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points by cmiles8 3 days ago | 0 comments

There are a lot of parallels to the WeWork S1. They’ve made absolutely massive forward cash commitments, on a business that’s increasingly commoditized, and with little hard evidence that they’ll generate the revenue (let alone the cashflow) to pay for all these future liabilities. All while everyone is discovering there isn’t really a secret sauce moat to demand much of a a premium over cheaper options that trade a few points above the direct COGS (cost of compute in this case).

If everything goes just perfect they might eek by. If it doesn’t this goes from high flying startup to insolvency and bankruptcy real fast.

[–] cloverich 3 days ago

> increasingly commoditized

Is it increasingly though? As of 5.5 I stopped using other models all together (and I used to regularly swap, indifferently). My $20 sub no longer runs out, even though I do _much_ more than ever. I use it for every single task at work, even trivial ones, and my spend has gone down. I was given _free_ Codex and realized... it still wasn't worth it. My rational brain says Anthropic has no moat and this is temporary. The progress of all the other models is amazing. I certainly wouldn't bet on them.

But if I look at the actions of myself and the most competent coders around me, they are all doing this same thing - using 5.5 and not really looking around any longer. And we know its not even their best model. OpenAI may respond, Chinese labs may catch up. But for the moment, Anthropic seem to have added separation, not lost it, based on current vs prior _behavior_ of coders I know at home and work.

[–] rbehrends 3 days ago

A couple of points.

First, it does not really reflect my experience. I find modern models to be largely interchangeable when it comes to common software engineering tasks, including some of the more recent open weight ones. The strongest models become interesting for Ph.D. level of work for me, which is not something I deal with regularly anymore.

None of them are perfect; they all have their strengths and shortcomings, but I can reasonably work with all of them and it honestly doesn't matter much anymore. I do sometimes wonder what exactly people are doing to see such a difference; at a minimum, their workflows must be very different from mine.

Second, you're arguing based on subscription pricing. But Anthropic makes the bulk of its revenue (and has its biggest margins) from enterprise/API pricing, where they are the most expensive provider by far. Anthropic isn't going to make a lot of money off your $20 subscription. With a subscription, you currently get more usage per dollar out of Anthropic's than OpenAI's plans, which approximately offsets the difference in API pricing.

[–] redox99 3 days ago

> I find modern models to be largely interchangeable when it comes to common software engineering tasks

If you think that, it means you're not demanding enough from your models.

Opus 5.5 still makes a lot of mistakes. Even if it can technically do all tasks you throw at it, there's no way it can do it at 100% reliability.

To be clear, AI writes 100% of my code since last year. But it still produces bugs, needs multiple prompts, and has less intuition than a human.

[–] rbehrends 3 days ago

If I'm not "demanding enough" from models, it's precisely because they are imperfect. Having them do long, complex tasks autonomously usually comes with more cleanup work afterwards IME.

My usual workflow (not counting throwaway code) is to use agents as virtual pair programmers, which gives me a good balance of quality and velocity.

Each interaction with the agent remains individually comprehensible and makes progress towards one of the following goals:

- Understanding the problem/solution space.

- Implementing a solution.

- Understanding the solution, especially any agent-written parts and interaction with existing code.

- Evaluating the solution (tests, code analysis, what-if scenarios, consider edge cases).

This does not just involve the model generating code, but also explaining or analyzing it as needed.

This process allows me to retain a mental model in lockstep with developing the written code and have some assurance both of its functionality and non-functional requirements. It also fits in nicely with most existing team-level workflows.

But it's also something that I can do with pretty much any of the modern models.

[–] redox99 3 days ago

Well that's kind of my point. Models still have a lot to improve. They are still imperfect enough that you don't trust them and have to use them as pair programmers.

[–] rbehrends 3 days ago

Yeah, but that's also a large part of why they remain interchangeable, I would say. I feel like we may be talking past each other?

[–] redox99 3 days ago

They are interchangeable maybe in your case. In my case for my tasks and for my product, Opus and GPT are at a level where I can vibe code with them and trust them, whereas the others aren't really there. When models get better they'll reach whatever point you need to be able to trust them.

