Words cannot express how excited I am for the coming margin squeeze on every “AI company” that isn’t Anthropic, OpenAI, Microsoft, or Google. The entire industry is built on an unethical foundation, having illegitimately acquired massive amounts of content from practically everybody. The companies selling “AI Coding Assistants” I am particularly excited to see implode.
Every “AI Coding Assistant” uses Large Language Models (LLMs) trained on the open source ecosystem and every one of those models is violating the licenses of every piece of code they were trained on.
My code has been slurped up into these models and is being used to create derived works without attribution, thereby violating the software I have personally licensed under MIT, Apache Software License 2.0, LGPL, AGPL, or GPLv3.
I saw a fun quote in this post from TechCrunch:
“That’s what everyone’s banking on,” said Eric Nordlander, a general partner at Google Ventures. “The inference cost today, that’s the most expensive it’s ever going to be.”
It’s not entirely clear how true that is. Rather than falling as expected, the cost of some of the latest AI models has risen, as they use more time and computational resources to handle complicated, multi-step tasks.
Kudos to the author Marina Tempkin for calling bullshit on the delusion that “inference will get cheaper.”
It will only get more expensive. It is a matter of when not if. Investors have poured billionrs into OpenAI for example, and they are expecting a massive return. The only way that happens is by OpenAI successfully executing the “YouTube Playbook”: run at a loss as fast as you can, get massive scale, corner the market, then pivot to monetization.
The companies built entirely with OpenAI API calls and little other “moat” are destined to have their margins squeezed hard and then wink out of existence.
I wish them all the best of luck in their future endeavors.
Think I’m salty? Read this great post from Marcus Hutchins which has a much longer and thoughtful take on the entire ecosystem.