Is that feasible? Why? How?
I think the article's analysis is basically right in a vacuum. That is, I think it's clear that inference is a viable business model. But what isn't clear is whether it will be such a profitable business model for any given company that it will justify the investment that company has taken. I kind of think the winners might be a follow-on generation of companies that focus on this commodity inference business model instead of the invent-machine-god-first "business model" and thus are wiser about their level of investment and capital costs.
> I think it's clear that inference is a viable business model.
Only if you also have the model thats better than anyone else's.
As soon as models are free, or there are no newer models (assuming thats going to happen, and thats not a given) then the only thing you can compete on is price.
This means that the only thing you have to differentiate is either price, speed or ease of use. (or regulatory capture...)
We are at pets.com level of spend currently. Unless model development becomes cheaper, then we are going to run out of novel debt but not really debt mechanisms.
But I also think there are multiple ways to differentiate. There is at the very least: "intelligence", price, latency, throughput, reliability. It's not clear to me yet what this looks like, but maybe there is also a services and integration level of differentiation. And then there is the universal stuff: sales, marketing, branding. And then on the other side of the ledger there is operational efficiency, management capability, cost of capital, that kind of stuff.
I mean, there is no kind of "model quality" difference between AWS and GCP or between Delta and Southwest or between Wal-Mart and Costco, etc. but all of these businesses remain viable in very competitive markets.
I totally agree that the level of investment / capex is not sustainable though! But I think what's going to happen is that it is not going to be sustained, while AI continues past that point as a viable business (but maybe with different specific companies leading that industry).
cs702 · · focus · HN ↗
The only aspect that is poorly analyzed by the OP is business model viability. All players are investing insane amounts of money in infrastructure with the expectation that their future profits will justify all that investment. The winner or winners in the AGI race, they believe, will find the proverbial "pot of gold at the end of the rainbow."
The OP glosses over questions of business model viability with a brief qualitative discussion and very little hard data. For example, to earn an annual return > 10% on every trillion dollars of capital sunk into infrastructure, the owners of that infrastructure must earn free cash flow (operating profit less investment) in excess of $100 billion per year in perpetuity. Is that feasible? Why? How?
The OP does not really consider such questions.
sanderjd · · focus · HN ↗
KaiserPro · · focus · HN ↗
Only if you also have the model thats better than anyone else's.
As soon as models are free, or there are no newer models (assuming thats going to happen, and thats not a given) then the only thing you can compete on is price.
This means that the only thing you have to differentiate is either price, speed or ease of use. (or regulatory capture...)
We are at pets.com level of spend currently. Unless model development becomes cheaper, then we are going to run out of novel debt but not really debt mechanisms.
sanderjd · · focus · HN ↗
But I also think there are multiple ways to differentiate. There is at the very least: "intelligence", price, latency, throughput, reliability. It's not clear to me yet what this looks like, but maybe there is also a services and integration level of differentiation. And then there is the universal stuff: sales, marketing, branding. And then on the other side of the ledger there is operational efficiency, management capability, cost of capital, that kind of stuff.
I mean, there is no kind of "model quality" difference between AWS and GCP or between Delta and Southwest or between Wal-Mart and Costco, etc. but all of these businesses remain viable in very competitive markets.
I totally agree that the level of investment / capex is not sustainable though! But I think what's going to happen is that it is not going to be sustained, while AI continues past that point as a viable business (but maybe with different specific companies leading that industry).