A blind man once told me, “I wish I knew what a beautiful woman looks like”. He started losing his sight from birth and lost it completely while he was still just a child.
What do the engineers trying to make artificial intelligence know about intelligence? To me, they look like a bunch of blind men, trying to build a “living” statue of a beautiful person. The worst part is, they don’t even know they are blind.
Do you remember the scandal when an engineer from Google claimed that the company’s AI is sentient? When I saw the headlines, I didn’t even open the articles, but my conclusion was that either Google made a terrible mistake in hiring him or it was an elaborate PR stunt. I thought Google was famous for having a high hiring bar, so I was leaning toward a PR stunt—I was wrong.
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What is amazing about that story is that roughly six months later, ChatGPT came out and put Google’s AI department into panic mode. They were far behind ChatGPT, which was not even close to being sentient.
Engineers from OpenAI, were the ones to start a new era, the era in which investors are presented with a statue that sort of has a human face, and has a speaker inside playing recordings of human speech, expecting that the “blind” men working on it, will soon make it become alive and beautiful. Of course, investors are also ignorant of the fact that engineers are “blind”.
OpenAI is now faced with many rivals, and the developing situation is starting to look like a bunch of bullies trying to out-bully each other instead of offering a superior product.
Image source: picture alliance/Getty Images
OpenAI under pressure from rivals
Meta’s recent investment of $15 billion in Scale AI seems to have hit OpenAI quite hard.
OpenAI will phase out work with Scale AI, said the company spokesperson for Bloomberg on June 18th. According to the same source, Scale AI accounted for a small fraction of OpenAI’s overall data needs.
It looks like Meta’s latest move angered OpenAI’s CEO Sam Altman. In a podcast hosted by his brother, he revealed that Meta Platforms dangled $100 million signing bonuses to lure OpenAI staff, only to fail. “None of our best people have decided to take them up on that,” he said, writes Moz Farooque for TheStreet.
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Unless Altman shows some evidence, this can also be a way to mislead Meta’s engineers into believing they aren’t compensated fairly. Not that Zuckerberg wouldn’t do such a thing, but only the people involved know the truth.
As if OpenAI’s competition is closing in, buying partner companies and trying to poach its staff by offering ridiculous bonuses aren’t enough, the company has even more problems. It is bleeding money, and has issues with a big stakeholder.
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OpenAI lost about $5 billion in 2024. There are no estimates on how much the company will lose this year, but according to Bloomberg News, the company does not expect to become cash flow positive until 2029.
Latest developments will likely push that date farther into the future.
ChatGPT or CheapGPT?
Microsoft has invested about $14 billion in OpenAI; however, the relationship has turned sour since then.
OpenAI has considered accusing Microsoft of anticompetitive behavior in their deal, reported the Wall Street Journal on June 16th. On June 19th The Financial Times reported that Microsoft is prepared to abandon its negotiations with OpenAI if the two sides cannot agree on critical issues.
Meanwhile, OpenAI has started shockingly discounting enterprise subscriptions to ChatGPT.
This had angered salespeople at Microsoft, which sells competing apps at higher prices, reported The Information.
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“In my experience, products are only discounted when they are not selling because customers do not perceive value at the higher price. If someone loses copious amounts of money at the higher price, how will the economics work at a lower price?” wrote veteran hedge fund manager Doug Kass in his diary on TheStreet Pro.”
OpenAI’s price cuts could kick off a price war, with a race to the bottom even as OpenAI, Microsoft, Meta, and Google continue plowing tens of billions into developing it.
“My suspicion, although those guys might be good (in theory) at technology, they are not good at business. I think they will find much less in the way of elasticity than they hope, because the problem is the quality of the output more than it is the price,” said Kass.
What will happen to OpenAI’s cash flow positive plan after 2029? I doubt it is reachable with the now slashed prices. Will the company even live to see 2029? I think that is a better question.
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