Meta's open AI hardware vision

> Do we think that brings more than 400+ million in value to Meta?

Tough to tell, given nobody is turning a net profit on LLMs yet.

Companies have a tendency to develop neuroses, though, just like people. Apple’s near miss with bankruptcy fuelled cash hoarding. For Facebook, their disastrous IPO and near miss of mobile seems to have made them hyper aware of the Innovator’s Dilemma. $400mm spent on a defensive move is certainly wider than tens of billions on the metaverse.

> Tough to tell, given nobody is turning a net profit on LLMs yet.

I suspect in the case of Meta and other big players, profit isn't necessary required to bring substantial value. Imagine their model being able to help them moderate more fairly and accurately. This alone could prevent potential legal actions from individuals, companies, and governments.

> profit isn't necessary required to bring substantial value

They’re private companies. If they can’t tie it to profit, it’s not adding value.

> being able to help them moderate more fairly and accurately

This reduces legal costs and increases strategic flexibility. Sort of like HR or legal departments: cost centres add value by controlling costs, a critical component of profitability.

Providing toilets to employees does not tie to profit. Toilets in all offices are now closed. We are saving over $10k per day.

> They’re private companies. If they can’t tie it to profit, it’s not adding value.

Not true, even strictly from an accounting perspective. If you spend $400M and build an asset that is worth >$400M, then you have increased the value of the company without modifying profit. For example, if a company were to buy land, and build a building, that building has a value regardless of if it is associated with any revenue.

Some people are gonna shit in their pants hearing this new policy.

> Tough to tell, given nobody is turning a net profit on LLMs yet

Perhaps, but Meta is definitely getting some money back from ad impressions supported by AI-generated content.

Correct. We know these models are producing fucktonnes of revenue. At least some of them can be run at a gross profit, i.e. where marginal power costs and capital costs are less than marginal revenues. (Put another way: if OpenAI were an absolute monopoly and stopped training new models, could it turn a profit?)

What’s unclear is if this is a short-term revenue benefit from people fucking around with the newest, shiniest model, or recurring revenue that is only appearing unprofitable because the frontier is advancing so quickly.

> * If you spend $400M and build an asset that is worth >$400M, then you have increased the value of the company without modifying profit. For example, if a company were to buy land, and build a building, that building has a value regardless of if it is associated with any revenue*

Why does it have value? It’s because it can be rented, occupied for productive use or sold to someone who can do either of those. Revenue-free assets are essentially money. (Companies aren’t in the business of non-revenue non-monetary assets—that’s the domain of society at large.)

> They’re private companies. If they can’t tie it to profit, it’s not adding value.

Smart companies understand other types of value exist.

If a democratic population hates you, it is harder to convince politicians to do your bidding. (Not impossible, just harder!)

If potential employees don't think kindly of you, it is harder to recruit.

Llama is a constant source of good PR for Meta in the developer community. Compared to just a couple of years ago when they were mostly laughed at by devs for metaverse stuff. Now it is "holy cow Zuck is standing up to Microsoft and Amazon and democratizing AI!"

With Llama, Meta has got great PR, and also developed cutting edge tech.

They also get to benefit from thousands of developers trying to make Meta's models run more efficiently.

From the little we know about OpenAIs inference infra, I feel like I can confidently say that if training stopped today, and they got cut off Azure subsidies, their $20.00 subscription model would probably not cover the cost of Inference.

I know nothing about the enterprise side of OpenAI but I'm sure they're profitable there. I doubt the subscription cost of a single power user of ChatGPT Plus covers the water they consume as a single user (This is probably an exaggeration, but I think I'm in the ballpark).

It may be that extra-large LLMs don’t make sense for ChatGPT. They’re for enterprise use, like supercomputers. The reason I say “at least some” is I’ve found use in running a local instance of Llama, which seems to imply there is some niche of (legal) activities AI can support sustainably. (Versus, e.g. crypto.)

> Providing toilets to employees does not tie to profit. Toilets in all offices are now closed. We are saving over $10k per day

Right. How do those companies tend to wind up?

I didn't say short-term profits. I said ultimately, the value of a non-monetary assets are tied to profitability. Particularly financial assets, e.g. C corporations. That doesn't mean that's the only measure of value. But for a company it's damn close.

Put another way: when a for-profit company starts arguing that profits don't matter, it's a little bit curious.

> other types of value exist

Sure. But they intermediate to profit. I'm not suggesting leadership should be justifying everything in those terms. But if an entire product line doesn't have a solid long-term net revenue generating or cost saving consequence, it's a flag for governance.

> potential employees don't think kindly of you, it is harder to recruit

And you get higher churn. Cost imperative. Not the sole reason--you have to work with the people, after all. But that's an agent benefit. Companies treat high-value employees well because it makes sense to, and they'd probably cease to exist if they stopped doing it.