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Comment by eqvinox | Hacker News Reader

Just because API pricing would've been $2180.16 doesn't mean that's the value of those tokens. For starters, you personally probably wouldn't have paid that. But also, sales price isn't value. This is like saying, oh, I saw this bar of gold somewhere for $10000 but got it here for $1000! So I got $10000 worth of gold for $1000! - no, the value of that gold is determined by its weight, which wasn't even mentioned.

We have no market convergence on tokens yet (and it'll differ between LLMs), so it's impossible to say what value you got for your $200.

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He's saying he's getting a great deal...a token from Opus on Claude code is the same as a token from Opus on the API. I remain as confused as Simon. He's not talking about "here's the ROI I got from my $100 subscription" it's "here's how much I saved from getting the monthly subscription instead of sending things through an API".

Right, the confusion is that the quote-unquote "subsidized" monthly pricing is often used by Anthropic/OpenAI skeptics as proof that inference is unprofitable, i.e. the API would have cost $2000 but you only paid $200 for a subscription, therefore OpenAI is selling dollars for 95 cents and the house of cards is about to collapse. As the GP says, this is faulty logic because we don't know what the actual cost of a token is; OpenAI might only pay $1 in inference costs, in which case they're merely "incredibly profitable" making $199 off you instead of "ludicrously profitable" making $1999 off you had you used the API.

But to your point, re-reading the article, this is not what Simon is saying at all; he's just pointing out that he got to use ~$2000 "worth" of tokens on his $200 plan. Which makes total sense! Subscriptions are sticky, that's why the entire software industry moved towards subscription models (as much as we hate it); the person paying $200/month is more likely to stick around than the person who paid $2000 using the API.

Which is a terrible metric sending a wrong message.

He’s just making a point that $100/mo subscription is cheaper than the API costs and that the same work would cost 10x as much on API pricing. It’s not some sort of swindle it’s a trade between consistent revenue that power users will overspend on but plenty of people will underspend (I’m on the underspend side) or pay-per-request service that makes more sense for say scaling out something custom (I run APIs a lot when I have say some pseudo labeling pipeline I want to scale to a lot of data. For this I typically use smaller models but lots of cases where you want larger models). What’s the wrong message here?

No, value is determined by what participants in a market are willing to pay for something. The only reason you are able to say that the value of gold is determined by its weight is that gold is a commodity and no matter what you paid for it you'll find others willing to pay market price.

Simon is saying that companies are (today) willing to pay API prices for tokens which is as good as any determination of value.

Is this some anti-FIAT take? The value the author got is not value as in intrinsic value, it simply means value as in better deal than the alternative. This is often called "value" and you will see this used when products are sold in "value packs" etc.

> Just because API pricing would've been $2180.16 doesn't mean that's the value of those tokens.

You seem to be suggesting the price of tokens is entirely disconnected to the cost of providing the service? I don't see much basis for that assumption.

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