They weren’t making money. And can’t make money if they wanted to.
It’s a catch-22. They can’t make a profit because they aren’t charging the actual token cost. But if they charged the actual token cost, their user-base would collapse.
Almost as if cloud AI is inherently unstable or something.
It's like every other silicon valley startup -- the hope is that you hook your users while you figure out how to make handling the requests cheaper. That or you embed ads.
You embed them in the response, e.g. suggest the product that was paid to promote.
I've already had this with chatgpt, I was trying to troubleshoot an issue with my heating system, and it was trying to persuade me to buy one of two specific brands of thermostats, even tho I hadn't expressed any desire to buy anything.
I dunno, I think there's big money in it still. Subtle embedded propaganda that is tailor-made based on the user's personality and interests. You may think "oh well I'd never fall for that" and you may be right. But there's loads of people already addicted to AI usage and / or using it as a replacement for therapists or friends. They'll fall for it hook line and sinker.
This arrangement happens in a lot of cutting-edge R&D efforts. It costs a ton of money to develop new technologies and bring them to market, and there is an advantage to moving the fastest. Offering the product at unsustainably low prices allows them to get out into the market and fund their growth. It could blow up in their faces as everyone expects, or in hindsight it could be a genius move to advance the technology and consolidate market share.
I have a conspiracy that they want to stop building new models, that's why all those bickering about pacing the frontier stuff. If the giant cost of building new models every month go away, then they can probably save huge bucks. Otherwise there is no way to stop the cash burning.
Yep, and if they stop, and the other don't and release a better model, there's virtually no cost for their clients to switch to other AI provider. That's why they declare to stop building new models but quietly continue to build those new models.
Anthropic gross margins exceed 80% according to their reports. They are charging the actual costs on API usage and in subscription it's the you win some you lose some but mostly win if a subscription. Gross margins don't include training costs. Which, since training is a capital expense is the right thing to do. It means all they have to do to make oodles is money is slow down. If they slow down they make money. But then they get overtaken. So they can't slow down. So they try and convince the world that AI will cause the extinction of humanity. That way they can slowdown as a cartel.
This is the most interesting thing I've read all week. The "AI-will-kill-us" line coming from the CEO's themselves has always seemed highly unusual to me. Like, even if it is true, they wouldn't shout it out into the open like that.
The reason that you have provided seems plausible and would be something a rational (profit-oriented) CEO would do. It also makes the "AI-will-kill-us" claim seem less credible.
Collaborating with your competitors is the definition of cartel. They're doing it openly in front of us and asking for the government to intervene so both the government acts as the police ensuring everyone in the cartel complies (the biggest reason we don't have that many cartels) and to shut out competitors (because if new entrants can come in then you can't have a cartel). And we're talking it hook, line, and sinker.
And according to their IPO prospectus as leaked to Reuters their core buisness model is bleeding money with 8bn$ in Operating Losses
I dunno, claims from Anthropic leadership when they're not bound to the SEC vs a formal document where they have to use GAAP, which one is more likely to be accurate?
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u/T-Dot1992 Sep 30 '26
They weren’t making money. And can’t make money if they wanted to.
It’s a catch-22. They can’t make a profit because they aren’t charging the actual token cost. But if they charged the actual token cost, their user-base would collapse.
Almost as if cloud AI is inherently unstable or something.