alt Hacker News>There's an important distinction here. Anthropic isn't actually spending more cash on AI than salaries. It's valuing its internal AI consumption at retail prices.
If virtually any other company in the world said "we have internal AI servers and we let our employees use them" ... the company would measure that as they would any other internal expenditure: by how much it costs them. You blow $50k a year on servers running your LLMs? It cost you $50k.
Only a company like Anthropic, desperate to make news and help their IPO, would measure by the cost they charge customers. It's as ridiculous as Microsoft counting every employee's use of MS Word ... as if it had paid the full consumer price of each copy.
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Plenty of companies use retail/wholesale pricing internally to make sure a business unit doesn’t appear profitable just because it’s being subsidized by the one providing the resources. Plenty also have to have arm’s length pricing for legal reasons.
Anthropic isn’t booking it as GAAP revenue, they’re just using the number for marketing.
That's not really true. Measuring the equivalent retail cost of the usage is the only way to put it in a relatable perspective.
If Anthropic had revealed their internal cost, there comments would be complaining that they were hiding something and giving useless, unrelatable data.
The expenditure is most interesting when compared to retail rates, because that's the rate the rest of us have to compare against.
> cost they charge customers
price they charge customers
In the US, the IRS doesn't see it that way, at least when it comes to fringe benefits as a part of employee compensation. https://www.irs.gov/businesses/small-businesses-self-employe... says, "In general, the amount the employer must include is the amount by which the fair market value of the benefits is more than the sum of what the employee paid for it plus any amount that the law excludes."
As an example, as I understand it, if a hotel chain allows an employee to stay in one of their hotels for free when they go on vacation, the tax value of that benefit is what they would have charged someone for that hotel room, not how much it increased the hotel's costs to have one more hotel room full — which is generally almost nothing.
Of course, the IRS does agree with you when it comes to expenditures that are for the employer's benefit, rather than the employee's. If it didn't, almost all companies would have negative profits from the IRS's point of view.
It might be difficult to value because datacenters have high fixed costs and upfront investment and low marginal costs. If I spend 1B building a datacenter and 10M/month to run it (assume this varies negligibly with usage) and on average 25% of it goes to internal use and 70% to customer inference and 5% idle, should I charge 25% of it to internal use even though the marginal cost is lower because internal workflows are predictable and can be scheduled during off peak hours? With that being said I agree it's wrong to value it at the retail price (unless they are supply constrained) and this is probably for marketing purposes.
I’ve worked at and with large orgs - it’s absolutely standard practice for BUs to bill other BUs at “retail” or at the very least a commercial rate.
I think it's usually cost +, but yeah, I don't know of another company offhand that sells the services at RETAIL.
Microsoft basically does the same with internal Azure services? When I was there our budget/usage was based on and consumed at the consumer price for GPUs and other compute. What happened behind the scenes really I have no knowledge.
Anthropic might well be actually spending more than their retail prices to host the API so not sure going to actual cost would improve these numbers.
They did lose an insane amount of money last quarter versus revenue.
In a lot of companies, you would get charges back on usage/license/cost and this can get even funnier in NGOs.
In a similar way, internal employees would have also a "standard daily rate" like an external employee.
> You blow $50k a year on servers running your LLMs? It cost you $50k.
Plus electricity
Seems entirely in line with Hollywood-style practices.
Actually I think it's very informational. For every other company, working on the cutting edge of technology, paying for intelligence at retail prices, means you are now paying more for AI than you are employees. That $ could have been spent on 2x the employees, however that's not as useful as 50% AI / 50% humans, and indicative of where we are headed.
Do they actually book the revenue against themselves?
This is the world of spend more, get valued more; obviously the investment will be used to spend more and get more, so it must be good. This is investor-think. If you don't have spend, why do you need investment?
(Or it could be bad. Very very bad)
No. This is opportunity cost.
A clear example is Google. They can easily give all compute to Deepmind, yet majority is allocated to be sold at market rate.
So, every compute Deepmind and Googlers get is lost revenue opportunity and must be measured as such.
No other internal tools or servers has this much external demand to be comparable.
Also, Anthropic is showing that to operate at Anthropic level, you need $300,000 compute spend per employee