OpenAI probably can't make ends meet. That's where you come in

https://garymarcus.substack.com/p/if-you-thought-the-2008-bank-bailout

101•treadump•1h ago

Comments

curt15•1h ago

Is Google also deep in the hole with Gemini, or is it just OpenAI that can't make ends meet?

ekelsen•1h ago

Google has the revenue to cover their spending and then some.

stuartjohnson12•58m ago

Depends what you mean by deep in the hole. Given how liberal Gemini is with free access it hardly seems like moneymaking is the end goal. Amongst AI labs, I've personally found Deepmind to be consistently the least sensationalist and least concerned with marketing. I think they're doing a great job of commoditising their complement.

https://gwern.net/complement

studmuffin650•54m ago

Also important to remember that Google is years ahead of most other AI shops in that they're running on custom silicon. This makes their inference (and maybe training) cheaper then almost any other company. People don't realize this when compared to OpenAI/Anthropic where most folks are utilizing NVIDIA GPUs, Google is completely different in that aspect with their custom TPU platform.

xnx•51m ago

> Also important to remember that Google is years ahead of most other AI shops in that they're running on custom silicon.

Not just the chips, Google's entire datacenter setup seems much more mature (e.g. liquid cooling, networking, etc.). I saw some video of new Amazon datacenter (https://www.youtube.com/watch?v=vnGC4YS36gU) and it looks like a bunch of server racks in a warehouse.

stego-tech•19m ago

Google’s datacenters are excellent, from what I’ve seen in my career. They genuinely had so many amazingly talented SMEs pushing boundaries for decades without executive intervention or deterrence, and that’s paid dividends in the subsequent tenure under Pichai and external shareholders (in that they have “infinite” runway and cash reserves to squander on moonshots before risking the company’s core businesses). That said, nothing lasts forever, and if their foray into LLMs don’t pay off, their shareholders are going to be pissed.

lokar•4m ago

And not just pushing the boundaries, working with the HW vendors to define them, asking for features and design elements that others don't really even see the point of.

cma•47m ago

Anthropic uses TPUs as well as nvidia. Compiler bugs in the tooling around the platform caused most of their quality issues and customer churn this year, but I think they've since announced a big expansion in use:

https://www.anthropic.com/engineering/a-postmortem-of-three-...

darth_avocado•39m ago

Google has a massive ad revenue that’s funding its AI habit. The difference between Google and OpenAI is that of a rich guy buying an expensive car that he can easily afford and a working class guy having a mid life crisis.

827a•26m ago

It cannot be stressed or even succinctly elaborated how far ahead Google is compared to every other organization doing anything remotely like this, anywhere on the planet. Practically speaking there is no "catching up" to Google; you can only hope to capitalize on any mistakes that they make.

HWR_14•25m ago

Google has enough income that they can self fund Gemini at a loss on whatever timespan they want. OpenAI does not.

warkdarrior•11m ago

ChatGPT has replaced Google Search for many people. If ChatGPT can also replace Gmail, Maps, and YouTube (by generating content for each of these), Google is done.

FromOmelas•1h ago

the "If you owe the bank 1M, you have a problem. If you owe the bank 1B, the bank has a problem" adagium scaled up ?

wavemode•34m ago

If you owe the bank $1B, the bank has a problem (they will work with you on repayment terms).

If you owe the bank $1T, the government has a problem (you're too big to fail and will get bailed out).

phillipcarter•55m ago

Wouldn't be a gary marcus post without congratulating himself for tweeting something that all but confirms a disaster that hasn't happened yet.

Anyways, OpenAI is not in profit-seeking mode, and there's no economic incentives to do so right now.

stanleykm•52m ago

Not being in profit seeking mode is one thing. Being so far away from profit seeking mode that you need a government bailout is an entirely different thing.

johnnienaked•49m ago

There's no ability for them to do so. They have a pathetic conversion rate and lose 3x as much money as they make.

bix6•39m ago

No economic incentives to seek profit?

