Openai Is Just Another Boring, Desperate AI Startup
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The article 'OpenAI Is Just Another Boring, Desperate AI Startup' sparks controversy and debate among HN users about OpenAI's business model, the value of its AI technology, and the author's biased perspective.
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Oh wait Claude did a better job than I would have:
https://claude.ai/share/32c5967a-1acc-450a-945a-04f6c554f752
maybe claude is funny.
I think Ed hit some broad points, mostly (i) there were some breathless predictions (human level intelligence) that aren't panning out; (ii) oh wow they burn a ton of cash. A ton; (iii) and they're very Musky: lots of hype, way less product. Buttressed with lots of people saying that if AI did a thing, then that would be super useful; much less showing of the thing being done or evidence that it's likely to happen soon.
None of which says these tools aren't super useful for coding. But I'm missing the link between super useful for coding and a business making $100B / year or more which is what these investments need. And my experience is more like... a 20% speed improvement? Which, again, yes please... but not a fundamental rewriting of software economics.
So who does? Genuinely curious. I, for one, don't really trust CEOs raising mountains of debt.
Oof!
Reacting to what I could read without subscribing: turns out profitably applying AI to status-quo reality is way less exciting than exploring the edges of its capabilities. Go figure!
I hate to make the comparison between two left-ish people who yell for a living just because they're both British, but it kinda feels like ed is going for a john oliver type of delivery, which only really works well when you have a whole team of writers behind you.
That is a laughable take.
The AI technology is very very impressive. But that doesn't mean you can recover the hundreds of billions of dollars that you invested in it.
World-changing new technology excites everyone and leads to overinvestment. It's a tale as old as time.
It is just a really good tool. And that's fine. Really good tools are awesome!
But they're not AGI - which is basically the tech-religious equivalent to the Second Coming of Christ and about as real.
The fear isn't about the practicability of the tool. It's about the mania caused by the religious component.
Yes we know how to grow them, but we don’t know what is actually going on inside of them. This is why Anthropic’s CEO wrote the post he did about the need for massive investment in interpretability.
It should rattle you that deep learning has these emergent capabilities. I don’t see any reason to think we will see another winter.
It's been true and kind of inevitable since Turing et all started talking about it in the 1950s and Crick and Watson discovered the DNA basis of life. It's not religious, not a mania, not far fetched.
(To be clear, I do agree that AI is going to drastically change the world, but I don't agree that that means the economics of it magically make sense. The internet drastically changed the world but we still had a dotcom bubble.)
It's not insane numbers but it's not bad either. YouTube had those revenues in...2018. 12 years after launching.
There's definitely a huge upside potential in openai. Of course they are burning money at crazy rates, but it's not that strange to see why investors are pouring money into it.
That's a lot of money to be getting from a subscription business and no ads for the free tier
Not hard to see upside here
GOOG is at record highs, FB is at record highs, MSFT is at record highs
And now we have 4 companies above 3T and 11 in the 4 comma club. Back when the iPhone was released oil companies were at the top and they were barely hitting 500B.
So yeah, I don't think anyone has really been displaced. Nvidia at up, Broadcom at 7, and TSMC at 9 indicate that displacement might occur, but that's also not the displacement people are talking about.
Maybe we all should have been a little more pro-actively freaked out when dividends went from standard to all-but extinct, and nobody in the investor class seemed to mind... like, it seems that the balance between "owning things that directly make money through productive activity" and "owning things that I expect to go up in value" has gotten completely out-of-wack in favor of the latter.
I definitely think the economy has shifted and we can see it in our sector. The old deal used to be that we could make good products and good profits. But now "the customer" is not the person that buys the product, it is the shareholder. Shareholder profits should reflect what the market value of the product being sold to customers, but it doesn't have to. So if we're just trying to maximize profits then I think there is no surprise when these things start to diverge.
giving away dollar bills for a nickel each is not particularly impressive
you can even pay people to help you out, and that helps even more!
Even if the guy peeing is a world champion urinator named Sam.
I mean sure, you can get there instantly if you say "click here to buy $100 for $50", but that's not what's happening here - at least not that blatantly.
Why would you pay if you can use a competitor for free?
ChatGPT is far and away my favorite for quick questions you'd ask the genius coworker next to you. For me, nothing else even comes close wrt speed and accuracy. So for that, I'd gladly pay.
Don't get me wrong, Claude is a marvel and Deepseek punches above its weight, but neither compare with stuff like 'write me a sql query that does these 30 things as efficiently as possible.'. ChatGPT will output an answer with explanations for each line by the time Claude inevitably times out...again.
I am not.
> The free tier is enough for me to use it as a helper at work, and I'd probably pay for it tomorrow if they cut off the free tier.
You are sort of proving the point that thid isn't crazy. They want to be the dealer of choice and they can afford to give you the hit now for free.
If they junk up the consumer experience too much users can just switch to Google who, obviously is the behemoth in the ad space.
Obviously there's money to be made there but they have no moat - I feel like despite the first mover advantage their position is tenuous and ads risk disrupting that edge with consumers.
edit: believe it was Fidji Simo et al.
https://www.pymnts.com/artificial-intelligence-2/2025/openai...
