Decoder with Nilay Patel
00:12:37 · Joey Brookhart
[00:12:37] S4: I agree. I think long term and we've even said this like internally, they want to increase actually the percentage of training if you believe you're building digital God or going towards AGI. And as long as you have the gross margins 85% plus on inference to do so, you can. Think they've grown faster, you know, obviously a lot faster than they thought, and they didn't expect to be at 11% non GAAP EBIT margins. Yeah, I think they'd love to be closer to zero or even below that if they could get that compute and allocate it towards training and continue to see these compute efficiencies. And I think they've messaged that too to investors in the roadshow that, hey, you can look at this S1 and just the curve of profitability over the last few years and how little cash they burned to get to this point. And you can say, you know, hey this is a good business model but we're going towards HEI, don't expect these margin, the margin leverage we're seeing to continue to this level, even though we can, long term margins can be quite a bit higher.
00:13:32 · Nilay Patel, Joey Brookhart
[00:13:32] S2: There's some real shades of Amazon in there, Jeff Bezos famously telling investors he wasn't going make money until he can make a lot of money. Obviously Amazon and Anthropic have a lot of back and forth. Maybe there's some family resemblance there. But I'm curious, there's a point of model capability that would allow you to go into more verticals than just coding. Right? We we might be at it now. Right? The the idea of capability overhang exists. The idea that the models we have today could go and take over bio research. They're taking over mathematics today. Like there's a point in which the smartest business decision is to stop training and to just sell your profitable model into more and more companies. Anthropic as a public company will face that pressure. Do you think they're they're organized or structured to to fend it off? [00:14:17] S4: Yeah, think they're structured well. Think with something like the voting stock in in areas like that, they definitely are. We've seen this in tech before and even like, you know, publicly, you know, when Zuckerberg has made these decisions before, you know, to invest heavily. I just want to point [00:14:31] S2: out, didn't always pay off. [00:14:32] S4: Yeah, did not always pay off. I think [00:14:34] S2: and I technically are in the metaverse right now. Yeah. In some definition.
00:14:34 · Nilay Patel, Joey Brookhart
[00:14:34] S2: and I technically are in the metaverse right now. Yeah. In some definition. [00:14:40] S4: Right. But I think that's something, and there's an interesting, you know, number in the S1 that 80% of revenue in the last six or last three months comes from models released in the last six months. So then you say, okay, 20% of the models are like OPUS, you know, 4.5 in earlier versions. I think one thing going forward is you always need to be if you're a frontier model company, you always need to be at the frontier. Wait, can I ask a really [00:15:03] S2: dumb question about that? Yeah. Why? Like this is I think the heart of my sort of curiosity about the industry right now is if you enabled some bleeding edge technology that could revolutionize the entire world. At some point, the most profitable thing to do is to just go play it out in all the different verticals, right? It is not to go make the next one and it's actually run efficient model in legal services and medicine and wherever else that there hasn't been diffusion of AI yet. And so that this idea that you always have to be at the frontier, that Anthropic always has to be competing with Google and OpenAI and whoever else. I get it right from their self conception. But from a business point of view, an AI enabled business is going to throw out more money and spend more money with me, the AI provider, and that isn't necessarily related to being at the frontier.
00:15:03 · Nilay Patel, Joey Brookhart
[00:15:03] S2: dumb question about that? Yeah. Why? Like this is I think the heart of my sort of curiosity about the industry right now is if you enabled some bleeding edge technology that could revolutionize the entire world. At some point, the most profitable thing to do is to just go play it out in all the different verticals, right? It is not to go make the next one and it's actually run efficient model in legal services and medicine and wherever else that there hasn't been diffusion of AI yet. And so that this idea that you always have to be at the frontier, that Anthropic always has to be competing with Google and OpenAI and whoever else. I get it right from their self conception. But from a business point of view, an AI enabled business is going to throw out more money and spend more money with me, the AI provider, and that isn't necessarily related to being at the frontier. [00:15:55] S4: Yeah, think there's a few portions of that, you know, four new verticals, and this is like very cyber specific, if an adversary is using frontier model, you need to be defending with a frontier model. Things like when we talk to some enterprises, it's not like email summary where I can run that on open source or Sonnet. There are just certain verticals where having mean, if you were in a legal case as a defendant, would you want your lawyer using a non frontier model if the [00:16:23] S2: prosecution Oh, yeah, got was bad news for you about what's going on in the legal market right now. Yeah.
00:16:23 · Nilay Patel, Joey Brookhart
[00:16:23] S2: prosecution Oh, yeah, got was bad news for you about what's going on in the legal market right now. Yeah. [00:16:29] S4: So, you know, there are certain areas, yes, that are more, you know, the competitive dynamics do dictate that. And I, you know, I think from a go forward perspective, we've seen this with like open source too catching up. The demand will be there. I think Dylan says this a lot, like the demand will always be there for frontier intelligence, especially in competitive And there are certain tasks, think as you go towards more labor replacement versus labor augmentation, where that also is the case, you know, at the same time, they are getting more vertical. If you go look at like job postings or what they're hiring for, you know, putting out more of these SKUs in areas, and there's a lot of beta testing going on, like Claude for Financial Services, Claude for Legal. Their cyber program, they're giving away $2.50, or sorry, 25 ks of credits per month for people in their cyber program. So that'll be a huge SKU for them in 'twenty seven. Those verticalized areas and then ones that are specifically where you need to be, know, it's more adversarial, should say, or competitive, are kind of the main reasons why. But I think we can both agree there's areas like email summary and work that definitely doesn't need to happen.
00:17:39 · S0
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