Yeah there certainly aren’t when you can sucker everyone else into paying for your money losing company and cash out in the secondary market.

HWR_14•26m ago

Almost every Silicon Valley startup goes through a period where they seek growth, not profit and spend their investors money to maintain it.

mortehu•21m ago

And some of them have moats. What are the network effects here?

gipp•16m ago

Yes, at about 1% of this scale. OpenAI's obligations are not something they can just run to daddy VC to pay for; he can't afford it either

BolexNOLA•15m ago

But what percentage of those startups are making such grand promises while taking in such unfathomable amounts of capital? The sheer scale of the investment per AI company, the massive tax incentives being given out by states and debt being taken on by energy companies promising massive increase in loads…I mean this is all without precedent. AI speculation is rapidly driving infrastructural changes at the state level across the country.

We know they can’t all be winners. But the price and ripple per failure seems to me will be staggering. Am I off base here?

malfist•12m ago

Sure, most of then lose millions of dollars, but uh, not trillions

babelfish•25m ago

800M WAU is a "losing company"?

disgruntledphd2•19m ago

The W is important there. If the DAUs were good, they'd report those. I do generally find that LLMs are a weekly thing at best in a chat bot form (the agentic stuff I use more often).

moralestapia•12m ago

Weird thing to fixate about when the whole industry actually uses MAUs.

Even if all GPT users only logged in once a week (which I highly highly doubt), the question still stands.

800M WAU is a "losing company"?

zamadatix•18m ago

Maybe, maybe not. The stat alone doesn't really dictate the answer - it just gives hope they'll be able to turn a profit one day (hopefully soon) without losing their position vs doubt of the same.

gipp•17m ago

"money-losing"

woeirua•31m ago

Is that why they just changed to become a for-profit company?

sethops1•16m ago

Huh? They have committed to about a trillion dollars in infrastructure build out they will need to pay for. How about instead of begging tax payers to back loans to pay for this, they actually produce some profit and pay for it themselves?

d0odk•8m ago

If you show revenue, people will ask "How much?" And it will never be enough, but if you have no revenue, you can say you're pre-revenue. You're a potential pure play. It's not about how much you earn, it's about what you're worth. And who's worth the most? Companies that lose money.

esafak•53m ago

He's defensive but not agitated: https://www.youtube.com/watch?v=WEnBCfzsgyE

bn-l•37m ago

It struck me as performative for whatever reason.

lupire•28m ago

Buried lede there is Natella explaining how there isn't enough electric power in the world for AI!!

csours•48m ago

I feel like inferred tokens are a commodity and will be subject to commodity pricing pressure.

Which indicates to me that the value add will come from somewhere else, which would seem to be whales and addicts.

kevindamm•21m ago

which is a real problem if a significant part of being in the population of whale or addict involves AI psychosis

zerolayers•48m ago

Here's an entertaining take that flows with this topic: https://syntheticauth.ai/posts/synthetic-auth-the-power-prob...

xyzal•45m ago

Time to sell shares and buy bonds?

bix6•38m ago

Gold having quite a year!

zer0tonin•2m ago

If the US government has to find 1T$ somewhere, it isn't very good for US treasuries you know.

torpfactory•43m ago

I'm just going to copy my comment on a previous post about this topic:

You think that Trump won't demand something in return for this?

I keep telling everyone I know that AI will be enshitified just like every other internet business. Tell me why the incentives will be different this time around. Putting yourself in hock to an aspiring authoritarian is certainly one way to supercharge that process.

What do you think OpenAI's output about Jan 6 will be one year from now if this goes through?

gdulli•25m ago

LLM technology is the endgame and holy grail of advertising and propaganda.

bgwalter•42m ago

The China "AI" threat? Xi has warned of a bubble, has shut down the Internet during exam time and is in no hurry at all to push this nonsense.

