OpenAI probably can't make ends meet. That's where you come in

https://garymarcus.substack.com/p/if-you-thought-the-2008-bank-bailout

by treadump • 9 months ago

170 140 9 months ago

garymarcus.substack.com

curt15• 9 months ago

Is Google also deep in the hole with Gemini, or is it just OpenAI that can't make ends meet?

ekelsen• 9 months ago

Google has the revenue to cover their spending and then some.

stuartjohnson12• 9 months ago

Depends what you mean by deep in the hole. Given how liberal Gemini is with free access it hardly seems like moneymaking is the end goal. Amongst AI labs, I've personally found Deepmind to be consistently the least sensationalist and least concerned with marketing. I think they're doing a great job of commoditising their complement.

https://gwern.net/complement

studmuffin650• 9 months ago

Also important to remember that Google is years ahead of most other AI shops in that they're running on custom silicon. This makes their inference (and maybe training) cheaper then almost any other company. People don't realize this when compared to OpenAI/Anthropic where most folks are utilizing NVIDIA GPUs, Google is completely different in that aspect with their custom TPU platform.

xnx• 9 months ago

Also important to remember that Google is years ahead of most other AI shops in that they're running on custom silicon.

Not just the chips, Google's entire datacenter setup seems much more mature (e.g. liquid cooling, networking, etc.). I saw some video of new Amazon datacenter (https://www.youtube.com/watch?v=vnGC4YS36gU) and it looks like a bunch of server racks in a warehouse.

cma• 9 months ago

Anthropic uses TPUs as well as nvidia. Compiler bugs in the tooling around the platform caused most of their quality issues and customer churn this year, but I think they've since announced a big expansion in use:

https://www.anthropic.com/engineering/a-postmortem-of-three-...

darth_avocado3• 9 months ago

Google has a massive ad revenue that’s funding its AI habit. The difference between Google and OpenAI is that of a rich guy buying an expensive car that he can easily afford and a working class guy having a mid life crisis.

827a• 9 months ago

It cannot be stressed or even succinctly elaborated how far ahead Google is compared to every other organization doing anything remotely like this, anywhere on the planet. Practically speaking there is no "catching up" to Google; you can only hope to capitalize on any mistakes that they make.

HWR_142• 9 months ago

Google has enough income that they can self fund Gemini at a loss on whatever timespan they want. OpenAI does not.

warkdarrior• 9 months ago

ChatGPT has replaced Google Search for many people. If ChatGPT can also replace Gmail, Maps, and YouTube (by generating content for each of these), Google is done.

FromOmelas• 9 months ago

the "If you owe the bank 1M, you have a problem. If you owe the bank 1B, the bank has a problem" adagium scaled up ?

wavemode2• 9 months ago

If you owe the bank $1B, the bank has a problem (they will work with you on repayment terms).

If you owe the bank $1T, the government has a problem (you're too big to fail and will get bailed out).

phillipcarter2• 9 months ago

Wouldn't be a gary marcus post without congratulating himself for tweeting something that all but confirms a disaster that hasn't happened yet.

Anyways, OpenAI is not in profit-seeking mode, and there's no economic incentives to do so right now.

stanleykm• 9 months ago

Not being in profit seeking mode is one thing. Being so far away from profit seeking mode that you need a government bailout is an entirely different thing.

aeonfox• 9 months ago

According to this[0] podcast some captains of industry in SV consider that bubbles are good, actually. At least, that is the thesis of this[1] book published by Stripe Press. Not because they'll deliver returns for their investors, but because they drive innovation in the long run. But obviously, if they are perceived to have terrible ROI, they aren't getting over the line, which leads to a dilemma – how do we reach that moonshot without fooling a bunch of people and destroying the economy along the way?

All that said, anyone who spends a lot of time with AI knows the current direction of generative AI isn't really that moonshot. But the scale of compute that is being unlocked right now, along with technologies like photonics, might be what's key to AGI.

[0] https://shows.acast.com/the-david-mcwilliams-podcast/episode... [1] https://www.stripe.press/boom

johnnienaked• 9 months ago

There's no ability for them to do so. They have a pathetic conversion rate and lose 3x as much money as they make.

bix63• 9 months ago

No economic incentives to seek profit?

