Monologue: Tokenpocalypse Now

believed that everybody was spending simply to remain competitive. Fucking love that, don't you, and added that the first hyperscala to signal that it can slow the pace of spending

would likely see its share price rewarded. If I had to bet, I think it's between Meta and Microsoft, the latter of which has made numerous noises about using cheaper AI models like deep Seek and its co pilot cowork product Yeah and Also, I should add the Sacha and Adela keeps doing interviews where he's like, yeah, no, one company should have all that power. We shouldn't rely on one lab, one lab being able to be shut down at any times bad.

thinks might work, you know, like a fucking cargo cult. Anyway, as I've mentioned over the last few months, both Anthropic and open Ai both started to charge their enterprise customers companies with over one hundred and fifty users for the actual cost of the AI tooken spend as of the middle of Q one, twenty twenty six. To explain, when you use a regular chat, GPT or claud account, you burn tokens, each one about three quarters of a word, up to a five hour or weekly limit, depending on

what kind of model you're using. So with Anthropic on their clause subscription Opus four point eight and Fable when it was around, had a specific limit to themselves. But anyway, just the more powerful the model powerful being meshed by the companies, of course, the more it burns and the

less you can use it. On a regular subscription you're able to burn and I am not kidding eight thousand dollars worth of tokens a month on Claude and fourteen thousand dollars a month on open Aiy's chet GPT codec subscription.

result is multiple companies capping their workers token spend. As I've reported, both T Mobile and Brecks have done so, and others have reported that Uber, Meta, Walmart, Coinbase, and Cisco have all done so. Meta notably had a token maxing leaderboard. Very funny again, just changing direction based on random signals. None of these people have a plan, none of them. None of these companies have a plan. Nobody

integrating AI has a plan. If they did, they would have been like, Yeah, let's make sure we know how much this is gonna cost, or let's make sure we know whether this is good or not, whether we can measure the roy you know, anything that would suggest anyone

knew what the hell they're doing, but they don't. And four o four media reports that Management Consultancy Firm and Evil Corporation Accenture, which is an insane way of saying that I'm just going to keep has seen what it calls soaring token spend based on leaked audio recordings, with much of that token spend being driven by non engineers doing things like combining PDFs into presentation slides. I love this shit is the easiest stuff in the world made

slightly easier but probably worse, costing way more. You could definitely hire an extra, but you could just hire a contract to do this. You could iira a bloke at forty five bucks an hour to do that for you. Maybe the happiest man alive probably cost your less thought too. I know, Ugh, God, this stuff is exhausting. You ever sit and wonder what you could do with the rest of that money I could have, Oh no, not like millions of dollars a month. I could have like a

week's worth of diet coke. Anyway, it turns out that telling your workers that AI can do basically anything and to use it as much as possible starts costing you a lot of money when you actually pay what it costs. As I've said before, we're barely three months into enterprises paying the actual cost of AI, and they're already screeching

like they're being pecked to death by birds. And that joke is a courtesy of Kisei Kugawa, whos said that to me about a year ago when we talked about the amount of money that Anthropic was allowing people to burn on Claude subscriptions. Meanwhile, the threat of open source

models appears to be getting more serious. I've heard from numerous sources that Chinese AI lab z poos GLM five point two coding model is competitive with Anthropic Sopus four point eight at somewhere between a quarter and a sixth of the price, but that seems to vary based on the cost of the task. As far as whether GLM five point two is actually competitive goes it appears that the hype is somewhat real, but it's kind of you

kind of had to check your saucing. Open source AI coding company Cliin ran benchmarks on a natural bug from its repo and found that while GLM used twice as many tokens to fix it, it also did so at a cheaper cost forty one cents versus OPUS four point

eights eighty one cents. Opus was quicker, taking one point six minutes versus glm's four point seven minutes, but one thing that stood out was the GLM to quote client cleaned up dead code and verified the build compiled before completing something that Opus, the more expensive frontier model run by the company that uses billions of dollars, apparently didn't

bother to do. It's just one bug, but GLM five point two seems to score well on many of the major benchmarks, coming third on cybersecurity firms semgreps cyber benchmarks, with the top two being semgp's own harness, so their own thing that they put on top of the models running Opus four point eight and GPT five point five, followed by GLM five point two, which is interesting.

