ELI5: I'm struggling to understand a particular aspect of the staggering losses at OpenAI and Anthropic?
I'm a new reader of Ed's blog. I'm floored by the losses the AI model companies (e.g. OpenAI, Anthropic) are sustaining. Here's an aspect I don't quite understand as I'm reading his posts.
Ed occasionally mentions business customers, like:
- Cursor: chat bot that generates code
- Harvey: chat bot for lawyers
- Lovable: chat bot for creating web prototypes
These customers delegate queries to the major models...but apparently they're suffering massive losses because they're charging subscribers far less than what they have pay to the AI model providers. So presumably these guys are stuck using the API pricing model. They're bearing the full cost of their queries. But if that is indeed the case, why wouldn't OpenAI and Anthropic just kick their feet up, collect their toll, and make a fortune extracting money from this type of doomed-to-fail business customer? Why offer the money-losing subscriptions that allow users to, in extreme cases, run up to $10,000 in token usage on a $200/mo plan?
Eventually the so-called "business idiots" lending to companies like Cursor and Lovable, as well as those funding the unprofitable data centers, will run out of cash and the party's over. But in the meantime, why don't OpenAI and Anthropic just keep capex and headcount low, and rent out their models with API pricing instead of doing the whole subscription thing? Seems like they could be making a fortune doing that. But instead they're losing a fortune. What's their rationale? Is there some kind of game theory thing going on with these companies where they feel compelled to lose billions on these subscription models to ward of competitors? Or is the cost of training these models so astronomically high that even if they were to shut off all subscriptions and offer API only, they'd still be underwater? I'm confused how they could be losing so much money if there are tons of idiot-subsidized startups like Harvey and Lovable that are willing to pay OpenAI and Anthropic premium prices for API usage.
* Sorry for the naive nature of this question. I'm not really a tech/AI expert... or business expert... or really an expert in anything at all.