Yeah there certainly aren’t when you can sucker everyone else into paying for your money losing company and cash out in the secondary market.

HWR_142• 9 months ago

Almost every Silicon Valley startup goes through a period where they seek growth, not profit and spend their investors money to maintain it.

babelfish• 9 months ago

800M WAU is a "losing company"?

zahllos• 9 months ago

Yeah. No revenue. Nobody wants to hear about revenue! It's not about how much you make, it is about how much you're worth and who is worth the most? Companies that lose money.

woeirua• 9 months ago

Is that why they just changed to become a for-profit company?

sethops1• 9 months ago

Huh? They have committed to about a trillion dollars in infrastructure build out they will need to pay for. How about instead of begging tax payers to back loans to pay for this, they actually produce some profit and pay for it themselves?

Forgeties792• 9 months ago

I feel like this question needs to be even louder because in the past they would just mumble something about “job creation,” but that’s undermined by the fact that they also tout AI as “job replacement” to investors and clients alike.

d0odk• 9 months ago

If you show revenue, people will ask "How much?" And it will never be enough, but if you have no revenue, you can say you're pre-revenue. You're a potential pure play. It's not about how much you earn, it's about what you're worth. And who's worth the most? Companies that lose money.

Gud• 9 months ago

Actually, companies that make a shitload of money are worth the most.

array_key_first2• 9 months ago

And who's worth the most? Companies that lose money.

This is a fairly new phenomenon and we don't actually know if it works. It's entirely possible this exact mentality blows up the economy.

wavemode2• 9 months ago

Anyways, OpenAI is not in profit-seeking mode, and there's no economic incentives to do so right now.

You disparaged the article, but then immediately agreed with its main point. The fact that there is no economic incentive for OpenAI to run sustainably is a problem. It means they will happily continue to spend trillions of investor, lender, and (soon) government money, most of which is being burned as waste heat radiating from GPUs, in pursuit of an AGI pipedream.

phillipcarter2• 9 months ago

I didn’t agree with the article at all.

esafak• 9 months ago

He's defensive but not agitated: https://www.youtube.com/watch?v=WEnBCfzsgyE

arresin• 9 months ago

It struck me as performative for whatever reason.

lupire• 9 months ago

Buried lede there is Natella explaining how there isn't enough electric power in the world for AI!!

csours• 9 months ago

I feel like inferred tokens are a commodity and will be subject to commodity pricing pressure.

Which indicates to me that the value add will come from somewhere else, which would seem to be whales and addicts.

kevindamm• 9 months ago

which is a real problem if a significant part of being in the population of whale or addict involves AI psychosis

zerolayers• 9 months ago

Here's an entertaining take that flows with this topic: https://syntheticauth.ai/posts/synthetic-auth-the-power-prob...

Awesomedonut• 9 months ago

When reality writes better satire than satirists can invent, perhaps it's time to ask some harder questions.

Oof

red-iron-pine• 9 months ago

more like: it's time to get torches and pitchforks

onemoresoop• 9 months ago

https://officechai.com/ai/microsoft-has-ai-chips-sitting-unu...

xyzal• 9 months ago

Time to sell shares and buy bonds?

bix63• 9 months ago

Gold having quite a year!

zer0tonin2• 9 months ago

If the US government has to find 1T$ somewhere, it isn't very good for US treasuries you know.

torpfactory• 9 months ago

I'm just going to copy my comment on a previous post about this topic:

You think that Trump won't demand something in return for this?

I keep telling everyone I know that AI will be enshitified just like every other internet business. Tell me why the incentives will be different this time around. Putting yourself in hock to an aspiring authoritarian is certainly one way to supercharge that process.

What do you think OpenAI's output about Jan 6 will be one year from now if this goes through?

gdulli• 9 months ago

LLM technology is the endgame and holy grail of advertising and propaganda.

bgwalter• 9 months ago

The China "AI" threat? Xi has warned of a bubble, has shut down the Internet during exam time and is in no hurry at all to push this nonsense.

Perhaps the government should loan OpenAI $1 billion so it can donate to a four times larger ballroom, upon which it will receive $100 billion in public money to fund the TikTok Sora videos.

