alt Hacker NewsThere is a lot of value from LLMs but it is something that I can switch easily. Yes, some frontier models are much better but users can still chose to use cheaper models for most of the work. In fact most applications, through which people will interact with LLMs anyway, will not need frontier models unless they offer "chat with AI". Anything that solves specific problems (even multiple problems) does not need frontier LLMs.
Anthropic and OpenAI will have to become more of the end user application stack. Files, calendars, emails, photos, and much more have to pass through them for them to keep making money. Else they cannot make money like the way they have been in this early era of LLMs.
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People seem very unimaginative about the ways in which somebody equipped with a lot of intelligence and compute, and control over both, might make money.
The recent Anthropic push into biomedical research gives a clue.
The frontier is addictive.
a big move into end-user software would mean that they have to compete heavily with their own largest customers. The economics of offering SaaS are also under meaningful pressure and don't warrant anywhere near the valuation that is being suggested
Yes, they know that. That’s why Claude is becoming a platform like Google Workspace.
They need to leverage Claude Code in the software industry to position themselves as the go-to platform for businesses.
Meanwhile, Google and Microsoft, which already dominate that area, seem to be dormant.
When people want to argue that AI is a commodity, they confuse two concepts
1. switching costs
2. fungibility
I do agree that LLMs have low switching costs. But they are not fungible - each model is unique with different strengths and weaknesses.
I also disagree that they can increase switching costs by moving in application stack.
For instance, oil and electricty are commodiites because they are fungible, not because switching cost is high.
Whereas clothing has low switching cost but not fungible
True. We will end up getting more Google alternatives. Nothing beyond that for now at least.
This is the same argument we have heard many times with SaaS that would presumably get replaced by open source equivalents. In practice it does not happen because there is a lot of value in having someone else deal with a problem.
Easily in the context of the corporate world is to pay for something, that something gets installed and then just works, and if it doesn’t work there’s always someone you can call 24/7 to come and fix it. I don’t see how this is possible with open models.
It feels like people are still trying to bet on the horse that will achieve gAI.
Not only can you switch easily, they all seem to do the same thing, fail in the same ways, make the same bad linguistic choices, write the same code... I think at the end of the day, LLMs are a commodity. They're like a grease, or oil. They're trying all the tricks with branding cute names, version numbers, benchmarks, thinking levels, but it all just seems the same stuff to me: I put in tokens, I get more tokens back, and if I didn't know ahead I wouldn't be able to distinguish if they'd come from Anthropic or OpenAI or wherever. Maybe some people can but I can't.
Switching models is easy as a solo developer. Switching LLM providers as a company is not, once all your employees have it integrated with GitHub, their IDE, etc. I think Anthropic will look a lot more like a cloud provider like AWS, GCP etc… same-looking product, very high switching cost that would have to be driven at the CIO-level. And ultimately they are selling compute capacity.