Comment by felixfurtak

To be fair, I would get a ton of value out of someone selling dollars for 20 cents apiece.

But ya, OAI is clearly making a ton of revenue. That doesn't mean it's a good business, though. Giving them a 20 year horizon, shareholders will be very upset unless the firm can deliver about a trillion in profit, not revenue, to justify the 100B (so far) in investment, and that would barely beat the long term s&p 500 average return.

But Altman himself has said he'll need much more investment in the coming years. And even if OAI became profitable by jacking up prices and flooding gpt with ads, the underlying technology is so commodified, they'd never be able to achieve a high margin, assuming they can turn a profit at all.

All of which you will be able to do with your bundled assistant in the not-to-distant future.

OpenAI is a basket case:

- Too expensive and inconvenient to compete with commoditized, bundled assistants (from Google/ Microsoft/Apple)

- Too closed to compete with cheap, customizable open-source models

- Too dependent on partners

- Too late to establish its own platform lock-in

It echoes what happened to:

- Netscape (squeezed by Microsoft bundling + open protocols)

- BlackBerry (squeezed by Apple ecosystem + open Android OS)

- Dropbox (squeezed by iCloud, Google Drive, OneDrive + open tools like rclone)

When you live between giants and open-source, your margin collapses from both sides.

There's no doubt you're getting a lot of value from OpenAI, I am too. And yes the subscription is a lot more value than what you pay for. That's because they're burning investor's money and it's not something that is sustainable. Once the money runs out they'll have to jack up prices and that's the moment of truth, we'll see what users are willing to pay for what. Google or another company may be able to provide all that much cheaper.

> They're not paying me to use it.

Of course they are.

> As long as the inference is not done at a loss.

If making money on inference alone was possible, there would be a dozen different smaller providers who'd be taking the open weights models and offering that as service. But it seems that every provider is anchored at $20/month, so you can bet that none of them can go any lower.

> I get a ton of value from ChatGPT and Codex from my subscription

I think that’s what they’re saying. OpenAI is selling you a $1 product for $0.2

Tokens are too cheap right now and nobody is working on a path to dial up the cost

As a developer - ChatGPT doesn't hold a candle compared to claude for coding related tasks and under performs for arbitrary format document parsing[1]. It still has value and can handle a lot of tasks that would amaze someone in 2020 - but it is simply falling behind and spending much more doing so.

1. It actually under performs Claude, Gemini and even some of the Grok models for accuracy with our use case of parsing PDFs and other rather arbitrarily formatted files.

Well, don't you think you're getting a ton of value because they're selling each of their dollars for 0.2 dollars?

That the product is useful does not mean the supplier of the product has a good business; and of course, vice versa. OpenAI has a terrible business at the moment, and the question is, do they have a plausible path to a good one?

If the subscription cost 5x as much would you still pay and feel you are getting such a great value?

You are mostly missing the point. You’re saying you get value out of what OpenAI is offering you. Thats not at issue here.

The question is, does OpenAI get value out of the exchange?

You touched on it ever so briefly: “as long as inference is not done at a loss”. That is it, isn’t it? Or more generally, As long as OpenAI is making money . But they are not.

There’s the rub.

It’s not only about whether you think giving them your money is a good exchange. It needs to be a good exchange for both sides, for the business to be viable.

>. As long as the inference is not done at a lost this analogy doesn't hold.

I think that there were some article here that claimed that even inference is done at loss - and talking about per subscriber. I think it was for their 200$ subscription.

In a way we will be in a deal with it situation soon where they will just impose metered models and not subscription.

That's not the parent point though? His point is that if the models are not largely available, and then are better competitors; then what's the point of ChatGPT? Maybe you decide to stick with ChatGPT for whatever reason, but people will move to cheaper and better alternatives.

Why is it that I feel like your confidence in OpenAI's path to profitability exceeds Sam Altman's?

FWIW the selling $1 for $0.2 is widely applied to any business that is selling goods below cost.

For example: free shipping at Amazon does not have resale value and is not obviously fungible, but everyone understands they are eating a cost that otherwise would be borne by their customers. The suggestion is that OpenAI is doing similar, though it is harder to tease out because their books are opaque.

They're not selling a service, they're selling access to a service. You can access a more or less equivalent service from multiple companies.

The value of an LLM isn't an LLM. That's entirely 100% fungible. The value is exclusively what it produces.

If other people can produce the same thing, your LLM value approaches 0.

He can. He's selling dollars. He's a person who sells dollars for fewer dollars. You'd get dollars.

People need to understand that OpenAI is not a publicly traded company. Sam is allowed to be outrageously optimistic about his best case scenarios, as long as he is correct with OpenAI's investors. But those investors are not "the public", so he can publicly state pretty much anything he wants, as long as it is not contradicting facts.

So he cannot say "OpenAI made 20B profit last year." but can say "OpenAI will make 20B revenue next year." Optimism is not a crime.

I am not a lawyer, but it is possible he can say whatever he wants without consequences to public because OAI is not a public company.

I'm reading 5% on a quick search. Isn't that an unsurprising conversion rate for a successful app with a free tier? Why would it increase further in ChatGPT's case, other than by losing non-paying customers?

> Mozilla would effectively collapse.

given how bloated it (the org) is, i think that may be a good thing. Return firefox to good old community contributions, and donations from users.

> My first hand experience tells ChatGPT and even ClaudeCode are no where near the expertise they are touted to be

Not doubting you, but where specifically have the latest models fallen short for you?

Ads make sense in an AI search engine product like Perplexity. ChatGPT could try to make a UI like that.

But the thing is, the world already has an AI search engine. It's called Google, and it's already heavily integrated with Gemini. Why would people switch?

RIP privacy.

Hello Stasi Google and its full personalised file on XorNot.

Google knows when you're about to sneeze.

You can say it about the AI companies, but Google or Microsoft are far from AI companies.

Google and Microsoft have existing major money printing businesses to keep their AI business afloat and burn money for a while. That's how Microsoft broke into gaming (and then squandered it years later for unrelated incompetence)

OpenAI doesn't have that.

Yeah- given all top AI models are more and more generalists, as time goes on there is less and less reason to use one over another.

Are all of their sales their code gen model? And isn't there a lot of competition in the code gen space from Google and Anthropic?

I'd imagine they sold these to enterprise:

https://openai.com/business/

"ChatGPT for Business", sold per seat

"API Platform"

I could see the former getting canned if AI isn't adding value.

Developers can change the models they use frequently, especially with third party infrastructure like OpenRouter or FAL.