AI Platforms' Subsidy Strategy and the Coming Affordability Crisis
By
ilreb
Summary
The article analyzes how AI platforms have been using a "drug-dealer's algorithm" strategy — massively subsidizing their products to generate overwhelming demand, justifying massive investments, with the expectation that once users are addicted, they will pay vastly higher prices. The author admits being late to recognizing this pattern, noting that early skepticism came from Sequoia Capital. The piece examines the affordability crisis in AI as these platforms begin to shift from free/subsidized models to monetization.
Source
Hacker NewsAI Platforms' Subsidy Strategy and the Coming Affordability Crisisblog.dshr.orgKey quotes
· 3 pulledThe AI platforms were running the drug-dealer's algorithm, 'the first one's free'.
By massively subsidizing the use of their products, they were generating overwhelming demand for them.
They used this demand to justify massive investments, in the hope that, by the time they had to show a return on these investments, the users would be so addicted that they would pay the vastly higher prices needed to generate a return.
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