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Free newsletter: AI's business model is inherently broken. Both OpenAI and Anthropic are discussing potential price cuts to to the cost of their models for enterprises as they allow their subscription users to burn $8k to $14k in tokens for $200 a month. www.wheresyoured.at/brokenomics/

Friday brought new drama, as Anthropic was forced to cut access to its new Fable and Mythos models to non-US citizens, both inside and outside the country. The entire situation is a mess, and a direct result of Anthropic's disingenuous doomer marketing. www.wheresyoured.at/brokenomics/

The entire shitshow is a self-inflicted wound for the ages. Anthropic, after hyping up the *very normal LLM capabilities* of Fable and Mythos, is now learning what happens when someone believes you. www.wheresyoured.at/brokenomics/

It appears that Fable and Mythos were banned after Amazon researchers - and CEO Andy Jassy - reported that it was possible to jailbreak Fable to the US commerce department. This all times terribly with its supposed upcoming IPO. www.wheresyoured.at/brokenomics/

The Fable saga is only a distraction from another more pressing problem for the AI industry — that none of their business models work. It only took three months of token-based billing for Anthropic and OpenAI to talk about price cuts. Customers are in revolt. www.wheresyoured.at/brokenomics/

In a little under three months, Anthropic and OpenAI’s customers are in mutiny after being shifted to a token-based billing model where they pay the actual cost of AI. This is terrible timing for two near-IPO companies that cannot afford to have their growth slow. www.wheresyoured.at/brokenomics/

After a few months of paying the actual cost of AI via token-based billing, an increasingly-anxious conversation has begun about AI's ROI. Per Cisco's Jeetu Patel, the costs of AI tokens are far higher than the actual value that these tokens are generating at scale. www.wheresyoured.at/brokenomics/

Now both OpenAI and Anthropic are considering "drastic" price cuts to appease enterprises complaining about spiraling costs. These price cuts would be deadly, leading to a race to the bottom for AI services that have already-unsustainable unit economics. www.wheresyoured.at/brokenomics/

Anthropic and OpenAI know their subsidized subscription-based customers won't pay the actual cost of AI, which is why they allow them to burn $8k to $14k in tokens a month on a $200-a-month subscription. There's no way these users would accept token-based billing. www.wheresyoured.at/brokenomics/

In the space of three months, the conversation around AI has moved from its supposed capabilities and promises to story after story of businesses planning spending cuts after burning hundreds of millions on experimental token usage. AI is slowing down. www.wheresyoured.at/brokenomics/

AI businesses only function by subsidizing or swindling their customer base using deceptive media campaigns that say “let people use as much AI as possible." The second anyone faces the actual costs, they protest. This is not a viable or functional industry. www.wheresyoured.at/brokenomics/

The AI industry is the direct opposite of what made Silicon Valley famous. It flattens everything, absorbing the majority of VC funding, media, talent, and intellectual oxygen, suffocating dissent or scrutiny and framing skeptics as non-believers. www.wheresyoured.at/brokenomics/

Anthropic and OpenAI are not startups, but ways for hyperscalers to extract VC dollars via companies with no viable business model. These are not plucky underdogs who shoulder-barged their way to near-trillion dollar valuations, but subsidiaries of big tech. www.wheresyoured.at/brokenomics/