[–] NoDodgeQuestion 3 days ago

Do you have example, open source you make using non-interchangeable model, that you can not make using other model?

[–] redox99 3 days ago

That wasn't my point, my point was that open models can technically do everything but they make mistakes more often. As an example imagine Opus makes a mistake every 5 prompts and Deepseek every 20. Because you still have a human in the loop, you tell it to fix that mistake and it does, but it's time wasted or bugs sneaking up on you.

Having said that, I was working on an AI for a certain video game, and I had Astra 6 and Sol 6/6.1 work for 30 hours straight, with some human steering to get it unstuck every now and then. It could not get it to work right, and the code it created was a mess.

When Opus 5.5 came out in like 4 hours it cracked it.

I didn't try but I'm very confident if Astra failed, the open models would've failed too.

[–] NoDodgeQuestion 3 days ago

Less time wasted or bugs sneaking are also good example, can you share video game AI example?

[–] redox99 3 days ago

Sorry it's proprietary but imagine a bot for a multiplayer videogame that can replace real players who disconnect mid game.

[–] cloverich 3 days ago

To clarify, i use both subscription pricing (personal use) and api pricing (at work). My spend going down was referring to api pricing, while using it more (for "everything").

Personal efficiency is noted as never hitting my limit despite it doing huge amounts of work at a time (ex: rewrite my notes app in swift for ios and install on my phone, 2 hours later its opened on my phone, looks nice, is working (base set of features). No follow up prompts, around 2 hours of work. 45% of my 5-hour limit.

Work efficiency is spend, task complexity, code quality (how often i have to steer - rare now), and wiring it up to more stuff (ex having it setup metrics and dashboards etc etc).

[–] bigwheels 3 days ago

I used to sing the same tune as you are now- "models are interchangeable". For today, all other models seems significantly dumber and waste more of my time than Opus 5.5.

tl;dr: You should try Opus 5.5 and report back.

[–] rbehrends 3 days ago

I have been using Opus 5.5 (as well as pretty much all frontier models). I am not sure why you think I haven't.

[–] bigwheels 3 days ago

It hinges on what you consider "common engineering tasks", this definition may not be shared amongst the audience.

[–] cmiles8 3 days ago

The history of tech is one where “good enough” beats “best in class” nearly every time. Anthropic’s whole business plan is that for reasons they can’t explain this time “best” is what matters.

All indications are the models are increasingly worth less and less and rapidly approaching zero. Even worse, everyone is rapidly shifting to “router” architecture where they switch models constantly. LLMs are perhaps the least sticky product in the history of tech.

The only money to be made is selling compute to run models on. The only real out I see for Anthropic is if somehow compute becomes so constrained that they can flip to sell all their committed compute at a markup to run commodity models. Absent something like that it would appear they don’t have a viable business plan. As many have been pointing out, they casually left Q3 off their charts. Put that back in and suddenly the charts look very worrisome.

[–] repeekad 3 days ago

You're admitting the problem here, anthropic needs revenue to keep growing and growing, yet you're already settled into a willingness to pay of only $20/month as probably a fairly ideal customer, bigger better models just aren't valuable to most people at the price they need to be to make the money back.

[–] Gareth321 3 days ago

It is estimated that only 2% of the global workforce is paying for AI right now. If that grows to double digits - especially in the 30%+ range - and Anthropic captures a significant proportion of it, their valuation is justified. This is assuming they don’t offer virtual employees and these are 100% in the pipeline.

[–] zbentley 3 days ago

Sort of. If they can rely on differentiation and loyalty now, pre-IPO, from their large-but-cheap customer base, they can focus their growth on serving enterprise/other markets, and lean on their existing base as a low-churn-risk (compared to the rest of the AI ecosystem) customer and marketing surplus. Focus is good.

[–] fastball 3 days ago

Anthropic does not make money if everyone is like you, spending $20/m on their SOTA model and are happy. That sounds very commoditized to me.