Perhaps the government should loan OpenAI $1 billion so it can donate to a four times larger ballroom, upon which it will receive $100 billion in public money to fund the TikTok Sora videos.

Havoc•39m ago

There is certainly some concern around what is effectively a giant bet but I’m finding Gary’s aggressive doomer takes a little tiresome lately. Just like Sam can’t know for sure that the bet will work, Gary can’t know it won’t. Conviction levels should reflect that

Every startup begins with lots of debt and little revenue and a all in bet that it’ll change. Sam’s company unsurprisingly follow same playbook

foldr•34m ago

Almost all of those startups fail. Doomerism is the objectively correct outlook on any given startup in the absence of strong countervailing evidence. This isn’t “glass half full vs glass half empty”, it’s “wild optimism vs sober consideration”.

Your use of the word ‘bet’ is a useful clue here. If I bet on a horse, then neither of us knows if the horse will win or not. That doesn’t mean that optimists and pessimists about my prospects as a professional gambler have equally justifiable positions.

Havoc•7m ago

>Almost all of those startups fail.

Funding model aside this has little in common with them. The average SaaS isn't in the right spot at the right time for a once in a lifetime general-purpose technology (along with money to execute at scale)

>doesn’t mean [..] equally justifiable positions.

Indeed. And I'm not confident it'll be enough to cover Sam's 1 trillion either but the range of possible outcomes here seem very wide to me and a good chunk of it being positive. Seems entirely plausible to me that the odds are 60% in favour here or whatever. We don't really know, but we're reading an article that seems very certain.

foldr•3m ago

Every startup says that it’s not like other startups. If the founder of the company’s response to being asked how they’re going to obtain one trillion dollars in revenue is (fluff aside) essentially equivalent to “trust me bro”, then I am very comfortable putting long odds on this happening (unlesss via some kind of government bailout).

And yes, obviously there is a wide range of possible outcomes. However, there is not a uniform probability distribution over them.

roadside_picnic•21m ago

> Every startup begins with lots of debt and little revenue and a all in bet that it’ll change. Sam’s company unsurprisingly follow same playbook

This reads like an intentional misunderstanding of the general concerns around this current boom. The arguments aren't about the odds of the bet, they're pointing out that in fundamental ways the bet itself doesn't make sense.

I also wouldn't describe this post as "doomerism", it's basically pointing out that this "bet" only makes sense if the plan is for the US public to ultimately be the ones paying for the risks being taken.

ChrisArchitect•38m ago

OpenAI asks U.S. for loan guarantees to fund $1T AI expansion

https://news.ycombinator.com/item?id=45830380

darth_avocado•31m ago

Absolutely not. Why should taxpayers bail out a company that is actively putting people out of jobs?

Insanity•30m ago

Because “China”. Also because the people in charge of that in the government won’t understand the technology, and only listen to the PR.

lokar•8m ago

And the people in government and their cronies are getting a cut

ToucanLoucan•27m ago

Same reason we bailed out the auto industry: nvidia and co now comprise 1/4 of our goddamned economy, and are thusly wearing a C4 vest in the middle of our money system and threatening to blow it to bits if we don't pay up.

The most rational economic system strikes again. The rich get richer. Everyone else gets fucked. Socialism for corporations, capitalism for the workers.

dwa3592•22m ago

"Socialism for corporations, capitalism for the workers." ../n this was in my mind but couldn't phrase it. thank you

miltonlost•21m ago

At least auto industry produced tangible things of value (even though america's car culture is itself a problem). AI firms can't even point to that

ungovernableCat•13m ago

Yep. An American is free to pay $80k for a Tesla while the rest of the world buys a BYD for $25k An American is free to pay $100 for Insulin while the rest of the world pays $20. So too will an American pay for OpenAI while they start blocking foreign competitors from the market "for security reasons" the more the government gets entangled into the scheme.

darth_avocado•2m ago

There’s a difference between Americans paying $80K and getting an overpriced car in return and paying a ton of money to OpenAI and getting nothing in return.

lokar•7m ago

The stock market is not the economy

zozbot234•22m ago

Maybe they should buy it out and convert it into a non-profit.