Havoc2• 9 months ago

There is certainly some concern around what is effectively a giant bet but I’m finding Gary’s aggressive doomer takes a little tiresome lately. Just like Sam can’t know for sure that the bet will work, Gary can’t know it won’t. Conviction levels should reflect that

Every startup begins with lots of debt and little revenue and a all in bet that it’ll change. Sam’s company unsurprisingly follow same playbook

foldr2• 9 months ago

Almost all of those startups fail. Doomerism is the objectively correct outlook on any given startup in the absence of strong countervailing evidence. This isn’t “glass half full vs glass half empty”, it’s “wild optimism vs sober consideration”.

Your use of the word ‘bet’ is a useful clue here. If I bet on a horse, then neither of us knows if the horse will win or not. That doesn’t mean that optimists and pessimists about my prospects as a professional gambler have equally justifiable positions.

Havoc2• 9 months ago

Almost all of those startups fail.

Funding model aside this has little in common with them. The average SaaS isn't in the right spot at the right time for a once in a lifetime general-purpose technology (along with money to execute at scale)

doesn’t mean [..] equally justifiable positions.

Indeed. And I'm not confident it'll be enough to cover Sam's 1 trillion either but the range of possible outcomes here seem very wide to me and a good chunk of it being positive. Seems entirely plausible to me that the odds are 60% in favour here or whatever. We don't really know, but we're reading an article that seems very certain.

roadside_picnic• 9 months ago

Every startup begins with lots of debt and little revenue and a all in bet that it’ll change. Sam’s company unsurprisingly follow same playbook

This reads like an intentional misunderstanding of the general concerns around this current boom. The arguments aren't about the odds of the bet, they're pointing out that in fundamental ways the bet itself doesn't make sense.

I also wouldn't describe this post as "doomerism", it's basically pointing out that this "bet" only makes sense if the plan is for the US public to ultimately be the ones paying for the risks being taken.

ryukoposting• 9 months ago

I refuse to accept that a publicly-traded company with a $300B market cap and hundreds of millions of users is a "startup." Nothing about a startup is comparable to OpenAI besides the megalomaniac running the show.

Yeul2• 9 months ago

It's not much of a bet really. In the old days if a general got it wrong he would die on the battlefield if he was lucky or get shot before a firing squad.

These AI clowns will still have their mansions come what may.

ChrisArchitect• 9 months ago

OpenAI asks U.S. for loan guarantees to fund $1T AI expansion

https://news.ycombinator.com/item?id=45830380

darth_avocado3• 9 months ago

Absolutely not. Why should taxpayers bail out a company that is actively putting people out of jobs?

Insanity• 9 months ago

Because “China”. Also because the people in charge of that in the government won’t understand the technology, and only listen to the PR.

lokar6• 9 months ago

And the people in government and their cronies are getting a cut

ToucanLoucan3• 9 months ago

Same reason we bailed out the auto industry: nvidia and co now comprise 1/4 of our goddamned economy, and are thusly wearing a C4 vest in the middle of our money system and threatening to blow it to bits if we don't pay up.

The most rational economic system strikes again. The rich get richer. Everyone else gets fucked. Socialism for corporations, capitalism for the workers.

Edit: upon further thought, this has less in common with the bailout of the auto industry, and far more in common with the 2008 housing crash, and subsequent bailouts which went to the bankers, of course, while workers lost their homes in droves.

The meat of my point remains unchanged though. I just sometimes forget which once-in-a-lifetime economic collapse is which, side effect of being alive right now.

dwa3592• 9 months ago

"Socialism for corporations, capitalism for the workers." ../n this was in my mind but couldn't phrase it. thank you

miltonlost• 9 months ago

At least auto industry produced tangible things of value (even though america's car culture is itself a problem). AI firms can't even point to that

ungovernableCat2• 9 months ago

Yep. An American is free to pay $80k for a Tesla while the rest of the world buys a BYD for $25k An American is free to pay $100 for Insulin while the rest of the world pays $20. So too will an American pay for OpenAI while they start blocking foreign competitors from the market "for security reasons" the more the government gets entangled into the scheme.

lokar6• 9 months ago

The stock market is not the economy

frotaur4• 9 months ago

Genuine question : When companies are bailed out by the taxpayer, why can't we then give ownership of the company to the taxpayer? Effectively 'buying' the company to save it, instead of just gifting it money for it to survive.

