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Comment by Aurornis | Hacker News Reader

> It's not very clear why using GPT-4 in early 2023 was so expensive and then six months later 20 bucks could get you a fair amount of GPT-4 inference.

The price is what the market is willing to bear for the available compute capacity and competitive landscape. You can only discover that price after trying different price points and seeing what happens.

Everyone is trying different pricing schemes and discounts as they test the market. The demand is fluctuating at the same time.

It’s probably very confusing if you’re primarily familiar with stable and mature markets. Price fluctuations are a common feature of new and evolving markets.

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Most unmature markets aren't subsidized to the point that LLM market is, most market have some level of baseline profitablity, this market doesn't, that's because most market subsidized the marketing or the capex but this market doesn't hold the opex, the capex not the amount of marketing let alone all of this together

Most new markets are funded by initial investment capital. Early entrants operate at a loss as they grow.

This isn’t as unusual as some people are trying to make it sound. This has been happening since the dawn of finance.

I thought this would be less foreign to everyone since we just went through this whole conversation for a decade with Uber and Lyft. Their demise was predicted from the start from everyone who thought that it was going to collapse as soon as they couldn’t subsidize your rides with promos. There was much wailing and gnashing of teeth as their prices changed to feel out the market. Then they found profitability and the critics went silent.

Arguably we'd be much better off if none of those would be subsidized by investments, at least not to the "run unprofitable for decade+" level.

Because that just absolutely murders any competition that manages to not get that level of free money. You're not pouring money in to make it happen at all at that point, you are pouring money in so nobody else can get the part of the pie.

Which is great for investors, bad for everyone else

If the pie is valuable enough then competition can get money. We have competition in AI. You can't build big things without investment.

What would be the alternative? You’ve got the government funds absolutely everybody on one end of the scale. Where do we find a reasonable alternative?

Yeah, in the Uber example, Hailo was a great competitor with a franchise model that got destroyed by Ubers essentially infinite capital.

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