Post

I was very bearish on AI to begin with, but recently I started experimenting more with APIs and building my own agents. And wow, I did not realize how heavily subsidized all the subscriptions were: 🧵 1/6

The $200/month Claude subscription I have is okish. Current frontier model capabilities are mediocre at best, but I can find $200/month worth of value here and there, so it's worth it for me. But, via the API though, I can burn $200 worth of tokens with a single prompt. 2/6

Most of the die-hard AI fans I talk to are using stuff like Cursor, Claude Code, ChatGPT, etc. All of those are heavily-subsidized to the point where those $20/month and $200/month subscriptions they're paying for are letting them burn thousands of dollars worth of tokens. 3/6

I'd guess some of the heavier subscription users are probably burning like $15-30k/month worth of resources. Then you have to consider the fact that the actual cost of API tokens may also be subsidized. These company are getting discount compute from cloud providers looking to expand. 4/6

So, like, yeah, "everyone gets a free supercomputer" is great and all. But it isn't a serious business model. I just don't see how any amount of capability advancement or decrease in operational cost makes generative AI even remotely good value for money. 5/6

Then every AI proponent I talk to about this just come up with some insane napkin math where token costs keep decreasing exponentially forever. It feels as if the entire industry is basically operating on some insane Moore's law hypothesis where everything just becomes free... 6/6

What’s wild to me is that OpenAI thinks they’re going to churn most of their $20/mo subscriptions into $8/mo subscriptions by the end of 2027. Do businesses usually plan to scale by moving most of their customers to lower-revenue users?