> Also, Anthropic is showing that to operate at Anthropic level, you need $300,000 compute spend per employee

They have infinite money to burn so they aren't going to optimize.

I've seen that trivial changes to workflows can token usage by 30%. Repeat this a few times and my token usage has plummeted over the last few months.

Only outputting test failures instead of having agents read test run output in real time. Not having build logs get fed into context. Projects like UCL (unified context layer) so agents don't rediscover the same facts about a code base again and again.

Giving tools agent output modes so they only print out the minimal info needed for an agent to get work done.

When I hear a company has an absurd AI spend I assume they aren't even trying to reign it in.

> No. This is opportunity cost.

It’s not opportunity cost. It would be opportunity cost if their employees not using it would lead to additional revenue. However, if Inwas to go to Anthropic and double my token usage Anthropic wouldn’t decline my money. If Anthropic’s employees would stop using Claude, their revenues wouldn’t increase by an equivalent amount.

Their revenues are not currently supply constrained.

It’s just a cost cost. If their employees stopped using these services they would simply need less infrastructure, and therefore save on the cost to build and run that infrastructure. It wouldn’t translate into an increase in revenue.

I don't buy it. A company like Anthropic is not going to just walk away from revenue. If external demand were really that high, then they should take the money first. And not just for the revenue; customer demand being that high is also an indication that the product is already great as-is so they stand to improve their bottom line by easing off on the R&D spend.

> Also, Anthropic is showing that to operate at Anthropic level, you need $300,000 compute spend per employee

That's API-list prices. They have an 80% margin over COGS.

Cost per equivalent output is dropping 10x every 18 months -> so in 3-ish years, if the trend continues, that will be $3k per employee.

Not bad. A lot of companies are already spending about that much or more on IT per employee.

Especially since that $3k bakes in an 80% margin. It's about $600 per year if you DIY at scale - which is about $50 per month - but at the $3k price, hardly anyone is going to.

In the West old-age dependency ratio (retirees per working-age adult) is climbing roughly 0.5 to 0.7 percentage points per year.

We've got to get 0.7% more productive for employees to keep the same quality of life (unless retirees get screwed, and since they vote and make up a huge portion of the voting block, I wouldn't count on that happening).

Further, more and more of the population has to transition into into elder care.

Unless we hit 3%+ GDP growth, us workers are probably going to see declines in quality of life (and we're probably not going to get those levels of growth)...

> A clear example is Google. They can easily give all compute to Deepmind, yet majority is allocated to be sold at market rate.

Google is in the business of buying compute and renting it out. To the extent that their internal use reduces revenues from that business, there is an opportunity cost.

Anthropic is not in that business.

It depends on your assumptions. When Google is in "space crunch" mode, there are opportunity costs. Otherwise, there aren't, because you could do both.

You could also look at the opportunity cost of not letting Deepmind do quite as much research. How much is additional research worth on the margin? There will be diminishing returns.

They also offer $300,000 in compute spend (allegedly) for $200 a month to anyone who isn't employed by a large corporation so their pricing should be taken with a grain of salt.

> Anthropic is showing that to operate at Anthropic level, you need $300,000 compute spend per employee

You have confused necessary and sufficient.

> Also, Anthropic is showing that to operate at Anthropic level, you need $300,000 compute spend per employee

There are a bunch of open source harnesses that are competitive with CC and they aren't using anywhere near that many tokens to do it.

So every business should measure any client fungible resource that way? Should a bank put a revenue number to any capital held in excess of regulatory requirements, for example?

There is a huge difference between Anthropic and Google dog-fooding: Anthropic does not own or build data centers, they rent (as far as all the reporting on this I've read). Anthropic employees dog-fooding with Claude tools isn't "internal", its most likely being run on external AI data center compute, which they have to pay for, there's just no margin on it. It might even be run out of Google's data centers.

> So, every compute Deepmind and Googlers get is lost revenue opportunity and must be measured as such

Maybe, but it also reduces supply that can drive up prices

Is there any reason to believe that if this computer wasn’t used by an anthropic employee that it would be sold at retail price? That would imply that Anthropic’s computer is 100% utilized at all times, with no slack - something highly unlikely.

It depends on if Anthropic make more money on their internal spend on tokens than selling them externally. I strongly guess they do.

Not really- since they have an internal view of low and high usage times of the day, they can optimize differently.

Even within a single moment, if there is capacity for an internal request, just send it, if market traffic is currently at 100%, don't.

If it were opportunity cost, that would imply that Anthropic can't sell as many tokens as people want to buy. But as far as I can tell, there aren't any "token shortages," at least at API prices. Or is there a maximum per-customer limit that I'm not aware of?

By 'operate at Anthropic level', you mean terrible reliability and availability, and terrible efficiency right?

aka Cobblers children have no shoes. Anthropic profit less by selling it.