way they wish. And yeah, I mean in theory, any company that wants to use LMS could either run their own version of it locally or be on a rig that cost tens of thousands of dollars, or pay an inference provider like base ten to spin up and train their own version. Now, I must be clear that there's not a ton of evidence that running GLM five point

two is profitable for the inference provider. In fact, there's really note I genuinely have looked, nor do we have any significant signs that customers are moving away way on mass from open AI and anthropics models. People generally like name brands, and they even though Anthropic shit is constantly broken. Go look at their stability page, stability page, uptime page. I don't know what you call that. Email me if you know what they call that, or I could just look after this.

isn't clear. We should know by now. All that being said, now does feel like the perfect time for a shift towards open source models, se if only because everyone is

crapping themselves about costs. Everyone is really freaking out, And I think that this is going to be the time when we start separate the wheat from the chaff, the people that actually like this stuff versus the people who just feel good because they're doing AI and they don't know what else to do with their time, and they like forcing people to use it.

on the spend on the task. I hate to give him any credit though, I really don't like doing this, but Scott Gallaway recently made the point that China could thrive by AI dumping high quality open source models into the ecosystem as a means of destabilizing the major model providers. And I hate to say that's what's happening. It's like

a fucking broken clock. I guess. Zepu and Minimax are both partially government funded by the Chinese government and also both wofully unprofitable, but neither do so at the scale of anthropic or open aim. While both do the kfabe discussion of AGI and autonomous compute and all that bullshit, they seem far more focused on creating open weight models to compete with them. And just for the differentiation here,

open source means you can share some of it. Open weights means you actually can deddle with the model itself. That's a flattening. Someone's gonna email. They're gonna be mad at me.

a cheap to run model. Remember Baseten just they're an influence provider. They just raise one and a half billion dollars. They're not profitable. I mean, ZEPU isn't profitable, and they do the same thing open ai does with their stuff where they say, oh yeah, yeah, our cost of revenue, it's lower than our revenue. However, when you add the sales and marketing, it's actually it's actually unprofitable as well. Oh also we lose hundreds of millions of dollars because

of training. Other than that, we're super profitable. Yeah, it's really fucking stupid industry. And look, even if GLM five point two can do things at half the cost of OPAHS four point eight, that's still half of what in some cases is hundreds of thousands or millions of dollars a month. I've heard tell from multiple source is that that hardware demand is growing and that customers at big companies are starting to look into those high end hardware solutions.

And I think that that is the only future for this stuff, and I think it would reduce the cost significantly for the end user, probably keep this shit off the internet, massively marginalize the damage that LM based code can do by focusing on people actually give enough of

a shit to buy the buy the actual machines. And ah No, I feel like an actual serious fiscal commitment makes companies take things a little bit more seriously, unless, of course, your Microsoft, Google and Amazon and meta buying GPUs, at which case you gives a shit. But I mean, if this takes off, it is it's curtains vazousha. It's it's a bad time for Open AI and Anthropic unless they too start doing these hardware driven things. This is just a guess. This is just a guess they would

ever think about that. But I think it's possible. I think it's really the only economically viable end for this unless there are just going to be companies that lose billions of dollars a year for no apparent reason. I just don't think that's gonna happen. It's not enough money to do it. And goddamn, please go and listen to the Open AI will not get bailed out AI is not too big to Fail podcast They did.

everything's bad, so everything stays bad. I actually want to bring you a message of hope. I don't think these companies get bailed down. I don't think they get anything. I think that they get allowed to die. I think partner assets might be scooped up by Amazon, Google and Microsoft. I think the government might take a chunk out of them. Perhaps they get some sort of bridge financing. But I actually don't know if the government could even extend that

because AI is very unpopular with regular people. Regular people do not like this, and they hate data centers, and they have intelligently connected data centers, these horrible AI companies, and so in the end, I tell you please stop emailing me. The surveillance thing. Hey, it's not true. You're wrong. You sound you sound like someone that wants to be paranoid but doesn't want to do the reading well enough to be paranoid. If you want to be paranoid, go

read the promised software. Go look at Oracle like Go look at the actual history of these companies if you want to be freaked out by something.

