Ed Zitron on AI companies having deceived users w/subsidized rates they can't afford: There's no way to right this ship

[highplainsdem]

DUer erronis posted about this a couple of days ago - https://www.democraticunderground.com/100221137092 - but it didn't get the attention it deserved then.

Ed's newsletter:

The Subprime AI Crisis Is Here
https://www.wheresyoured.at/the-subprime-ai-crisis-is-here/

Anthropic and OpenAI are in particular trouble. With one of the clearest signs Anthropic throttling Claude usage recently: https://www.democraticunderground.com/100221129029

This entire very long newsletter from Ed is well worth reading, including for the first section about subprime mortgages....but if you want to skip that and get to the start of the section specifically on AI, search Ed's text for the word deceitfully.

I want to quote from part of this section near the end:

-snip-

Anthropic and OpenAI (and Other AI Startups) Have Trained Their Users To Use Their Unsustainable Products In Unsustainable Ways, And Their Users Are Intolerant of Rate Limits and Price Increases

-snip-

To be clear, no AI company should have ever sold a monthly subscription, as there was never a point at which the economics made sense. Yet had these companies actually charged their real costs, nobody would have bothered with AI, because even with these highly-subsidized subscriptions, AI still hasn’t delivered meaningful productivity benefits, other than a legion of people who email me saying “it’s changed my life as a programmer!” without explaining to me what that means or why it matters or what the actual result is at the end.

-snip-

The very foundation of every AI startup is economically broken. The majority of them sell some sort of “deep research” report feature that costs several dollars to generate at a time, and many sell some form of expensive coding or “computer use” product, tool-based web search features, and many other products that exist to keep a user engaged while burning tokens, all without explaining to the user “yeah, we’re spending way more than we make off of you, this is an introductory rate.”

This intentional, blatant and industry-wide deception set the terms for the Subprime AI Crisis. By selling AI services at $20 or $50 or even $200-a-month, AI startups and labs created the terms for their own destruction, with users trained for years to expect relatively unlimited access sold at a flat rate for a service powered by Large Language Models that burn tokens at arbitrary rates based on their inference of the user’s prompt, making costs near-impossible to moderate.

-snip-

I’m going to be as blunt as possible: every bit of AI demand — and barely $65 billion of it existed in 2025 — that exists only exists due to subsidies, and if these companies were to charge a sustainable rate, said demand would evaporate.

-snip-

"There is no righting this ship" - Ed's words that I quoted in the thread title start the paragraph immediately following the one above. No price charged to customers to eliminate these losses will be acceptable to those customers. There's no technological breakthrough coming in the near future that will reduce costs drastically.

It's a dishonest, unsustainable industry.

Zitron says the end of the AI bubble won't be as bad as the financial crisis of 2008. It "would be cataclysmic to venture capitalists, bring about the end of the hypergrowth era for the Magnificent Seven, and may very well kill Oracle" but that's still not as bad as 2008 was.

But there's going to be a reckoning, which the AI industry brought on itself.

[RockRaven]

1. If you like your news/commentary in audio, Ed Zitron also has a podcast, "Better Offline"

[highplainsdem]

3. Thanks! There's also an r/BetterOffline subreddit where Ed posts as ezitron.

https://www.reddit.com/r/BetterOffline/

[BlueNProud]

2. Much love to Ed!

[highplainsdem]

4. He's been doing brilliant analysis of the AI industry.

[BlueNProud]

6. Yes indeed

[EdmondDantes_]

5. That's kind of the standard business practice now

Run at a loss on venture capital, corner the market, raise prices or get bought. Uber/Lyft, Netflix, LinkedIn etc.

Blitzscaling. Not only is it a poor form to name things after nazis, the tactic didn't win the war.

The allure of billions for founders at start ups is strong and with enough equity, even if the business fails, you can hit it big. See Adam Neumann.

[hunter]

7. They'll make a quick pivot to mass government surveillance...

... and our tax dollars will keep the data centers humming.

Big Brother will be omnipresent, continuously manipulating society in subtle and not-so-subtle ways.

That's another good reason to oppose the financing and construction of these giant data centers.