Units of Economics of LLMs. Reply to Ed Zitron's "AI Is a Money Trap"

This stood out to me:

> ChatGPT 5 and ChatGPT OSS are here with the purpose of profitability

This is economically good, but it's also a signal that their capacity to moonshot is stalling either through lack of funding or lack of innovation. They're now pivoting to a more sustainable model.

Models have seen diminishing returns over the last 2 generations of model: GPT3.5 to 4o to 5.

Doubling parameter size does not double model ability/quality.

In the long term models will become commodities that can be interchanged with competitors and open source models, there's no moat, it's not likely anyone is going to sustainably have a hugely better model than the next company.

Claude Code is already showing that you can win in a niche with specialization.

I expect 3 things:

1. We won't see massive jumps on model performance again for a while without new techniques. 2. Model makers will specialize in specific use cases like claude code 3. Moonshot projects like stargate will not have outsized returns, the step change from o3/o4 models to whatever comes next will not be groundbreaking. Partly because of diminishing returns and partly because the average person is bad at explaining what they want an LLM to do.