I think the fact that we have so little information is the most important information we have. If OpenAI had a sound business plan and was on strong financial footing, they'd have IPO'd.
All of this continued stalling and obfuscation can only mean one thing, IMO: OpenAI has no long-term viability and they're desperately hoping for some new breakthrough to reinvent their business model before the VC money faucets turn off for good.
Sam conceded he had no business plan in 2022 after releasing chatgpt. He even said he doesn't intend to come up with a business model, he would rather wait for the model to reach AGI then ask it to come up with a model.
No he wasn't wearing a red ball on his nose. He didn't even smile saying this. Dead serious.
The investors need to make a couple trillion dollars soon or it all falls apart, right? Maybe I misunderstand how the financing for this works, but my understanding is they have borrowed and set on fire an enormous pile of money as a sacrifice to summon the Machine-God.
If He fails to arrive, or arrives late, they will be the railroad financiers in the Panic of '73.
They do because the other part of the equation is that they need to keep spending a lot of money to build out infrastructure faster than their two most significant competitors, one of which is public and wildly profitable (for non-AI reasons) and another has already filed for IPO. So it puts them at a disadvantage to walk away from a massive cash infusion.
Two reasons. First, there's more money in the public markets, and Altman's appetite seems insatiable (he's the one who's been calling for gigantic, government-sponsored "Manhattan Project" efforts related to AI); and second, public money comes with fewer strings attached - private investors want protections, board seats, etc.
I certainly wouldn’t say that public money comes with fewer strings attached. Just different strings. But the strings that come with public money tend to have sharper legal teeth behind them.
Who knows what Altman wants? It's moot what individual motivations are as he is definitely fronting for investors who have significant power in the business.
Public money comes with legal fiduciary duties.
The reason to IPO is to get private money out, materialise the whole valuation.
At scale that OpenAI is valued at public markets are only place with enough of liquidity. At smaller scale private equity is an option. But if you are speaking of near trillion scale it really is not.
Unhinged conspiracy, if you take the implicit goals of AI research orgs at face value (I.e., replacing all knowledge work) and assume it possible; why would they drag a few thousand knowledge workers along to the promised land when they can just shed them after their usefulness has worn out?
What does adding a few more suckers to the pile of tens of millions of other suckers do to those that get the real benefits? It’s not like after they achieve their goals, the people who helped them would have the ramp or resources to recreate the process.
That then begs the question of whether there's any promised land at all after all knowledge work is replaced.
If you've made tens of millions of people unemployed over the timeline of a few years, then you no longer have nearly the market to sell goods and services - including your AI - to.
Assuming these guys answer that with "let's make UBI" - which is a huge assumption given the way SV fetishizes those who "create value" and looks down upon those who don't - you now basically have tech feudalism. The remaining upper crust "generously" pays the rest of the population enough to not starve until they die.
You'll basically have an entire society in stasis, with no hope of improving their lot, being given the bare minimum to keep humans alive, if that. Well, no hope of peacefully improving their lot.
From my read this line of thought was alluded to by GP's ironic "promised land". A promised land for whom? Not for the vast majority of humankind.
Comparisons to feudalism kind of sell the direness of the AGI vision short: in feudalism, the lord still depended on the peasants. The lord would be inconvenienced if he had them all killed. Not so with AGI! He won't even notice their gone.
Exactly why I’m confused with the “techno-feudalism” point as well. What are the serfs for if they’re useless (sans some physical labor maybe?). The AGI dream is for the smallest amount of humans needed to keep the system running, and if AI can do everything feasible, then that group is basically those that “own” the AI. Techno-feudalism, if even necessary, would be a fleeting blip in the end.
They are in a vicious circle there’s no good way out of. Building and operating their services is not operationally profitable. Therefore they need more funding. The only way to get more funding is to get a wider adoption and show new features. The only way to do that is to keep spending money.
Not being profitable in itself is not a problem or has not been historically. With software, there’s a bunch of investment into making the service but the variable cost of providing it is negligible. It’s ok not to be profitable because the growth of userbase will pay you back. Capex isn’t a thing, you can just rent somebody else’s from the cloud. This is how the world used to work pretty much for a quarter century, ever since the dot-com bubble. But OpenAI is not like it. Their variable cost is huge as is the capex to enable being able to even make that cost happen. It’s not that they are not profitable, it’s that their financial profile does not fit into anything this generation of decisionmakers is used to.
I don't know why comments pointing out this simple fact are getting downvoted.
The oversimplified view that has been drilled into startup discussions for years has been that IPO is the singular goal for every startup and they need to get there as fast as possible, but that hasn't been true for a long while. There are high profile examples like Stripe with no intent to go public any time soon. Some public companies are even gradually doing share buybacks partially to remove their public exposure.