[–] tedd4u 3 days ago

An example is I like Claude a lot, but for the same $20 spent with Google to get Argon 4, I also get ad-free on YouTube, a ton more storage, and it can access all my Google Drive files natively. I’m not going to pay for both. And I already stopped paying ChatGPT last Nov when Claude got good.

[–] butlike 3 days ago

Make sure you test egress so you're not stuck paying a premium price for storage if you ever want to switch off. Having too much in iCloud was a major pain point when I wanted to downgrade my subscription.

[–] halfmatthalfcat 3 days ago

Ngl, I've been on Opus 5.5 but had to switch to open for a while. DSv4/Minimax 3.1 were pretty damn good/comparable. Definitely not the same but completely servicable.

[–] zarzavat 3 days ago

If some later version of Deepseek had the capability as Opus 5.5, would you use Opus?

What many of us experienced this year is that Fable 5 and Opus 5.5 are good enough and future model improvements may have diminishing returns even if benchmarks improve.

I’m very excited for smarter models but what I really want now is not capability but speed, cost and open weights.

[–] wyre 3 days ago

There will be a version of Deepseek with the capabilities of opus 5.5, but by that time there will be Opus 6 and it will likely cost the same or cheaper than Opus 5.5 and have nearly unlimited usage for subscribers.

Every model release people say the model is good enough, yet Opus and Sol are still more popular than Deepseek. The frontier is shortening, but there are still considerable room for models to improve. SlopCodeBench is new and not close to being saturated.

[–] dwoolf 3 days ago

this conversation happens over and over every 6 weeks. It is absolutely a commoditized product. The models are getting better but they're _all_ getting better. GPT beats Claude beats Gemini. Then open models distill them at cheaper prices, etc.

This is great for us, but that behavior is the behavior of a commoditized product.

[–] mattmaroon 3 days ago

Right, the thing is, for most tasks, there’s a finish line. Once a model can do a given task right, future improvements may be of little to no benefit beyond cost reduction.

Right now OpenAI and Claude (and maybe Gemini) are over the finish line with reasonable prices for many tasks whereas the rest are still in the race.

But what happens when the open weight models cross the line and it just comes down to price?

[–] nikhilsimha 3 days ago

> My $20 sub no longer runs out, even though I do _much_ more than ever.

Somewhere in there is a definition of commoditization.

[–] foobar_______ 2 days ago

Haha thank you. Maybe humans are just stochastic parrots after all. We all just string together tokens that kind of sound right, but we don't really know ... commoditize, democratize, operationalize...

[–] mattmaroon 3 days ago

I do a similar thing with 6.1 Sol. I find it pretty comparable to Opus 5.5 in many ways.

[–] natedagreat22 3 days ago

Eh, we have cursor at work with most of the top models and I switch regularly. I went from Claude to sol 5.6 and preferred its prose. Then my work took away the frontier models because they want to see if we can get by on cheaper models. I using Gemini Astra now because it’s discounted and it’s 90% of sol level and completely functional for planning and coding. Some coworkers are using muse coding, some Kimi and glm. Everyone is still producing code. I don’t think it’s a real moat as in you don’t have other options or switching models is actually a difficult process

[–] xnx 3 days ago

> I using Gemini Astra now

Probably meant Gemini Argon

[–] caughtinthought 3 days ago

At $20/month you're the reason they're 80B in the red lol

[–] tsunamifury 3 days ago

"Yahoo! is the best search engine, and I cant imagine anyone making anything better."

[–] cloverich 3 days ago

Wouldn't a better analogy be Google, which would actually contradict the point you are trying to make?

[–] tsunamifury 3 days ago

If you'd ever worked for Google, you'd know how insanely you're missing the point. There have been probably over 1000 self disrupting changes to google search as it continued to stay on top.

[–] cloverich 3 days ago

I take it you have - i guess can you provide some examples and how they would materially differ from what Anthropic would do then? It feels very similar on the surface.