I will be the first person to say that AI models have not yet realized the economic impact they promised - not even close. Still, there are reasons to think that there's at least one more impressive leap in capabilities coming, based on both frontier model performance in high-level math and CS competitions, and the current focus of training models on more complex real-world tasks that take longer to do and require using more tools.
I agree with the article that OpenAI seems a bit unfocused and I would be very surprised if all of these product bets play out. But all they need is one or two more ChatGPT-level successes for all these bets to be worth it.
[0] https://mercor.com/apex/
Don't get me wrong, I actually quite like GPT-5, but this is how I understand the backlash it has received.
I’m very happy with GPT5, especially as a heavy API user. It’s very cost effective for its capabilities. I’m sure GPT6 will be even better, and I’m sure Ed and all the other people who hate AI will call it a nothing burger too. So it goes.
IMO the only takeaway from those successes is that RL for reasoning works when you have a clear reward signal. Whether this RL-based approach to reasoning can be made to work in more general cases remains to be seen.
There is also a big disconnect between how these models do so well in benchmark tasks like these that they've been specifically trained for, and how easily they still fail in everyday tasks. Yesterday I had the just released Sonnet 4.5 fail to properly do a units conversion from radians to arcsec as part of a simple problem - it was off by a factor of 3. Not exactly a PhD level math performance!
Another way to think of oAI the business situation is: are customers using more inference minutes than a year ago? I definitely am. Most definitely. For multiple reasons: agent round trip interactions, multimodal parsing, parallel codex runs..
So "boring" ? Definitely not.
In Europe, most companies and Gov are pushing for either mistral or os models.
Most dev, which, if I understand it correctly, are pretty much the only customers willing to pay +100$ a month, will change in a matter of minutes if a better model kicks in.
And they loose money on pretty much all usage.
To me a company like Antropics which mostly focus on a target audience + does research on bias, equity and such (very leading research but still) has a much better moat.
But say you're correct, and follow the reasoning from there: posit "All frontier model companies are in a red queen's race."
If it's a true red queen's race, then some firms (those with the worst capital structure / costs) will drop out. The remaining firms will trend toward 10%-ish net income - just over cost of capital, basically.
Do you think inference demand and spend will stay stable, or grow? Raw profits could increase from here: if inference demand 8x, then oAI, as margins go down from 80% to 10%, would keep making $10bn or so a year in FCF at current spend; they'd decide if they wanted that to go into R&D or just enjoy it, or acquire smaller competitors.
Things you'd have to believe for it to be a true red queen's race:
* There is no liftoff - AGI and ASI will not happen; instead we'll just incrementally get logarithmically better.
* There is no efficiency edge possible for R&D teams to create/discover that would make for a training / inference breakaway in terms of economics
* All product delivery will become truly commoditized, and customers will not care what brand AI they are delivered
* The world's inference demand will not be a case of Jevon's paradox as competition and innovation drives inference costs down, and therefore we are close to peak inference demand.
Anyway, based on my answers to the above questions, oAI seems like a nice bet, and I'd make it if I could. The most "inference doomerish" scenario: capital markets dry up, inference demand stabilizes, R&D progress stops still leaves oAI in a very, very good position in the US, in my opinion.
Futures like that are why Anthropic and oAI put out stats like how long the agents can code unattended. The dream is "infinite time".
Brand loyalty and users not having sufficient incentive by default to switch to a competitor is something else. OpenAI has lost a lot of money to ensure no such incentive forms.
Moats, as noted in Google's "We Have no Moat, and Neither Does OpenAI" memo that made the discussion of moats relevant in AI circles, has a specific economic definition.
https://www.goodreads.com/book/show/32816087-7-powers
It has branding as one of the seven and uses coca cola as an example.
You may not see it, but OpenAI’s brand has value. To a large portion of the less technical world, ChatGPT is AI.
Comparing "brand moat" in real-world restaurant vs online services where there's no actual barrier to changing service is silly. Doubly silly when they're free users, so they're not customers. (And then there are also end-users when OpenAI is bundled or embedded, e.g. dating/chatbot services).
McDonald's has lock-in and inertia through its franchisees occupying key real-estate locations, media and film tie-ins, promotions etc. Those are physical moats, way beyond a conceptual "brand moat" (without being able to see how Hamilton Wright Helmer's book characterizes those).
from my recollection, post-FB $75B+ market cap consumer tech companies (excluding financial ones like Robinhood and Coinbase) include:
Uber, Airbnb, Doordash, Spotify (all also have ~$1bn+ monthly revenue run rate)
As Jobs said about Dropbox, music streaming is a feature not a product
I would be shocked if OpenAI was not in a similar (or worse) position.
Hyperbole to say no major consumer tech brands have launched for decades
I propose oAI is the first one likely to enter the ranks of Apple, Google, Facebook, though. But it's just a proposal. FWIW they are already 3x Uber's MAU.