And I'll say that my thesis remains undeterred. I believe a great deal of AI usage is cargo cult shit driven by executives that don't do any work and people that feel pressured into adopting AI by their peers on the media, or of course, people that spend twelve to eighteen hours a day on Twitter who just follow the algorithm. I call it the Dunce's Casino because you just crank the thing and a bunch of insane people come out. And all of these people come out and they're like, if.

and when it doesn't is dogshit. Yay, great, I'm so glad we sunk a trillion plus dollars into this. Look, these are specialist tools that are being forced to solve generalist problems, and they're probabilistic models that fail to do deterministic things, and they're really just an eternal financial black hole for anyone trying to scale them into a Google search or a meta sized business. And it's never going

to work like that. Just before this, as well, I saw that Broadcom and open Ai announced their Jalipino chip is giant dinner place sized motherfucker.

specific request if you have an information subscription. At some point in the last year, I know there was an information story that suggested that the Broadcom's open Ai chip would have modest gains. If you bring that to me, I will fuck it. I will venmo you five dollars if you can bring me that story. Seriously, I need that story because I'm pretty sure that if Broadcom's chip was going to change everything for open Ai, open Ai would sink every fucking dollar they had into it. Open

Ai would dispense within video. Instead, it's like, oh, yeah, we're getting Microsoft to pay for some of it, and it'll be there in twenty twenty seven.

it has been a long few months. I've still got plenty of energy, but this has definitely been a tough few But it's hard to tell what happens next. I know it's hard. I know you asked me when it

will burst. I truly don't know. But I'm gonna do my best every week to inform you, keep you up to date, and to try and explain what the fuck is going on, because quite frankly, I don't think most people have any idea, and I think that that's actually the story of the moment, because when you look around the tech industry right now, does this strike you as an industry full of leaders or followers? Meta is apparently working on a polymarket competitor after releasing some new three

hundred dollars fucking glasses that only perverts will wear. What Microsoft a year ago was saying open source was bad, now it's good. Six months ago, Anthropic was good. Now most of a Sulliman says they're too expensive and they're going to stop working with them. This is an industry full of people working things out as they go along.

Except the difference between you and them is that they have billions of dollars, billions and dollars, billions and dollars I'm keeping it billions of dollars, and also all the talent and all the resources and all the ability to raise that they could do anything.

hypergrowth ideas now. They probably wouldn't say it in those exact words. They could have said, this is the era of experimentation, this is finding our new business lines the next Google search and announced it like some world's fair bullshit. Oh no, Maybe the markets wouldn't have been quite as happy, but they'd be happier that they're going to be at the end of this era. And I think in the end, it's frustrating to watch because logic and reason have gone

out the window. But gravity exists and this era will come to an end. And next week we've got an awesome interview something that's not about AI for once, with two writers from The Wall Street Journal about the greasy, nasty, freaky world of poly markets influencer marketing involving all sorts of weird shit, like ads that include fake bets on fake poly market websites, genuinely weird shit, And that'll be coming up next Wednesday. I enjoy hearing from you. Please

email me itron a Easyatbetter Offline dot com. Jesus Christ, I messed up my own email. It's been a long few weeks, folks, but I'm loving hearing from you. Please email me, please jump on the subreddit. I love to hear from you. I love feedback. I love feedback. That's reasonable. If you send me a typo correction, I'm only going to get mad.