[–] tsunamifury 3 days ago

They could. Let’s see if they do. I’m just saying it ytd if they are yahoo or google.

[–] mritchie712 3 days ago

that's a real stretch. WeWork was in a business that had already been commoditized (e.g. Regus) for decades.

Anthropic is in a business that didn't exist 3 years ago.

[–] cmiles8 3 days ago

Yes it is a newer business but doesn’t change the fact that models are trending towards a commodity. And that’s a huge problem for the business model on offer.

[–] 827a 3 days ago

I don't think the models being a commodity matters much. Consider: Email providers are a commodity. Cloud linux server hosting is a commodity. Checking accounts are a commodity. There's a lot of great businesses, trillion dollar businesses, built on commodities. DeepSeek v7 Pro might open source and be better than any Claude model (unlikely), but JP Morgan and Eli Lilly are not going to go spend $500M on chinese AI tokens routed through OpenCode. They just aren't. The models really matter far, far less than the experience these companies build around the model, and both Anthropic and OpenAI are doing a decent job of making that experience reasonably sticky and compelling.

[–] atomicnumber3 3 days ago

"trillion dollar businesses, built on commodities"

Which ones? I'm looking at the list of companies with > $1T market cap and none of them have commoditized markets. Instead, they all have huge network effects (Apple), enormous legacy lockin (Broadcom), a religious monarchy (...), or are some of the only people on the planet who can do what they do (nvidia, tsmc).

Mind you, there's lots of _billion_ dollar businesses in commoditized or partially commoditized markets. But Anthropic as a billion dollar business is sunk.

[–] dzonga 3 days ago

religious monarchy - you mean musk & the muskites.

[–] nozzlegear 3 days ago

> DeepSeek v7 Pro might open source and be better than any Claude model (unlikely), but JP Morgan and Eli Lilly are not going to go spend $500M on chinese AI tokens routed through OpenCode.

But they might spend them on American inference providers running DeepSeek v7 Pro with ZDR routed through OpenRouter. Or hell, they might just run it themselves like we're already seeing some enterprises do right now.

[–] 827a 2 days ago

They might, but I am skeptical of this idea. The story of the past fifteen years in enterprises has been pretty clear: Move things to the cloud, we don't want to manage data centers. There are notable exceptions, but by-and-large that's the trend, and I don't understand why people believe this will suddenly reverse in the era of AI. Running a GPU cluster is substantially harder and more expensive than any other cloud resource. These companies don't even want to run their own Microsoft Exchange servers anymore, and you think they'll want to run an NVL72?

To be clear, I don't like this trend, and I strongly believe most companies are better off owning as much of their technology stack as possible, working with partners to help maintain it rather than making themselves lesser by working with AWS/GCP/Azure; but it is the trend.

Something like Azure Foundry w/ ZDR is more likely. And yeah, its possible that Ant will find competition from those kinds of providers. But Ant will also find revenue from those providers, and its hard to say where things will land in the end.

[–] SkiFire13 3 days ago

> but JP Morgan and Eli Lilly are not going to go spend $500M on chinese AI tokens routed through OpenCode

And they likely won't be spending them on something without ZDR like Fable 5.

[–] Lalabadie 3 days ago

Right – they can't argue for acceleration factored in their own value, if it's a property of the whole surrounding market.

IMO, US AI providers are not leaders in efficiency anyway, they're still running the original ~2010 playbook that led to LLMs ("What if we took ML researchers' work, but funded it at 50M/yr instead of 250k/yr?").

They're currently arguing for the continuation of that approach: Scale funding first, and the rest will follow. It is high-risk and WeWork-like, by nature.

[–] gtirloni 3 days ago

It's high-risk in that it's proven to not work anymore. Scale isn't a differentiator or won't be in the short term.

Meanwhile, everyone else is working on making these models more useful through a ton of ecosystem around them.

I don't see how the frontier labs will have any control over that to deliver on what investors expect. As mentioned in another post here, if they could, they would already be spawning hundreds of companies to diversify their reach but they aren't, because this era of AI is awesome but still doesn't allow a few individuals to replace millions of others that easily (or efficiently).

