OpenAI Burns the Boats

https://ethanding.substack.com/p/openai-burns-the-boats

by whoami_nr • 11 months ago

37 16 11 months ago

ethanding.substack.com

ru552• 11 months ago

This explains why Anthropic cut OpenAI off of their models just before GPT-5 was released.

impure• 11 months ago

I don’t think that saying means what you think it does.

Also I have not seen any evidence that OpenAI is pivoting to advertising. And even if they did I’m doubtful that advertising would pay the bills. This is one of the reasons Google did not originally pursue LLMs despite having the technology.

jsnell• 11 months ago

The unit economics of inference are incredibly good.

To be profitable, OpenAI would need to be 1/10th as good as Meta or Google are at monetizing via ads.

frizlab• 11 months ago

Very interesting article

But why on earth would you not use proper case for your words? ai is difficult to read as everybody else on the planet uses AI! Even the sentences feel weird without their uppercase at their beginning. (At least the final sentence dots were there…)

guywithahat• 11 months ago

I mean if Anthropic is really stealing market share from OpenAI in the enterprise space, as this article suggests they are, then what OpenAI is doing makes total sense. They should price competitively to get companies hooked on OpenAI early to build market share. I don't think OpenAI is burning boats because I don't think their position is dire

g42gregory2• 11 months ago

I don't know where the author gets his information. The GPT-5 is not on par with Claude Opus.

It's still cheaper than Sonnet, but certainly not by 10x. Sonnet, arguably, is still better than GPT-5, although not by much and not in all circumstances.

I read analysis that GPT-5 is better at debugging (super important) and following exact instructions (many people don't quite know what they are asking for anyway, so this could be counter-productive in many cases).

So no, OpenAI did not burn the boats...

(Ok, this is for coding only. I have no information on other uses.)

shallmn• 11 months ago

"I don't know where the author gets his information."

Same place that told them parking was free at Disney?

singron• 11 months ago

Yeah parking is $30/day at the theme parks: https://disneyworld.disney.go.com/guest-services/parking/

Hemospectrum• 11 months ago

The citation is right there in the article:

source: i made it up

g42gregory2• 11 months ago

Nice. I seem to have missed this particular citation. :-)

SilverElfin• 11 months ago

The lack of capitalization is not only making this hard to read, but it makes the author seem like they don’t really value their own words. If they don’t care, why would I care as a reader?

Also burning the boats means committing to something, without a way to get out of it. The article doesn’t seem to be about that.

DerSaidin• 11 months ago

I think the "burning the boats" action is releasing very low API pricing. Once consumers see the lower price they would balk if it was raised back up enough to provide some margin on inference. So the article is saying OpenAI won't have a way to switch back to profit from inferences.

bgwalter• 11 months ago

Where does the statement that "inference is profitable" come from? Several sources say they are burning cash, I'll quote the most reputable one:

https://www.ft.com/content/3c8cf028-e49f-4ac3-8d95-6f6178cf2... (Jul 25 2025)

"Despite their rapid growth, neither Anthropic or OpenAI is close to being profitable, with both burning cash to pay for the huge amount of computing power needed to train their models. They also face increasing financial demands in a fierce war for talent which has been accelerated by Meta chief Mark Zuckerberg offering top researchers packages of $100mn in recent months."

starchild3001• 11 months ago

The reality is that cloud and AI model serving has become a race to the bottom. Top models are increasingly similar in capabilities, so price, not features, has become the main differentiator.

OpenAI’s key move was to put its thinking capability behind a router, making it automatic and optional. This allows the system to use more expensive reasoning only when needed, reducing average serving costs.

They're clearly doing the right thing -- the router approach, in principle, will lower their costs while maintaining roughly the same quality.

Of all things, this benefits OpenAI's bottomline. It isn't necessarily an attack on Antropic or Google Gemini.

It's just inference costs slowly becoming "too cheap to meter", while user experience vastly improving thanks to reduced latency for easier-to-answer prompts.

It's a win for OpenAI (lower cost). It's a win for chatgpt users (lower latency and better model for the free tier). And stronger competition for anyone else, which eventually benefits everyone.

FYI, you can get a glimpse of the current AI-model market share here: https://openrouter.ai/rankings?view=week

adrianbooth17• 11 months ago

Had to give up on this due to lack of capitalization. How f**ing hard is it to format this properly? Why is "small caps" becoming a stylistic choice

pjjpo• 11 months ago

Presumably either deference or satire in writing an article about OpenAI using Sam's writing style. Personally it makes Sam seem like one of the least intelligent business leaders, but maybe not hip enough to get it.

OpenAI Burns the Boats

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