Being a public company kind of sucks in many ways. I'll admit my sample size is small, but every post-IPO CEO I've known has expressed some regrets about going public. It was a fascinating revelation to me after being raised on the idea that IPO is the ultimate victory goal of every startup.
lol but they're trying to IPO, it's what sam altman has been talking about for the past 2 years? Are you saying you know something better about sam altman than his public opinions?
I am not sure why you'd, at this late date, think Sam Altman's public statements have anything to do with anything. Time and time again demonstrated compulsive bullshitter.
If they wanted to IPO they could do it at any moment and have a swarm of bankers and lawyers knocking down their door to work 16 hour days to get it done.
The only reason they’re not doing it is by choice, because they want to find an optimal time to maximize their returns.
There is no “we’re trying to IPO but can’t”. If they were actually trying, it would be in motion.
I'm guessing downvotes are not because people don't understand that this happens, but because based on OpenAI's words and actions it is highly unlikely that this is what they are doing. Also, Stripe has been confirmed to be profitable.
> OpenAI has no long-term viability and they're desperately hoping for some new breakthrough to reinvent their business model before the VC money faucets turn off for good.
If a startup is riding a hype cycle and is one of two leaders in the global industry with unreal growth numbers, they can IPO whenever they want. The incentives lean toward doing an IPO before the hype runs out, not delaying it.
If they were worried about running out of VC money, going to the public (the P in IPO) would be the move.
Companies don't actually have to go public quickly or even at all, even though that's been drilled into us as the only goal of every investor-backed startup.
I know it would be unworkable ripe-for-abuse, but for a moment I wished there was no tax if you sold from an index fund that broke its core rules and operating principles to invest in another that preserved them.
American venture capital and by extension US power (because the expectation is this is re-invested) means that it has to be allowed to happen whether you and I like it or not.
This is the entire game if you zoom out.
Exit -> Recycle some of the money so USA stays ahead. That is the entire game, you see it right...? I hope you do.
That only works long-term if the companies produce real value. Historically speaking, the venture cycle had a lot of failures (and they were allowed to fail) and a few successes, but those success were real and created value internationally.
Spacex is transparently a scam to steal from people's retirement accounts. Normally, that would be a thing that wouldn't be encouraged by regulators, and our president wouldn't have participated in the scam. Times are not normal.
> If they were worried about running out of VC money, going to the public (the P in IPO) would be the move.
Yes? They were geared up for IPO this year until pushing it back. See all the marketing shenanigans around solving mathematics for this month's flavour. They have a balancing act to manage between the hype and the reality of the business.
> I think the fact that we have so little information is the most important information we have. If OpenAI had a sound business plan and was on strong financial footing, they'd have IPO'd.
The reason is that companies can choose the best timing to go public - when their financial look the best - and they do.
Anthropic trying to go public very soon is a good tell their financial look pretty decent. OpenAI postponing the IPO is a very good tell theirs look bad.
Those numbers intentionally exclude the single largest operating expense that Anthropic has: model training. [1]
So yeah, if they stop training models forever, Anthropic will probably start making a profit... until someone else with better models comes along to eat their lunch.
I am not even sure that is true. We don’t know everything that is included or excluded from their calculation. I suspect there is a lot of funny math going on to get to profitability. Remember there was a lot of similar talks and reports about SpaceX and how profitable they were. The reality was much worse. I just don’t believe it until I see it in the S1. Even then they can hide quite a bit.
Or if model training is more of a rollercoaster, where spending gets you to the top of the hill where you create a massive internal model which can then build the next version of itself for cheaper and cheaper amounts relative to human R&D costs. If Anthropic is first over that hill, they can race far ahead.
They have found a path to “profitability” iif you define “profitable” in a way that makes every early stage start-up that has at least one paying customer as “profitable”. Literally any start-up has a COGS lower than their income, but that doesn't mean anything at actual profitability given that the rest of their expenses dwarfs it.
If an AI company can exclude the cost of training the new models they release every three months from the business of whether they are profitable, it would be shocking if they weren't profitable. And the figure is tiny compared to the valuation they appear to be seeking, and may only be positive because of a short term boost.
Steve Eisman said the other day that he suspects part of Anthropic's rush to get to IPO is that their third quarter figures are terrible.
I loved how Dario used to AIsplain to credulous interviewers that AI labs had invented an entirely new business model where they were always highly profitable for their current commercially available model, but training the next bigger model made it look like they were losing money.