Is there a reason not to make the taxpayer (or government) the main shareholder after the bailout?

zozbot234• 9 months ago

Maybe they should buy it out and convert it into a non-profit.

MarsIronPI• 9 months ago

You mean a non-profit like it was originally supposed to be?

layer8• 9 months ago

What, and repeat that cycle every couple of years? ;)

Rury• 9 months ago

How will taxpayers even pay if they don't have jobs?

bix63• 9 months ago

With all their WORLDCOIN obviously

beefnugs• 9 months ago

Because it doesn't put Dump and his richies out of jobs just the plebs who have zero control over anything, least of all the spending of taxes

spaceman_20203• 9 months ago

Why should we bail out OAI again? It’s hardly sota anymore. Replacing it with a (more) competitive model made by a trillion dollar company with tons of cash is as easy as replacing an API key

SV_BubbleTime• 9 months ago

There is a difference between a model, a product, and a network.

OAI has a solid handle on the latter two.

800,000,000 users a month last I saw them report. 10% of the world population a month is no joke.

That isn’t to say they are worth it, I am commenting that “the model” isn’t the important part.

There is more to a car than its engine. Even among our people, no one really cares about engines anymore.

BeetleB• 9 months ago

If they go out of business tomorrow, those 800M users aren't going to just stop using LLMs. They'll shift to other providers.

spaceman_20203• 9 months ago

If Google stops working tomorrow, will we all just go back to looking up stuff in the library, or switch to Bing?

daemonologist• 9 months ago

The idea is that they're too big to fail, or at least trying to become so - that if they go down, they'll take Nvidia, AMD, Microsoft, and Oracle down with them. (Maybe not literally, but at least in terms of share price, which of course is the only thing that really matters.)

Obviously this is not a good reason to bail out a company, but I wouldn't be surprised...

spaceman_20203• 9 months ago

I think this is one reason why they're literally giving out free Pro (well, chatGPT GO) access for a whole year to users in India (I got mine just yesterday). They want to pump up usage numbers so much that they seem too big to fail

port11• 9 months ago

I struggle to see how these companies would be affected in the medium-term. The stock would dip for a few weeks? OAI has virtually no revenues when compared to their passive; good lord, every other of these companies has actual, profitable products, long-time customers, etc.

I don't see why you'd bail out a company that a) isn't a very large employer, or b) essential to the economy, or c) essential to the country. OAI is neither of these, its users can switch model/provider/APIs with little friction.

Yikes, if Altman keeps conning people the way Musk did/does, maybe these companies should tank so that we all learn to be more moderate in our investments.

mvdtnz2• 9 months ago

"You" as in Americans. Not me.

stego-tech2• 9 months ago

Let them fail, and take the overhyped tech economy with them I say. After the utter disaster that were the 9/11 Airline bailouts, the 2008 Bank bailouts, and the COVID bailouts, I am sick and fucking tired of tax dollars supporting rich sociopaths who can’t make rational financial decisions beyond the scope of their personal wealth.

Let. It. Burn.

mrandish2• 9 months ago

I just hope it's very soon. The longer they go on propping up the house of cards, the more it seeps into the broader economy making the inevitable crash deeper and longer.

mrguyorama• 9 months ago

Too bad, you elected the guy that is best friends with all the people who will profit from an AI bailout.

What did you expect?

TrackerFF• 9 months ago

If banks were too big to fail back in '08, it makes total sense that the current AI bubble is also too big to fail, given that it is many multiples of the financial crisis.

Not to mention that it is propping up the stock market. Ain't no way the current admin will allow the biggest financial crisis to unfold on their watch.

ModernMech• 9 months ago

sama showed a really bad side of himself in that answer to Brad Gerstner. You can tell Gerstner thought Altman was kidding at first, but when it became apparent he was lashing out, the answer became less about the answer and more about why Sam Altman was so injured by the (very fair) question. Which, if you haven't read TFA or seen it, the question was "How are you going to make money given how much you borrowed" but Sam's answer was essentially "How dare you ask me that question, we're happy to take back your shares if you have a problem with the way things are going". That was my read on it anyway.

Corporate leadership in America has a megalomania problem. Billionaires in general have a megalomania problem. OpenAI specifically, apparently, has a megalomania problem.