[–] bjacobel 3 days ago

Selling subscription productivity tools is a business that has existed for decades if not centuries. Just because their product is new does not mean their business is.

[–] stusmall 3 days ago

Oh come on. That's like saying "This isn't novel. People have exchanged money for goods and services for thousands of years"

[–] postexitus 3 days ago

If that was the business, yes. The first rule of understanding the business is understanding the business model. Not the product. If the business model is a subscription, then you look at the moat. If the moat is not there - you are not that much different from Microsoft Office (which arguably has a larger moat).

[–] kevinsundar 3 days ago

Its already commoditized. Thats why things like OpenRouter are useful and successful because it lets you route inference at the click of a button between different providers after balancing cost and availability. Exactly how commodities behave.

[–] creativeSlumber 3 days ago

> Anthropic is in a business that didn't exist 3 years ago.

but it's already commoditized.

[–] dgellow 3 days ago

And is already commoditizing. If not already commoditized

[–] reticulates 3 days ago

when they start removing biscuits from the Anthropic offices, that’ll confirm their WeWork-like death spiral

[–] SkyEyedGreyWyrm 3 days ago

Someone should do the same thing Karen Hao did for OpenAI with the furniture costs of their office, if Anthropic's HQ decoration and office equipment value stops growing then we start worrying

[–] thewhitetulip 3 days ago

This is hilarious lol

[–] JumpCrisscross 3 days ago

> There are a lot of parallels to the WeWork S1

Time has tempered it, then–re-read it [1]. It's a kaleidoscope of stupidity with no coherent economic case. The Anthropic S-1 is ridiculously ambitious. But it puts forward an argument for its valuation that is at least falsifiable.

[1] https://www.sec.gov/Archives/edgar/data/1533523/000119312519...

[–] next_xibalba 3 days ago

> little hard evidence that they’ll generate the revenue (let alone the cashflow) to pay for all these future liabilities

According to the S1:

- FY24 revenue $386 million -> FY25 revenue $4.59 billion (+1,008%)

- Q126 revenue $4.7 billion -> Q26 revenue $11.5 billion (+145%)

That seems like pretty good evidence of current and ongoing explosive growth. Much of this revenue is pre-paid (re: cashflow). Meanwhile, operating margins went from -184% to -$4%.

Seems like pretty good evidence. Will growth continue apace? Unknown. But the arguments for Jevon's paradox applying to intelligence seem pretty convincing, so the TAM here seems likely to be enormous.

> All while everyone is discovering there isn’t really a secret sauce moat to demand

Also not convinced by this. The Chinese models seem to have distilled their way to current levels, with Anthropic and OpenAI now getting serious about defending against this.

I don't think you're definitely wrong in all this. Rather, I think your claims are too confident.

[–] SkiFire13 3 days ago

> Q126 revenue $4.7 billion -> Q26 revenue $11.5 billion (+145%)

I suspect this started stagnating in Q3/Q4, which is why they're looking to IPO now.

[–] tantalor 3 days ago

Yes, and 5 years and 1 Chapter 11 bankruptcy later, WeWork is now (EBITDA) profitable.

And they've gone private now.

[–] cmiles8 3 days ago

Nobody was saying subleasing offices wasn’t a business. It was just WeWork’s setup that was untenable and ultimately insolvent.

Similarly nobody is saying AI can’t be a successful business, but here too the big labs have dug themselves into a giant hole such that a bankruptcy reset may ultimately be the only way out of it. Time will tell.

[–] doctorpangloss 3 days ago

was it though? sounds like wework had the last laugh. is bankruptcy part of the strategy? people like you call insolvency the end of the journey. the journey is whatever you want it to be.

[–] jjfoooo4 3 days ago

The corporate entity called WeWork still exists, sure. If you were a pre-bankruptcy investor or equity holder in WeWork you got wiped out. The management and capital that went into the first iteration is gone.