Originally Netflix was a single tier at $9.99 with no ads. As ZIRP ended and investors told Netflix its VC-like honeymoon period was over - ads were introduced at $6.99 and the basic no ad tier went to $15.99 and the Premium went to 19.99.
Currently Netflix ad supported is $7.99, add free is $17.99 and Premium is $24.99.
Mapping that on to OpenAI pricing - ChatGPT will be ~$17.99 for ad supported, ~$49.99 for ad free and ~$599 for Pro.
OpenAI didn't build the delivery system they built a chat app.
But at this point - there's nothing really THAT special about them compared to their competition.
Let’s say Google or Anthropic release a new model that is significantly cheaper and/or smarter that an OpenAI one, nobody would stick to OpenAI. There is nearly zero cost to switching and it is a commodity product.
The AI market, much like the phone market, is not a winner take all. There's plenty of room for multiple $100B/$T companies to "win" together.
This is not at all how the consumer phone market works. Price and “smarts” are not only factor that goes into phone decisions. There are ecosystem factors & messaging networks that add significant friction to switching. The deeper you are into one system the harder it is to switch.
I don't think this is true over the short to mid term. Apple is a status symbol to the point that Android users are bullied over it in schools and dating apps. It would take years ti reverse the perception.
The human side is impossible to cost ahead of time because it’s unpredictable and when it goes bad, it goes very bad. It’s kind of like pork - you’ll likely be okay but if you’re not, you’re going to have a shitty time.
Anecdata but even in work environments I hear mostly complaints about having to use Copilot due to policy and preferring ChatGPT. Which still means Copilot is in a better place than Gemini, because as far as I can tell absolutely nobody even talks about that or uses it.
As a player for over 20 years this will be a core memory of OpenAI. Along with not living up to the name.
It has 20m paid users and ~ 780m free users. The free users are not at all sticky and can and will bounce to a competitor. (What % of free users converted to paid in 2025? vs bounced?) That is not a moat. The 20m paid users in 2025 is up from 15.5m in 2024.
Forget about the free tier users, they'll disappear. All this jousting about numbers on the free tier sounds reminiscent of Sun Microsystems chirpily quoting "millions and billions of installed base" back in the Java wars, and even including embedded 8-bit controllers.
For people saying OpenAI could get to $100bn revenue, that would need 20m paid users x $5000/yr (~ the current Pro $200/mth tier), but it looks they must be discounting it currently. And that was before Anthropic undercut them on price. Or other competitors.
>The free users are not at all sticky and can and will bounce to a competitor.
If you really believe this, that just shows how poor your understanding of the consumer LLM space is.
As it is, ChatGPT (the app) spends most of its compute on Non work messages (approx 1.9B per day vs 716 for Work)[0]. First, from ongoing conversations that users would return to, to the pushing of specific and past chat memories, these conversations have become increasingly personalized. Suddenly, there is a lot of personal data that you rely on it having, that make the product better. You cannot just plop over to Gemini and replicate this.
[0] https://www.nber.org/system/files/working_papers/w34255/w342...
- your comment about lock-in for existing users only applies historically to existing users.
- Sora 2 is a major pivot that signals what segment OpenAI is/isn't targeting next: Scott Galloway was saying today it's not intended to be used by 99% of casual users; they're content consumers, only for content creators and studios.
And that's nice for them.
- your comment about lock-in for existing users only applies historically to existing users.
ChatGPT is the brand name for consumer LLM apps. They are getting the majority of new subscribers as well. Their competitors - Claude, Gemini are nowhere near. chatgpt.com is the 5th most visited site on the planet.
You're aware they already announced they'll add ads in 2026.
And the circular trades are already rattling public markets.
How do they monetize users on the base tier, to any extent? By adding e-commerce? And once they add ads how do they avoid that compromising the integrity of the product?
Netflix introduced ads and it quickly became their most popular tier. The vast majority of people don't care about ads unless it's really obnoxious.
They have no moat, their competitors are building equivalent or better products.
The point of the article is that they are a bad business because it doesn't pan out long term if they follow the same path.
Training costs can be brought down. New algorithm can still be invented. So many headrooms.
And this is not just for OpenAI. I think Anthropic and Gemini also have similar room to grow.
I also wouldn't say "democratized", more like popularized or made accessible. Though I'm more nitpicking here.
No answer.
OpenAI is many things but I don't think I would call it boring or desperate. The title seems more desperate to me.
Some nerve
But this shows a certain intellectual laziness/dishonesty and immaturity in the response.
Someone's taken the time to write a response to your article, you can choose to learn from it (assuming it's not an angry rant), or you could just ignore it.
In fact, that completely dismisses this stupid article for me.
I find he exhbits the same characteristics of things that drove people like red letter media in the early aughts to be "successful". Make something so long and tedious that the idea of arguring with its own points would require something twice as long, and as such the ability to instead just motion to an uncontested 40 minute longread is then used as a surrogate for any actual arguement. Said diffferently, it's easy for AI skeptics to share this as some way of proving backing up their own point. It's 40 minutes long, how could it be wrong!
And no we didn't need a subscription reminder every 10s of interaction
Epic ragebait dude.
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