> No. This is opportunity cost.

This is NOT the definition of opportunity cost. Please do not throw in random terms you don't understand. Opportunity cost is the value of the next best alternative you give up whenever you make a choice. WTF does it have to do with mis-classifying an expense?

[dead]

My understanding is most use a cost + figure and not retail. Do you know of any that use retail?

What's is the 'retail cost'? Because nobody (except total idiots) is actually paying their published API pricing.

Not an apt comparison. You are conflating the opex of the company with taxable benefits.

If what you said was how taxation worked, a hand tool manufactuting company giving hammers they make for $1 and retailing for $2 to workers building a shed on their property would be increasing the workers' income tax bill by $2. Of course, in reality the workers get no income tax bill on the hammer given to them for work and the company can get a $1 tax writeoff from the opex of making the hammer.

IRS rules should never be used as an example of how accounting "should" work. They're full of politics and the implications of the rules on tax avoidance.

Suppose a company could transfer an asset to an employee and have its value set as the employer's cost. A company could make a bunch of volatile investments and see which ones pay off. Then the ones that go south get sold back into the market as a tax loss and the ones that do well get transferred as compensation to employees at the purchase price instead of the current value, reducing the tax liability of both the employer (no taxable gain) and the employee (less taxable income). What would happen if any employer could do that with any employee and any asset?

Conversely, there is a separate carve out for "employee discounts", which is essentially the employer offering its employees its own products for something in the neighborhood of its own cost. Why? It's not in any way a principled accounting distinction, it's because it's harder to use for tax avoidance at scale, because then a soap company can give its employees a discount on soap, but people only need a finite amount of soap and then the soap company can't use it for cars and real estate and stocks.

Your AI token bill isn't a "benefit", it's just an expense, just like all the other software subscriptions your work pays for.

Not true. Azure has a very different internal pricing. You can often get a glimpse of it if you have a.. particularly enterprising TAM. What happens sometimes (Like now when compute/GPUs are in high demand) is finance department would calculate the opportunity cost on allocating those resources internally vs selling them externally. The calculation isn't even always straight forward. What is the opportunity cost of using compute for internal CI or company operations vs selling them externally? It's not a straightforward equation and you would have to adjust the scale often depending on how clogged your internal processes get.

The extremely discounted internal cost promote waste, so there is always a room for improving efficiency, but that too has a cost.

>means you are now paying more for AI than you are employees.

Yea, isn't the entire point of RSI to replace your employees altogether? So you'd spend an infinite amount more on AI than employees in that theoretical.

Like, if you were in an energy generation business spending way more on fuel and capital expenditures is way better than having zillions of employees earning checks , it would be a sign of efficiency.

Anthropic's use of AI in no way translates or represents any other companies' use of AI, so your apparent extrapolation makes no sense.

I'm personally really not impressed by their software quality, at least we know from their experience that infinite tokens at the best model available still doesn't replace good engineering.

>>If I was an Anthropic employee expected to dog-food the product…

>I wonder how much dog shit has crept into their codebase by this point.

You'd think they'd know not to shit where they eat… ?

A while ago the Claude code source code was leaked. It was very revealing.

From what I remember they had a large regex to match “bad words”

Rather than using their AI to simply scan messages to flag.

True. I was reacting to the article mentioning that April was when the usage exceeded salaries. Mythos was released in restricted preview through Glasswing in early April, and I presume was available internally for at least a few weeks before that, which helped tip the numbers.

> Now spend 0.5x their salary on AI, and they become 5x productive compared to no AI. > > Now spend 1.1x their salary on AI, and they become 20x productive compared to no AI.

This is what I am getting at. If this were true - and I've yet to see evidence it is, despite some anecdotal evidence (organizationally, IME, it's about 2-3x for power users, and probably a net loss of productivity in certain areas) - why would their headcount be growing so much still YoY, pretty much doubling every year. If the AI is 10-20xing why such a big jump in headcount? Yes, the numbers are shiny, the growth is apparent, I would just expect with this AI narrative they'd be "doing more with less" as this thing improves every year.

> The AI usage still needs a knowledge worker to direct it in ways that it can't direct itself, so you still need the employees.

This is the story AI sells though, and Anthropic has participated in it heavily. Yet, their interview process requires hard skills and doesn't let you use AI, so clearly, what you're saying is correct, it just doesn't really align in my head with the whole knowledge worker being replaced narrative.

They are 20x productive on the old KPI.

And the product now iterate 2 times faster with 10 times more bugs and customers are pissed.

Looking at you Apple: https://aperocky.com/blog/post.html?slug=apple-watch-sucks

Yes, one can quite easily make quite fantastic numbers fall out of simply applying arithmetic and not dealing with messy propositions like grounding those numbers in any kind of real world outcome.

