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Comment by libraryofbabel | Hacker News Reader

This is already happening. For new Anthropic enterprise accounts you are billed at api token prices (maybe with a small volume discount). Anthropic makes a profit on those tokens. (Sure, that profit does not cover the model training costs, but that’s a separate issue.) It’s the subscriptions for individuals (e.g. Claude Max) that are still subsidized below cost.

> I wonder if managers will be as excited about AI when the prices go up.

Companies are willing to pay the api pricing. Engineering time is very expensive and AI coding agents actually work now since December and are actually showing measurable productivity gains, finally. It’s a good deal to make (obviously, with caveats: you need to make sure your tokens are going on productive tasks that will actually grow revenue) and anyone who penny-pinches is making a strategic mistake.

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"Engineering time is very expensive"

I always wondered about this statement, like we are generally salaried and there is so many variables that affect how I spend my "time". None of us are machines that can do X work per day and our managers get to slice it as they see fit. Pull a dev off a project they love and throw them onto something they hate and suddenly X is diminished greatly.

I would almost predict that reshaping our workflow to be: "prompt, wait, approve changes." results in losses because it is such a mentally tiring workflow and drills into our brains the desire for the LLM to "just fix it". It is the next level of just moving tickets to completed all day.

> Sure, that profit does not cover the model training costs, but that’s a separate issue.

I don't think it is. At some point they have to make money and they can't do that if the token cost doesn't include ALL the costs. Someone has to pay for that at some point. And someone has to pay for the subsidized subscribers. So no. API token prices don't reflect the real price. They are still subsidized. Just in a different way.

> Sure, that profit does not cover the model training costs, but that’s a separate issue

It is? If another company comes out with a better model tomorrow and offers it at the same price Anthropic charges for Opus, they’re going to lose customers fast. They have to keep training to keep selling inference.

Most businesses factor in the cost of making their product into the product’s P&L.

also, like super mario kart, SOTA models from the rear will be continually released because theyre sunk costs and open weights will advertise for themselves. Also, its clear FOMO is a DDoS attack on any perceived leader because theres no way they dont oversell.

Lastly, theyll realize like every good capitalist, theres more profit in exclusiveness and cutiing out customers.

They may be for now. Problem is that when foundation model pricing goes up, you're paying not just the increase in tokens you consume directly, but also for all tokens you're consuming via vendors as well.

If your company has Figma, Github, and Cursor and they're using the same models you are, your monthly costs with them increase as well. You're exposed N times to the foundation model price increases, where N is the number of times software you directly or indirectly use talks to a frontier model.

> Anthropic makes a profit on those tokens

Citation needed. Anthropic does not have public books

Their CEO is on record as saying this. You may think he's lying, but that's just your opinion; given the pricing and how it stacks relative to the pricing of inference providers of comparable open source models (who are certainly charging above cost!), I am inclined to believe Anthropic on this.

Why would you believe a tech CEO who has a vested interest in the untruth but can skirt fiduciary duties by speaking cleverly.

Maybe because Anthropic are trying to get to an IPO and everything is securities fraud?

If their CEO was just flapping his mouth without any other comparable baseline, it'd probably be different. But as the GP points out, open-weight model providers are charging comparable rates and very likely have positive profit margins. That would imply that with API pricing tokens are sold at above cost.

That cost may well be "inference only", so excludes everything apart from hardware and power. Whether that's enough to cover the enormous training costs and other overheads is a different question.

He just told you. Because overwhelming public evidence supports the claim. Especially the pricing of open weight model inference. Why do you allow a prejudice to overshadow evidence?

why would we believe skeptical randos on social media?

he has access to the real numbers and a legal risk from lying publicly. it does him no good to lie about this.

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