Isn’t it normal in startup world to make bets and not make money for many years? I am not familiar with the field so I don’t have intuitions for how much money/how many years would make sense, so I don’t know if OpenAI is doing something normal, or something wild.
Normally the way this works in a startup is that spend exceeding revenue should be in service of bootstrapping the company. That means that money is usually spent in a few ways:
R&D
functions that have relatively high floors (relative to revenue) to function well but then grow sublinearly (marketing, sales, etc.)
to gain a first mover advantage that no one will be able to catch up to
OpenAIs spend is concerning for the same reason, say, Uber and Netflix have/had concerning spend: they have to actually win their market to have a chance of reaping rewards, and if they don’t they’ll simply be forced to raise prices and cut quality/R&D.
Isn’t it normal in startup world to make bets and not make money for many years? I am not familiar with the field so I don’t have intuitions for how much money/how many years would make sense, so I don’t know if OpenAI is doing something normal, or something wild.
Yes, though note that this is still concerning.
Normally the way this works in a startup is that spend exceeding revenue should be in service of bootstrapping the company. That means that money is usually spent in a few ways:
R&D
functions that have relatively high floors (relative to revenue) to function well but then grow sublinearly (marketing, sales, etc.)
to gain a first mover advantage that no one will be able to catch up to
OpenAIs spend is concerning for the same reason, say, Uber and Netflix have/had concerning spend: they have to actually win their market to have a chance of reaping rewards, and if they don’t they’ll simply be forced to raise prices and cut quality/R&D.
Yes, good point. There is a discussion of that here.