And suggesting that maybe accounting norms should be changed so they could pretend that they were actually profitable despite the minor detail that they were consistently spending way more than they earned at any given point in time.
This was back in 2024 or so and the zeitgeist was still focused on the idea of the labs racing to AGI instead of building and selling products, with Sam Altman opining about whether money would even exist under AGI and his laughable suggestion that OpenAI might decide to give every American citizen shares in OpenAI for some reason.
If nothing else at least now they seem to be scrutinized more like regular tech megacorps instead of a sort of private yet benevolent Manhattan project of ascetic technopriests building a utopia machine.
And now they spend more time talking about building a doomsday machine that will kill you all and also show you ads.
I believe the entire basis of their profitable quarter was getting a discount on compute from Musk.
All these figures are so utterly weaselly. AAR is a made up measure to make them look good. If they cannot show GAAP numbers, they are hiding something. Full stop. While as private companies they are under no legal obligation to show us their books, their PR and intent to go public requires it.
I'm insanely profitable each month if you exclude my mortgage and bills and shopping too.
My low level conspiracy theory is AI is encouraging habits of people not to read so noone can read statements like "we excluded our costs from our profit calculation"
I think we're going to suddenly see them greatly scale back training and try to sell inference-only, but they all know when they do that someone can jump up and outstrip them.
But only as long as training actually improves models significantly. As soon as those improvements stay below a certain threshold, the better move is to invest your R&D money into other things like harnesses or new tricks one can play with existing models and the immense cost of training is just not worth it to be 0.5% ahead.
I'm absolutely certain that we will reach that point, just not when. Could come sooner than we think though.
Don't get me wrong I still want the models intelligence to improve, but for all practical purposes we are already there this is why many people are already moving to cheaper/open source. There is still a case though for the 1% of queries that demand SOTA
In this version of conspiracy theory, all the labs secretly understood that training wasn't economically feasible anymore so they all jointly made it look like they were stopping for safety reasons.
Is there no end to this kind of lazy conspiracy theory
You don't need to communicate to coordinate. All these companies have the same business model, if it was financially advantageous for one of them to push that narrative, then it's financially advantageous for all of them.
> Well there certainly is at least some kind of viable business running large AI models for a fee.
ok, where are:
- The economies of scale?
- The network effects?
- The switching costs?
- The intangible assets (e.g. brand?)
Running AI models for a fee has none of these. At best, there are some economies of scale for running a datacenter, but OpenAI and Anthropic have none.
There are not as many network effects, intangible assets, or switching costs as other businesses. I believe there are economies of scale in terms of power and cooling and network bandwidth and the people who plug in cables and other such things.
The business logic is similar to the general transition to cloud. Corporations and individuals are better off paying someone else to manage physical hardware that they just access over the network. That is even more true of large, expensive, fancy AI GPUs than regular web servers.
OpenAI and Anthropic may both fail, or may not, I don't know. But I'm sure there is some kind of viable business running some kind of AI in the cloud.
> OpenAI and Anthropic may both fail, or may not, I don't know. But I'm sure there is some kind of viable business running some kind of AI in the cloud.
The problem is that the investment does not expect "some kind of viable business" ROI needs to be in the order of several trillion for this to make any sense.
Well sometimes when people invest money that does not work out.
That money may not be made back in the way people hope.
But there is a whole ecosystem of companies on OpenRouter etc. who have a viable commodity business serving Chinese open source models on GPUs. I'm sure at least some kind of business like that will survive even if OpenAI and Anthropic completely fail. And I'm sure AWS, GCP and Azure will end up having something like that too.
Amazon will be able to run large models for a fee, and make money on it. It's not a trillion dollar business, it may not even be a good business, but they'll be able to do it.
Sure, a supermarket will sell avocados if they make a profit, and won't sell them if they don't. That's a very different business model; the product is the infrastructure, not the AI.
Anthropic likely would not be saying, in October, that they planned to go public next month, if this were also true of their business.
In the last ~month, OpenAI announced a delay to its IPO and Anthropic put a relatively near-term range on its IPO date. These are very different signals.
"If OpenAI had a sound business plan and was on strong financial footing, they'd have IPO'd."
This is a fallacious assertion, there are so many big private companies with strong businesses that stay private for a whole variety of reasons. E.g. Stripe, Revolut, Databricks, etc.
I think the fact that we have so little information is the most important information we have. If OpenAI had a sound business plan and was on strong financial footing, they'd have IPO'd.
All of this continued stalling and obfuscation can only mean one thing, IMO: OpenAI has no long-term viability and they're desperately hoping for some new breakthrough to reinvent their business model before the VC money faucets turn off for good.