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#models#open#zitron#openai#collapse#investors#weight#more#don#years
Discussion Sentiment
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Discussion (32 Comments)Read Original on HackerNews
He has been predicting a crash for how many years now? And while I can totally see Anthropic and OpenAI going through some things on the way to post-IPO FMV, those things do not include AI going away. It truly doesn't matter whether closed source Frontier lab models are spewing tokens or large foreign open weight models are doing it, the token factories will be just fine, and that's really all I care about.
The question to me is why the media favors influencers like this over practitioners.
And it's not like there aren't more balanced takes out there, here's just one...
https://overweightskepticism.substack.com/p/ais-cash-cushion...
You know what created the AI backlash as well as anyone, and it is: AI and AI people.
If e/acc voices were not so abrasively, obtrusively YOLO about their technology, if their entire take on what they earn millions to do was not so easily reduced to “yeah it sucks that your job will go away, learn AI I guess LOLz” then there would be far less to have a backlash against. Being lectured about the future by people who do not have a fucking business plan for how they will repay a trillion dollars and who might actually crash the economy does tend to grate on the nerves of the reality-based.
Being told again and again that we will be ruled over by two firms that ultimately amount to the corporate equivalent of trust fund kids, that is annoying.
Ed Zitron is just putting it into words. But nobody outside the tech industry really has a clue who he is.
I'm sure there weren't a ton of bankers predicting the mortgage collapse of 2008 but I, a young programmer of mortgage software could see something was weird (but didn't realize that it wasn't the norm).
So the ~one guy gets around.
The Gary Marcus for this stage of things.
The obvious way to recoup spend is to grow, rugpull by cranking up costs 6x and reducing inference cost by half (highly achievable with improved silicon and technology), then simply fire a large percentage of software engineers. From that perspective the current behavior is a bit wicked but downright logical.
And having two whale customers is not really out of the ordinary for any software company... it's just the scale that is staggering.
The actual risk that the author does not even broach upon for investors... the thing that will actually torpedo this massive investment are the open source open weight chinese models that commoditize the entire endeavor. If you don't have a monopoly, you cannot rugpull and 6x the costs on the consumer.
Ironically, the actual thing that will likely kill OpenAI is ACTUAL OPEN AI.
Not in this specific article but Ed Zitron has been talking about open models quite a lot
It seems like user numbers are stagnating, and the ad play isn't working out so far. Where is the revenue growth coming from? I don't think API can be the answer, because API has absolutely no switching costs.
> The obvious way to recoup spend is to grow, rugpull by cranking up costs 6x
Presumably, that was the plan, but I don't see how that can possibly work with how quickly the Chinese models caught up.
So much this. I've never touched the Chinese models (no particular reason) but it is having an impact as the frontier companies are pushing the price down as a defensive measure. Is this pulling forward what would have happened eventually? No idea.
It is unclear how effective anyone beyond China and Mistral have been at developing cheaper, capable models. It is an expensive business. I'd be curious if anyone had any thoughts on that
The monopoly will likely then shift from the model to the compute, i.e. who has the GPUs to serve inference at scale from the open weight models. The cloud compute giants have basically bought everything that Nvidia, Broadcom etc. have to offer. Currently, the inference margins are shared between the cloud giants and OpenAI/Anthropic. But if training great models becomes easier for some reason, the cloud giants benefit. Then they'll have used the OpenAI/Anthropic revenue and spending commitments to grow their cloud business, and then can serve other models and make even more money.
Given that OpenAI and Anthropic are private, I don't think there is any risk to retail investors in this scenario. AI not turning out to be so useful, and OpenAI/Anthropic not being able to pay their bills is the correct failure scenario i think, as identified by the author.
OpenAI and Anthropic investors yes, however open weight models are good for cloud providers. They can turn the two large customers into direct ai services that can be spread across many customers and reduce the cloud providers overhead on ai services.
For example, this article claims: "Every single story you’ve read about the “incredible growth” of these cloud platforms is an embarrassing misread of three companies that are misleading investors that will more than likely be forced in the next year or two to have to restate revenues, cut remaining performance obligations, and admit that they’ve drastically overbuilt capacity. "
In july 2024, Zitron wrote at length about how the economics of OpenAI were likely to collapse in the next 1 to 2 years [1].
It seems like the nearly inevitable collapse of generative AI is always 1 to 2 years away, but it's just the details of the intricate financial argument that change.
[1]: https://www.wheresyoured.at/to-serve-altman/
> I am hypothesizing that for OpenAI to survive for longer than two years, it will have to (in no particular order):
And listed various things like a technological breakthrough or more fundraising. I would bet he’s right that they’ll fundraise by the end of the year if they can’t IPO and pass the bag to retail investors.
What the AI bulls don’t seem to understand is that AI could be a great technological achievement AND an impending economic collapse because the valuations of these companies are absurd, basically requiring them to fulfill 10% of the country’s GDP within the next couple years. The achievements are impressive but vastly outpaced by the mania.
>What the AI bulls don’t seem to understand is that AI could be a great technological achievement AND an impending economic collapse
This doesn't seem to be Ed Zitron's position, though. He is always minimizing the use cases of AI, and seems to think virtually all of the demand is due to the technology industry manufacturing consent.
One of my clearest memories of the first tech bubble was of a number of people who accurately identified that it WAS a bubble and then predicted it would go pop 12-18 months before it did.
They attracted plenty of scorn and derision for being 80% right from people who were 100% wrong.
Some also lost a bunch of money - short selling really explodes in your face if you time it badly. It's not enough to know that it is a bubble, you have to be able to know when market sentiment will finally turn which is a gigantic gamble.
-- Isaac Newton
Personally I'm of the mindset that the current AI prices are too rich and that AI is very useful. Much like high speed internet in 2000. The prices were too high but the services themselves are great.
I have seen such people - notably Jim Chanos.
But, Zitron was vocal at the time where fawning over AI companies was basically mandatory everywhere else. He was the one bringing in numbers and, well, passion rather then fear when arguing that point.
On security, Brucr Schneier was also calling AI threat claims overblown repeatedly.
Gotcha.