Run the Numbers
00:00:00 · CJ Gustafson, Ali Hussain
[00:00:00] S0: The billing boys are back. We're gonna talk about pricing and packaging today in the world of AI. [00:00:05] S1: The average venture backed company now is spending anywhere from 20 to 50% in some cases, their overall human capital costs on AI. [00:00:16] S0: There's some dude at a Kearny Street dive bar right now screaming to his friends, I invented the credit. And they're like, sure you did, John. [00:00:23] S1: I think the most interesting thing this year has been everyone assumes these are like natives that are passing on AI costs. The biggest growth we've seen here is the legacy companies. [00:00:35] S0: I think everybody is using usage based pricing now. Even the guy who has texted us and offered to shovel our driveway this winter, Ali, he's using usage based pricing now. I love it. Alright. We'll get into the usage, the tiers, the credits, all that good stuff. But there is one question that I feel like not a lot of people are asking. Who's actually paying for this stuff? Do companies absorb AI costs, or do they pass them through? Is this thing on? Yesterday's price is not today's price.
00:01:16 · Ali Hussain, CJ Gustafson
[00:01:16] S1: CJ, I was at a dinner with an economist a couple weeks ago in San Francisco, and he said that the biggest question in the market right now is what happens when the broader economy foots the bill. The reality of the situation is the last two years have been maybe the greatest subsidy in history by the venture community that have given billions and billions, if not trillions of dollars, to builders that is now only translating itself to the actual pricing and costs to the rest of the economy. Let me just try to size this for you. The average venture backed company now is spending anywhere from 20 to 50%, in some cases, their overall human capital costs on AI. The general US economy, which has historically spent about three to 4% of their human capital spend on technology or software, is still at about three to 4% of costs, putting in some for inflation, but that also has come out in human capital costs. And so we're in this really delicate moment where the assumption has been that the subsidy, which has been mostly a drawdown of costs and who's been paying for it or who's been footing the bill, which is venture backed or highly subsidized organizations that are now having to wake up and make this more sustainable for the rest of the economy. I think there's no question that at some point, everyone in some way has to foot the bill. Nano man, are we at a point of transition right now? [00:02:53] S0: I think me and you are around the same age. Do you remember when Uber and Lyft first came out and were widely available?
00:02:53 · CJ Gustafson, Ali Hussain
[00:02:53] S0: I think me and you are around the same age. Do you remember when Uber and Lyft first came out and were widely available? [00:02:58] S1: When I first moved to New York, CJ, Uber had a $3.99 pass, some small fee a month, and any ride outside of the airport is $3.99, and I used the heck out of it. It was basically for a buck 50 or $2 more than a train, I could go anywhere. And even for the airport, for those listening, you just go to National or Avis, and it's $3.99. And you just get on the bus and you go there. And it was a it was a wild time. I think that's what you're talking about. [00:03:26] S0: So in 2012, I remember during the winter of the scene... My senior year in college, there was a cab stand that was really far away, and I was going to school in Boston. It was like 12 degrees, and it was a revelation that we could call to go to the bars on our phone and it would come and pick us up and it blew our minds as college kids who barely had enough for beer money that we could get all the way to, I think we were going to like Brighton for $12 but if we took the cab where we had to stand in the cold, it's going to be 25 to $30. And I bring all of this up because that is the last time period I remember where things were so heavily subsidized by the VCs. And I feel like there are many analogs and parallels to where we are now with the cost we're seeing Because if you get a bill from Anthropic for $60,000, I bet you dollars to donuts, it's actually closer to a 150 or $200,000 of actual services you're getting.
00:04:20 · Ali Hussain
[00:04:20] S1: 100%. And, like, and for us, most of us are thinking about this just as the Anthropic bill or the OpenAI bill, but there are probably 30 other tools you buy that still feel like the past. They're a seat. They're a flat fee. They're a onetime product. Have been building AI on top, and most of them have been absorbing that cost. And this year has been really the changing moment where I think that drastically shifts, and we're seeing it in our Tabs data. This time last year, less than 10% of our users were passing on tokens or AI cost to their customer. As of August of this year, in 2026, we're at 33%. And by end of year, just based on the trajectory, we think it's gonna be more than half. And so something has already started to shift, and the folks who, like you and me, were paying $3.99 for Uber, they're now about to maybe transition to Uber share or x costs. And it's still being subsidized in that Uber Black type framework, but it's about to get a little bit more real.
00:05:28 · CJ Gustafson
[00:05:28] S0: Well, then I remember, you know, I'm working for PWC a couple years later, and I'm flying around the country a lot. I would get out at the airport, and it actually came to a point where I started to just wait in the cab line because it became more expensive to take an Uber. So you're saying companies are passing this through. This is gonna come across as a dumb question, but isn't there supply and demand here? Like, how are companies getting away with that? Are... If they pass it on, are are buyers just gonna go to the cheapest vendor if if some of this inference becomes a commodity?
00:06:00 · Ali Hussain, CJ Gustafson
[00:06:00] S1: I think at the actual inference level, for sure, like, we're gonna see some of that, and I think we're already seeing it. Like, some of my most clod heavy users are now moving back to Codex, or my favorite one, like, we wanna call yesterday where someone just said, look. You know what? Gemini is good enough, and I bundle it with my g Suite, and it's the cheapest. On the other hand, though, when it comes to specific tooling, whether it's around how you do legal or how you do marketing, there's still a huge opportunity for some of the best vendors out there to make their products better through tokens or inference, but then provide service on top that you must still buy. I just think the way you've bought them in the past, like software and seats, must evolve, because they are fueling that with real inference costs. And it's not sustainable for them to shield that cogs, as they've gone 70, 80% gross margins to a... Like we've heard, there are many right now sitting at negative 20 to negative 50% gross margins. I just sustainable. And so I don't think that's a commodity. I think you'll still need it from these providers, but they're gonna have to... It's not that their costs are just gonna go down. They're gonna have to figure out a way to pass that through, and we're certainly seeing a huge surge in that this year. [00:07:17] S0: With that context, I do wanna touch on the pricing and packaging. What are the most common flavors you're seeing companies sell their products in?