[–] doctorpangloss 3 days ago

did they though? you're kind of assuming that they were. i'm confident so-and-so employee common holder got wiped out, but everyone? no.

[–] cmiles8 3 days ago

Anyone involved in WeWork 1.0 got wiped out. So there was nobody laughing there. WeWork as a concept lived on, but suggest you read how bankruptcy works.

[–] missedthecue 3 days ago

Well, not wiped out. In bankruptcy, lenders become the new equity holders. But yes, a major haircut on the loaned funds.

[–] cmiles8 3 days ago

The investors and employee equity holders got wiped out. Creditors are generally not seen as investors, at least until they walk away owning the thing after bankruptcy.

[–] ashkankiani 3 days ago

EBITDA profitable is not a substantial vote of confidence.

[–] nunez 3 days ago

and are much much smaller than they were at IPO

[–] JonathanCreek 3 days ago

This is an excellent way of looking at it: buying something for the long term (computing capacity) and selling it in short-term, smaller pieces (tokens). The risk is that the obligation is long term while the income is short term.

It's like signing a 10-year lease on an apartment in NYC and renting it out by the day on Airbnb. It may or may not work.

On top of that, there's the question of how you treat the remodeling of that apartment (model training). If it benefits you for years to come, it's an investment that you depreciate. If your guests frequently trash the apartment, or tastes change (the model becomes obsolete quickly), that remodeling (training) is just a cost.

[–] BoorishBears 3 days ago

My last shred of skepticism has been killed watching people try to imply this doesn't prove Anthropic (and likely OpenAI) were actually much better off than most people assumed and will certainly stay multi-trillion dollar companies

[–] financetechbro 3 days ago

I think this is unfairly underplaying WeWorks contribution to financial innovation with their creation of “community adjusted EBITDA”

[–] cmiles8 3 days ago

Well every startup plays the game of “we’re profitable if you ignore all the reasons why we’re not profitable.”

GAAP isn’t perfect, but it exists for a reason.

[–] moecables 3 days ago

except, I didn't need WeWork to get work done, I use claude like crack to get work done.

[–] levocardia 3 days ago

So you'll be shorting the stock, I take it?

[–] reticulates 3 days ago

Shorting a company is not a trade against the future of a company, it is a trade against the market. You can know a company is going to zero and the company can go to zero and you can still lose your shirt from shorting it.

[–] wickedsight 3 days ago

"The market can stay irrational longer than you can stay solvent."

This quote stops me from shorting pretty much anything.

[–] cmiles8 3 days ago

A lot of people will, if this IPO actually happens. But as is frequently pointed out a short is a market bet not a bet against the company and the market remains wild and irrational. You can be right about the company ultimately failing and still lose your shirt on a short.

However the price of CDS on bonds is already a strong market indication of where the market thinks all of this is heading. And none of that looks good if you’re betting on the AI exuberance continuing.

[–] singron 3 days ago

The bond market and the equity market care about different things. E.g. if the company has a 10% chance of going bankrupt and a 90% chance of doubling its market value, then paradoxically its bonds will look bad and its equity will look good.

[–] dpz 3 days ago

When you've got companies like Tesla valued at what they're valued at. Shorting is pretty dumb.

[–] surgical_fire 3 days ago

Shorting is not the only way to protect yourself from a bad investment.

You can simply not buy shares in companies you think are on a doomed trajectory.

That said, depending on the IPO target price, I might short it.

[–] Computer0 3 days ago

You say this as if retirement accounts, and S&P500 ETF’s don’t exist and aren’t very common. Many people were forced into some amount of investment in spacexsi

[–] surgical_fire 3 days ago

Which is beyond the point. I was replying to someone that mentioned shorting Anthropic if you think it is a bad investment.

I presume they are not playing with shorting with your retirement account?

[–] kozikow 3 days ago

"token factory" is indeed a terrible business model - no one is arguing that.

IMO the whole thing is based on the fact of "we will reach AGI/ASI eventually, and when we do, we will reach escape velocity".

No one knows - you, me, or Dario if this will happen and when.