[vlovich123]

Small alternative potential future changes that alter this analysis:

* At some point model capability reaches diminishing returns. Then inference >> training in the future but training >> inference now. It’s not a prisoner’s dilemma but a land grab to solidify market position and be one of the 2-3 firms left standing as dominant in the space. The model companies aren’t super sticky yet but they’re working on it.

* even if training remains >> inference, it’s possible to have multiple price points like they do today. If you need the most capable model you’ll be paying exponentially more per token to supplement the training cost even though the serving cost is marginal because most people will be satisfied with cheaper / less capable models for most tasks.

I buy that inference is a dropping line item while training is a growing one. There’s all sorts of things on the horizon that’ll be order of magnitudes improvements, from startups burning models into ASICs to get order of magnitudes more performance to alternate architectures like diffusion transformers that have orders of magnitude structural optimizations. It’s inevitable that it’ll come down even further from where we are. It’s possible model training also will go down but I’ve not seen any compelling research suggesting major “easy” reductions here.

[janalsncm]

The issue is that most tasks do not require frontier-level intelligence, but companies like OAI can really only profit off of the frontier. Capabilities from a year or two ago are so outdated that even OpenAI gives it away for free and there are many other models biting at their heels. In other words they are spending huge amounts of money to cash in on a depreciating asset.

So one possible future is that frontier-level training becomes so expensive and the use cases so sparse that it simply isn’t viable to keep going bigger.

[extraextra]

Once the land grab is over, the market will consolidate and the winners will absorb the losers. Then the few winners will be the only ones with real capital to train frontier models and will have true pricing power. Similar to how social media companies or the gig-economy benefits from network effects, AI companies will benefit from having the lion's share of paying customers (that also constantly feed in more data to train the models on).