Meneth• 9 months ago

How can I help destroy the company?

tim3332• 9 months ago

Write to your congressman? No government guarantees for OpenAI?

_vaporwave_• 9 months ago

It looks like they might not get the bailout they're hoping for - https://x.com/DavidSacks/status/1986476840207122440

ungovernableCat2• 9 months ago

What an amazing financial innovation. If the government involves itself now it'll actually be much cheaper then if the government involves themselves after they've entangled the entire stock market and financial sector into their bet. Maybe we can call it the pre-bailout.

They also propose that their services will be so key to some sectors (like pharma) that they'll also seek revenue sharing as part of the companies getting the privilege to use the most cutting edge intelligence. Insane stuff honestly.

All I'm going to say is I'm actually really hoping that China stays competitive in this field. Just like they are delivering EVs for $25k to the world it'd be great for all consumers and companies if they can also deliver 90% of the AI performance for 1/10 of the cost.

_lex• 9 months ago

The buildout is already taxpayer funded: see the big beautiful bill, which seems like it was engineered to make this effectively free.

They can blend leverage, 100% 1st year depreciation with using the hardware itself as a financing asset and dozens more financial engineering steps -

Their actual cost of financing is probably incredibly low already.

I worry that they are thinking of trying to run the company just ahead of debt/lease payments or something, otherwise this is just a distraction

So they want even more?

lokar6• 9 months ago

Depreciation only helps if you have revenue of the same basic scale to offset (to avoid a paper profit).

zer0tonin2• 9 months ago

Glad I'm not american!

pimeys• 9 months ago

Mm, I'm not sure if we're saved outside the US from this crash either...

keeda3• 9 months ago

Wait, if I reading the original article (https://news.ycombinator.com/item?id=45830380) correctly, this is not a bailout? It's more that the US government acts as a guarantor for loans from other parties, and only steps in if the debt is defaulted on.

Also this is not a loan for what has already been done so far, this is what will be built out in the future, so the US is getting something in return: huge amounts of infrastructure, most of which would be datacenters, chips, and power. (In an alternate timeline this would be clean power, or at least be built out in Australia, cf https://news.ycombinator.com/item?id=45836104 -- but sadly this is not that timeline.)

Worst case, when the bubble pops, we get a glut of power and compute which (ideally) should reduce overall electricity and the obscenely bloated cloud bills. However, at the rates that demand is growing, this seems unlikely.

So to rephrase: The real problem is that the infra needed to support the forecasted growth is very expensive, and requires trillions in funding, which gets very expensive to borrow. And so the US government is being asked to provide loan guarantees, because who better to appreciate what interest payments on trillions of debt look like?

mrbungie• 9 months ago

Worst case, when the bubble pops, we get a glut of power and compute which (ideally) should reduce overall electricity and the obscenely bloated cloud bills. However, at the rates that demand is growing, this seems unlikely.

You are making it sound like there is no opportunity cost to using money for this instead of, I don't know, welfare and social issues; or even other kinds of infrastructure projects altogether.

keeda3• 9 months ago

That's totally fair, but then that is the discussion we should be having, instead of "OMG bailouts!" which is a highly misleading and unproductive distraction.

That said, money going towards welfare or social issues is another thing I don't expect to happen in this timeline...

svenmalvik• 9 months ago

American tech giants like OpenAI and Nvidia borrow and spend far beyond what they can realistically earn back for decades. Now, short on cash, they’re framing AI as a national security race — warning that without government backing, China will win.

The real play is to socialize their risk while keeping profits private. When markets call this “innovation,” it’s worth remembering: that’s not capitalism working — that’s capture.

tim3332• 9 months ago

Nvidia shows total liabilities of $32bn, annual profit $73bn. I think they'll be ok.

OpenAI is a much more interesting question. $1.4 tn is 4.7% of US GDP or about 1% of global. It's a lot of money to extract to pay your debt back. Short of full AGI I'm not sure how that happens.

And although I think AGI will happen my thoughts are it'll need algorithmic breakthroughs which are probably best achieved by a lot of different people trying things rather than all the money going to Altman.

maxglute• 9 months ago

How much more has openAI actually spend on capex vs competitors? I don't find openAI noticably better in any of my use cases but it does feel significantly snappier than others.

OpenAI probably can't make ends meet. That's where you come in

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