This is a pricing model, i.e. what is the value according to the assumptions the model does (which btw are known to be weak for BS) but as anything else the price is what you are going to pay in the market for whatever other reasons.
Imagine you have a model that establishes the price of used cars, it can be really really good but if you go to the market to buy one you will pay whatever is been asked for not what your model says.
EDIT: Although pricing models do not have direct affectation to market prices they do in an indirect manner. To manage risk are needed pricing models which somehow condition market participants and therefore prices indirectly. In the simile with cars, you can buy as many cars as you want at the price you want, but what you do when you have them and if you want to take wise decisions with them you have to know something about their value.
Yes, but also no. Because you don't have to buy a mispriced asset (mispriced against you) and also, in many cases, you can construct what you want from pieces of other assets.
One car dealer trying to sell a 2023 Honda Accord with 60,000 miles can't just decide, independently, to forget the high mileage and price the car based solely on it being 1 year old. Sure that's "whatever is being asked" but that car will never sell until he brings the price down in line with other 60k mile cars - and that is because the pricing models are essentially agreed upon by all market participants.
Yes, but also no. The value of things is only what the market wants to pay for it, and it does not matter if it is a 2023 Honda Accord or a financial product, currency... In one you might trust the engine reliability and on the other on the government behind the currency, whoever is writing the option, issuing the bond, ... But still, it is a matter of faith and bid/ask.
It is weird that one of the most valued markets (openai, microsoft investments, nvidia gpus, ...) is based on a stack that is available to anyone that can pay for the resources to train the models and that in my opinion still has to deliver to the expectations that have been created around it.
Not saying it is a bubble but something seems imbalanced here.
>one of the most valued markets ... is based on a stack that is available to anyone
The sophisticated investors are not betting on future increasing valuations based on current LLMs or the next incremental iterations of it. That's a "static" perspective based on what outsiders currently see as a specific product or tech stack.
Instead, you have to believe in a "dynamic" landscape where OpenAI the organization of employees can build future groundbreaking models that are not LLMs but other AI architectures and products entirely. The so-called "moat" in this thinking would be the "OpenAI team to keep inventing new ideas beyond LLM". The moat is not the LLM itself.
As an analogy, imagine that in the 1980s, Microsoft's IPO and valuation looks irrational since "writing programming code on the Intel x86 stack" is not a big secret. That stock analysis would then logically continue saying "Anybody can write x86 software such as Lotus, Borland, etc." But the lesson learned was that the moat was never the "Intel x86 stack"; the moat was really the whole Microsoft team.
That said, if OpenAI doesn't have any future amazing ideas, their valuation will crash.
I'd say that Microsoft's moat was the copyright law and ability to bully the hardware companies with exclusive distribution contracts.
Writing a new DOS (or Windows 3) from scratch is something a lot of developers could do.
They just couldn't do it legally.
And thus it was easy to bully Compaq and others into only distributing PCs with DOS/Windows installed. For some time you even had to pay the Microsoft fee when you wanted a PC with Linux installed.
They don't have one, which is why they're struggling to maintain market share. They run solely on brand loyalty, and slightly on competing with AWS and GCP to sell server hosting to people with more money than sense.
So you believe they became the most valuable company in the world (a few times recently though Apple is currently 13% ahead) with no moat? That's an interesting take. Is it possible you just don't know much about them?
I agree in most of what you said. The main problem for me is that I dont see LLMs are as solid foundations to create a company as technology progress from the 80s.
Im 42 though and already feeling old to understand the future lol
I wouldn't write it off as a bubble, since that usually implies little to no underlying worth. Even if no future technical progress is made, it has still taken a permanent and growing chunk of the use case for conventional web search, which is an $X00bn business.
A bubble doesn't necessarily imply no underlying worth. The dot-com bubble hit legendary proportions, and the same underlying technology (the Internet) now underpins the whole civilization. There is clearly something there, but a bubble has inflated the expectations beyond reason, and the deflation will not be kind on any player still left playing (in the sense of AI winter), not even the actually-valuable companies that found profitable niches.
The more I think about it, the more I see how fucked up this world is and how unfair and imbalanced life can be for different human beings.
Some people risk their lives to save a few plants, while others (including myself) don’t give a damn about the consequences of our western lifestyle. Depressing...
To me this sounds pedantic, a good argument for a discretionary recruiting process and a good indicator of a bad interview/work experience. Why don't they instead try to define what superficial means? What do they expect from candidates in a way that can be measured? How many years of professional/research experience?
In banking it is mandated that a group validates any model that is used and reports the results to the FED. I wonder if something similar should exist for public institutions.
Imagine you have a model that establishes the price of used cars, it can be really really good but if you go to the market to buy one you will pay whatever is been asked for not what your model says.
EDIT: Although pricing models do not have direct affectation to market prices they do in an indirect manner. To manage risk are needed pricing models which somehow condition market participants and therefore prices indirectly. In the simile with cars, you can buy as many cars as you want at the price you want, but what you do when you have them and if you want to take wise decisions with them you have to know something about their value.
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