> The AI usage still needs a knowledge worker to direct it in ways that it can't direct itself

So we're back to square one, and your productivity increase has a ceiling that's much lower than 5x, let alone 20x. There's a limit on how many things one can keep track of, how many code changes one can reason about.

Now spend 1.2x their salary on AI and they become 99999x productive. So why not just go further if we're making up numbers?

Do we think they're not using them for personal projects? It's called "testing." ;)

Yea they used the wrong word and it felt like rage bait. AI tokens you use for your job given by your employer is not compensation. Hell money isn't even compensation in many cases, it all depends on the context. The author needs use AI to help them rework that sentence or open a dictionary

Is that really true? At least at large companies, the components are not usually fungible in my experience. At startups or smaller companies I'm sure it's a lot more flexible.

> I think the author used the wrong word.

True, though that phrase understates the author's problem a bit, as it is surrounded with more wrong-words, indicating it's a wrong-idea rather than a slip of the tongue.

As you note, it's closer to office/travel expenses. Employee computers, licenses for software on those computers, licenses for SaaS stuff, paying for bandwidth, etc.

I fully agree most big tech companies are pretty bloated. But FWIW a lot of my time at SaaS companies, especially in the B2B space, was spend working on features for larger customers that most others would never use or even see. Like, yeah, product X isn't that complex, but $BigCorp wants to use it in their private cloud, or needs it to be single tenant, or needs these audits done, or want their $Gov client to use it. Now you have a ton of work for zero visible changes.

Adobe has a shit ton of product lines, people think of it as just the core Photoshop, Illustrator, etc., but just go look at how much random stuff there is: https://en.wikipedia.org/wiki/Adobe_Inc.#Products

That's in addition to running the big SaaS offering of the creative cloud and all of the other SaaS's (behance, adobe express, adobe stock, etc.).

All of those include software engineers, SRE, support staff, PMs, etc.. Then there's the massive amount of sales staff, go to market, etc.

There's also a lot of R&D and domain experts, stuff like Adobe Firefly? That was spun up in like a year apparently, probably continuing existing in-house research.

It’s true employees at the big AI firms are living in the future, but since this disclosure is in marketing materials to sell their stock to investors, it’s important to note that almost all the money in personal computing was made in mobile which didn’t use any of these ideas, and in desktop computing the money was made by Microsoft who treated the GUI as ancillary and competed on distribution.

There's unfortunately a lot of emotions and cope around this so you will be downvoted. There was a recent viral news article implying that Anthropic had lost 80B in a single quarter, this was really because of increased valuations. But a lot still believe this is the case and Anthropic will continue to have this 80B loss..

The reality is that they are profitable in the normal sense

> Friction is good.

The nameless exec said that to me the last time we met, roughly a week before they were pushed out; precisely for that belief. (And at first I suspected you were the exec.)

And yes, the product that I worked on did have a ~600 ticket deep backlog, and plowing through it wouldn't have made the product better. At the time, the product was in a steady growth phase, where addressing customer pain points was just as important as building features.

Where the exec goofed (by jumping on the mobile bandwagon) was misunderstanding disruption, market needs, and how mobile would effect us. Ultimately, we were a "bolt-on" accessory, and the incumbents in our industry slowly pushed us out until our niche, (which had nothing to do with mobile) was our core differentiating feature.

Basically, the issue was allocation of resources. Too much were put into mobile, not enough into building features where we could compete against the products we were "bolting on to," and not enough into addressing customer pain points. The "friction is good" approach also severely hurt us, because too much time was wasted haggling instead of doing. (I specifically told the exec, the last time we met, it felt like he was running the air conditioner and heater at the same time.)

This exec is making a similar mistake by basically giving a small team unlimited tokens, instead of understanding how other players in the industry tackle these same problems with AI. It's not that their overall idea is bad, it's that they are probably starving the rest of the business on an unproven experiment / poorly chosen risk.

Are a majority of Anthropic developers working on SOTA models and RSI? I would have guessed not.

"ohhh, la-di-dah, this guy's got tens in front of his two nines instead of just 9.9" - github, probably.

to spell it out: the implicit claim is "ai companies think ai is a scam, as evidenced by them using humans instead of ai", and I believe the huge internal ai use is evidence to the contrary

they're using ai instead of employing more people, how is that not exactly the same minus a completely morale-destroying marketing stunt

both of those companies combined are smaller than the number of people microsoft is trying to buy out right now

[dead]

10x in three years for a "trillion dollar" startup is nothing

> I will keep assuming any news coming from AI companies are a type of corporate propaganda

That's just reverse naivity.

Recursive self-improvement is just around the corner. Any day now they'll be laying off all their employees as their god-like AI makes investors trillions of dollars. /s

Retail has shown no indication they won't happily foot the bill.