MarsIronPI•11m ago

You mean a non-profit like it was originally supposed to be?

layer8•11m ago

What, and repeat that cycle every couple of years? ;)

spaceman_2020•27m ago

Why should we bail out OAI again? It’s hardly sota anymore. Replacing it with a (more) competitive model made by a trillion dollar company with tons of cash is as easy as replacing an API key

SV_BubbleTime•21m ago

There is a difference between a model, a product, and a network.

OAI has a solid handle on the latter two.

800,000,000 users a month last I saw them report. 10% of the world population a month is no joke.

That isn’t to say they are worth it, I am commenting that “the model” isn’t the important part.

There is more to a car than its engine. Even among our people, no one really cares about engines anymore.

BeetleB•13m ago

If they go out of business tomorrow, those 800M users aren't going to just stop using LLMs. They'll shift to other providers.

moralestapia•10m ago

>If they go out of business [...]

Hold your breath, then.

mvdtnz•24m ago

"You" as in Americans. Not me.

stego-tech•24m ago

Let them fail, and take the overhyped tech economy with them I say. After the utter disaster that were the 9/11 Airline bailouts, the 2008 Bank bailouts, and the COVID bailouts, I am sick and fucking tired of tax dollars supporting rich sociopaths who can’t make rational financial decisions beyond the scope of their personal wealth.

Let. It. Burn.

TrackerFF•22m ago

If banks were too big to fail back in '08, it makes total sense that the current AI bubble is also too big to fail, given that it is many multiples of the financial crisis.

Not to mention that it is propping up the stock market. Ain't no way the current admin will allow the biggest financial crisis to unfold on their watch.

ModernMech•20m ago

sama showed a really bad side of himself in that answer to Brad Gerstner. You can tell Gerstner thought Altman was kidding at first, but when it became apparent he was lashing out, the answer became less about the answer and more about why Sam Altman was so injured by the (very fair) question. Which, if you haven't read TFA or seen it, the question was "How are you going to make money given how much you borrowed" but Sam's answer was essentially "How dare you ask me that question, we're happy to take back your shares if you have a problem with the way things are going". That was my read on it anyway.

Corporate leadership in America has a megalomania problem. Billionaires in general have a megalomania problem. OpenAI specifically, apparently, has a megalomania problem.

Meneth•20m ago

How can I help destroy the company?

_vaporwave_•19m ago

It looks like they might not get the bailout they're hoping for - https://x.com/DavidSacks/status/1986476840207122440

ungovernableCat•17m ago

What an amazing financial innovation. If the government involves itself now it'll actually be much cheaper then if the government involves themselves after they've entangled the entire stock market and financial sector into their bet. Maybe we can call it the pre-bailout.

They also propose that their services will be so key to some sectors (like pharma) that they'll also seek revenue sharing as part of the companies getting the privilege to use the most cutting edge intelligence. Insane stuff honestly.

All I'm going to say is I'm actually really hoping that China stays competitive in this field. Just like they are delivering EVs for $25k to the world it'd be great for all consumers and companies if they can also deliver 90% of the AI performance for 1/10 of the cost.

_lex•10m ago

The buildout is already taxpayer funded: see the big beautiful bill, which seems like it was engineered to make this effectively free.

They can blend leverage, 100% 1st year depreciation with using the hardware itself as a financing asset and dozens more financial engineering steps -

Their actual cost of financing is probably incredibly low already.

I worry that they are thinking of trying to run the company just ahead of debt/lease payments or something, otherwise this is just a distraction

So they want even more?

lokar•8m ago

Depreciation only helps if you have revenue of the same basic scale to offset (to avoid a paper profit).

zer0tonin•6m ago

Glad I'm not american!

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