Openai Probably Can't Make Ends Meet. That's Where You Come In
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Government Bailout
The article discusses OpenAI's potential financial struggles and the possibility of a government bailout, sparking debate among commenters about the implications and motivations behind such a move.
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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.
https://www.anthropic.com/engineering/a-postmortem-of-three-...
What's interesting about your comment is that back in 2004 people were like "Google releasing an email service? Why on Earth would they do that, that makes no sense!"
https://gwern.net/complement
If you owe the bank $1T, the government has a problem (you're too big to fail and will get bailed out).
Anyways, OpenAI is not in profit-seeking mode, and there's no economic incentives to do so right now.
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
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.
We know they can’t all be winners. But the price and ripple per failure (at least it seems to me) will be staggering. Am I off base here?
Even if all GPT users only logged in once a week (which I highly highly doubt), the question still stands.
800M WAU is a "losing company"?
Turns out people find these fortunes super useful, and many are actually paying real money to get more, and each vending machine is actually making money on this.
But now the vending machine industry has also figured out that bigger, more powerful machines produce tell better fortunes which draws in even more people.
So now the industry is investing heavily to build more, bigger vending machines. However, these machines need tons of expensive parts and power, and oh, we can't slow down because China, and so they are racing like crazy to build more.
Unfortunately, there is effectively only one company making a key part, and there's not enough power for all the machines being built, and so very expensive new infrastructure has to be built to meet the forecasted demand for all the fortunes in the world.
And this 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 would know what interest payments on trillions of debt look like?
Are you kidding me? Like, both Google and Facebook tracked l7, l28 which is the number of days that a person/account logged in over the last 7 or 28 days. Fundamentally, that's the sign of a useful product, in that people keep coming back.
> 800M WAU is a "losing company"?
Not enough information to be sure. If their business model requires selling dollars for fifty cents, then maybe.
I don't doubt the utility of these products (sometimes), but I do doubt the business model behind OpenAI & Anthropic (the "pure" model providers).
I can get 1 billion MAU if I just give out money or something. That's not impressive. Like, at all.
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.
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.
Which indicates to me that the value add will come from somewhere else, which would seem to be whales and addicts.
Oof
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?
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
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.
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.
And yes, obviously there is a wide range of possible outcomes. However, there is not a uniform probability distribution over them.
The sheer scale of this makes it nothing like other startups, so the same high risk / high return reasoning doesn't apply. Worse, the 'AI bet' isn't like a diverse VC portfolio approach. OAI, NVidia, MSFT, Oracle, etc are all incestuously inter-related parties propping each other up with future commitments they won't be able to meet at their current revenue growth rates. They are so over-leveraged their revenue growth rates would have to grow at increasingly implausible multiples to cover. So, you now have to believe a sequence of individually extraordinary events will all occur and do so in less than 5 years.
The financial engineering propping up OAI and it's unprecedented market cap makes it a speculative bet with an astronomically high break even and a fixed near-term expiration date. To compensate for that much risk, any sane VC would want at least a somewhat plausible path to 1000x returns - but at this mega-scale there's a serious question if that's even possible from one company in this time frame. That turns OAI into an incredibly specific prop bet which is increasingly untethered from the long-term ability of AI to become a transformative technology beneficial to humankind or even a sustainable growth industry. Those are still both plausible positive outcomes but OAI returning just 100x to their investors (or even surviving a crash of its own making) is increasingly implausible. A year ago I was trying to come up with a good way to short the bubble but couldn't find a pure play-enough bet. Now it's grown so over-leveraged I'm starting to worry the crash is going to seriously impact the broader economy well beyond tech and equities. So now we all have financial exposure to this crazy prop bet, even though we're not betting.
These AI clowns will still have their mansions come what may.
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.
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.
The parent is correct to identify that a lack of free market controls are what's destroying us here. You wouldn't have to pay out the nose like this if the fed didn't build and enforce monopolies for fun. But now we're here, after 20 years of Google's AdSense monopoly and Apple's App Store monopoly, throwing stones at OpenAI for ruining the fun.
Feels like we deserve this, everyone ignored the warning signs and pushed us way up the corporate escalation ladder.
It reminds me of 1990s Russia were the smart people didn't get caught up in capitalism casino and just kept tending their vegetable garden like they had done for centuries.
To quote Bob Dylan
"If you ain't got nothing you got nothing to lose"
Ha. Most people didn't have any money to get into the crony/gangster capitalism. Just peasants with their vegetable gardens. How many American have vegetable gardens?
Is there a reason not to make the taxpayer (or government) the main shareholder after the bailout?
tHaT'S sOcIAlIsM
Though ironically for the first time ever, the people shouting that would actually be correct. Kind of.
If you mean in a broad "is this possible" sense though, sure, absolutely. Entities owned in part or in whole by the state are not uncommon, but anytime such things are proposed in the US, the right loses it's fucking mind.
Edit: hit the comment rate wall.
> I see! But still, I don't get in what sense it is more socialist that just having people actually buy the company to save it (instead of just saving it 'for free'). If anything it makes it more capitalist if the taxpayers invest in the bailout, instead of just giving it away!
Because socialism isn't an economic system in American politics, it's a scary word that the Russians and CHYNA are. It's also completely interoperable with communism because our conservative party here has long since abandoned anything resembling reality, and even when they were here with us, they didn't know the difference between the two.
Doing it this way is capitalist because it's American. Doing it the other way is evil because it's socialist/communist, like the Russians/Chinese/North Koreans do with the lot of this rhetoric absolutely drowning in racism and nationalism. Mind you, all those countries have issues, absolutely. I'm just saying a conservative with a gun to their head couldn't actually explain those issues, they're just evil because they're not American. [ insert eagle screech here ]
Honestly the best distillation is: It's Freedom when private citizens run things, and it's Communism when the government does. The fact that the government sometimes has to give rich private citizens a shit ton of money to keep things afloat is not reflected upon.
If you try and analyze it through a lens of what these words actually mean, yeah it makes no goddamn sense at all.
Except company A in this case is the government. No? Why is it that when it is the government doing this action, it has to gift the money instead of potentially profiting from it?
Edit : just saw the edit. I see! But still, I don't get in what sense it is more socialist, instead of just saving the companing 'for free', people actually buy (forcefully invest?) in the company to save it. If anything it makes it more capitalist if the taxpayers invest in the bailout, instead of just giving it away!
In other very capitalist economies governments did take stakes in banks in return for bailouts. The first British bank that needed one (Northern Rock) was entirely taken over by the government and shareholders just lost their money. The government bought stakes in others. It was still criticised as being too generous to shareholders and management.
The auto bailouts did not feature shareholders having money thrown at them and keeping their stakes (GM and Chrysler shareholders, for instance, were almost completely wiped out in the bailout, with the new GM owned by the UAW and the US and Canadian governments; the new Chrysler was majority owned by Fiat with minority stakes held by an autoworkers pension fund and the US and Canadian governments.)
Bank bailouts were more protective of shareholders because they were mostly government purchase of distressed assets or extensions of credit,
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.
Hold your breath, then.
Obviously this is not a good reason to bail out a company, but I wouldn't be surprised...
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.
Let. It. Burn.
What did you expect?
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?
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?
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.
That said, money going towards welfare or social issues is another thing I don't expect to happen in this timeline...
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.
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.
OpenAI asks U.S. for loan guarantees to fund $1T AI expansion
https://news.ycombinator.com/item?id=45830380
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.
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.
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.
Corporate leadership in America has a megalomania problem. Billionaires in general have a megalomania problem. OpenAI specifically, apparently, has a megalomania problem.