There was an article yesterday that if you sign up for the most expensive OpenAI plan and actually use it fully, OpenAI loses $14k a year on you.
This reminds me of the early Internet days. I ran an ISP. Like everyone else we offered “unlimited” service. But if everyone actually used unlimited we would have been bankrupted because it would tie up a phone line (channel of a pri) and modem on the portmaster. Regular users only used 1/10th of “unlimited”.
Isn’t that basically every ‘all you can eat’ model though? 20% of people will fully max their usage, causing a loss, but the 80% of users will use far less than the purchase price, netting $$$ for the company. When that balance shifts, most places just put more limits to that ‘all you can eat’ or raise prices. Sure, I have unlimited internet, but it’s difficult to symmetrically max out my 5gbit connection to get that full ‘cost’ each month.
As long as OpenAI has a health amount of money in the bank ($50 billion it seems), they have a long time to burn money, and then you just keep getting people to invest. Pretty sure that’s been the model of every tech company for a long time. I think Uber took almost 15 years to be profitable, and had almost $50 billion invested. For a company that owns essentially zero cars, pretty wild.
I take your ISP didn’t have a free tier that also lost money, though, unlike these companies with apparently infinite money to give away
What does a CFO actually do in these situations, how do they balance a book that is creating its own black hole?
OpenAI still has $50 billion, about half of that in cash, because they keep fund raising. The game is keep extending the runway until early investors can cash out and leave someone else holding the bag.
That’s quite easy, the books are balanced, there are just more debits than credits. “Balancing the books” doesn’t mean that the net result is zero, it means that all the money going in and going out is accounted for.
OpenAI can keep bleeding money as long as there are fools willing to fund it in exchange for the illusion of future profits.
You can’t have balanced books where there are more debits than credits. That would be out of balance.
Balanced means debits = credits.
I’m not an accountant, but you can certainly balance books while showing a loss. Double-entry bookkeeping simply means that every transaction has two parts, and “balancing” simply means that all the transactions cancel out properly.
I joke with my accountant friends that their entire job is counting to zero.
A loss is not an imbalance of debits and credits, but how much of those debits end up in expenses and the credits end up in revenue.
DR Expense $1,000 CR Cash $1,000With no other activity in a period, that is a $1,000 loss funded by cash.
DR Expense $1,000 CR Loan $1,000Is a loss funded by borrowings.
DR Sales Discounts $1,000 CR Sales Revenue $1,000Is 0 profit/expense as the sale was marked down to 0 (assuming no cost of sales).
Exactly. My terminology might not be correct, but my point is that their books can be perfectly balanced, and they can also be losing a shit-ton of money, as long as investors keep shoveling money in.
Yeah the terminology
the books are balanced, there are just more debits than credits
is the opposite of everything discussed above.
