Claude Code has rate limits for a reason: I expect they are carefully designed to ensure that the average user doesn't end up losing Anthropic money, and that even extreme heavy users don't cause big enough losses for it to be a problem.
Everything I've heard makes me believe the margins on inference are quite high. The AI labs lose money because of the R&D and training costs, not because they're giving electricity and server operational costs away for free.
I was downvoted big time. Ah, I love it when people provide an example so it can finally be exposed without me having to say anything.
Unfortunately this is a huge problem on here - many people step outside of their domains, even if on the surface it seems simple, but post gibberish and completely mangled stuff. How does this benefit people who get exposed to crap?
People form very strong opinions on topic they barely understand. I'd say since they know little the opinions come mostly from emotions, which is hardly a good path for objective and deeper knowledge.
I'll be convinced they're actually making money when they stop asking for $30 billion funding rounds. None of that money is free! Whoever is giving them that money wants a return on their investment, somehow.
Once that happens, whomever is left standing can dial back the training investment to whatever their share of inference can bear.
Or, if there's two people left standing, they may compete with each other on price rather than performance and each end up with cloud compute's margins.
Training costs are fixed at whatever billions of dollars per year.
If inference is profitable they might conceivably make a profit if they can build a model that's good enough to sign up vast numbers of paying customers.
If they lose even more money on each new customer they don't have any path to profitability at all.
I mean we just have to look at old discussions about Uber for the exact same arguments. Uber, after all these years, still is at a negative 10 % lifetime ROI , and that company doesn't even have to meaningfully invest in hardware.
IMO this will probably develop like the railroad boom in the first half of the 19th century: All the AI-only first movers like OpenAI and Anthropic will go bust, just like most railroad companies who laid the tracks, because they can't escape the training treadmill. But the tech itself will stay, and even become a meaningful productivity booster over the next decades.
In theory they can increase prices once the customers will be hocked up. That's how many startups works.
He often gathers good information but his analysis of that information appears to be heavily influenced by the conclusions he's already trying to reach.
I do pay attention to him but I'd like to see similar conclusions from other analysts against the same data before I treat them as robust.
I don't personally have the knowledge or experience of company finance to be able to confidently evaluate his findings myself!
Which means that training needs to be ongoing. So the revenue covers the inference? So what? All that means is that it doesn't cover your costs and you're operating at a loss. Because it doesn't cover the training that you can't stop doing either.
>Training costs are fixed at whatever billions of dollars per year.
Which I think is the part people disagree with.
Capex is probably the biggest hurdle, but I can see how electricity cost might become a factor under heavy use.
Seems like a pretty dumb take. It’s like saying it only takes $X in electricity and raw materials to produce a widget that I sell for $Y. Since $Y is bigger than $X, I’m making money! Just ignore that I have to pay people to work the lines. Ignore that I had to pay huge amounts to build the factory. Ignore every other cost.
They can’t just fire everyone and stop training new models.
Gross profit = revenues - cost of goods sold
Operating profit = Gross profit - operating expenses including depreciation & amortisation
Net profit = Operating profit - net interest expense - taxes
If I am on a roll, I will flip on Extra Usage. I prototyped a fully functional and useful niche app in ~6 total hours and $20 of extra usage, and it's solid enough and proved enough value to continue investing in and eventually ship to the App store.
Without Claude I likely wouldn't have gotten to the finished prototype version to use in the real world.
For Indy dev, I think LLMs are a new source of solutions. This app is too niche to justify building and marketing without LLM assistance. It likely won't earn more than $25k/year but good enough!
For people doing work with LLMs as an assistant for codebase searching, reviews, double checks, and things like that the $20/month plan is more than fine. The closer you get to vibecoding and trying to get the LLM to do all the work, the more you need the $100 and $200 plans.
On the ChatGPT side, the $20/month subscription plan for GPT Codex feels extremely generous right now. I tried getting to the end of my window usage limit one day and could not.
> so the "just another $20 SaaS" argument doesn't sound too good
Having seen several company's SaaS bills, even $100/month or $200/month for developers would barely change anything.
but at that point you could go for a bugger one and split amongst headcount