Erik Bernhardsson: evaluation

Transcript context

…I mean, we focus more on like custom models and custom code. And I think in that space, there's like less competition and I think we can have a pricing markup, right? Like, you know, people will always compare our prices to like, you know, the GPU power they can get elsewhere. And so how big can that markup be? Like it never can be, you know, we can never charge like 10x more, but we can certainly charge a premium. And like, you know, for that reason, like we can have pretty good margins. The LLM space is like the opposite, like the switching cost of LLMs is zero. If all you're doing is like straight up, like at least like open source, right? Like if all you're doing is like, you know, using some, you know, inference endpoint that serves an open source model and, you know, some other provider comes along and like offers a lower price, you're just going to switch, right? So I don't know, to me that reminds me a lot of like all this like 15 minute delivery wars or like, you know, like Uber versus Lyft, you know, and like maybe going back even further, like I think a lot about like sort of, you know, flip side of this is like, it's actually a positive side, which is like, I thought a lot about like fiber optics boom of like 98, 99, like the other day, or like, you know, and also like the overinvestment in GPU today. Like, like, yeah, like, you know, I don't know, like in the end, like, I don't think VCs will have the return they expected, like, you know, in these things, but guess who's going to benefit, like, you know, is the consumers, like someone's like reaping the value of this. And that's, I think an amazing flip side is that, you know, we should be very grateful, the fact that like VCs want to subsidize these things, which is, you know, like you go back to fiber optics, like there was an extreme, like overinvestment in fiber optics network in like 98. And no one made money who did that. But consumers, you know, got tremendous benefits of all the fiber optics cables that were led, you know, throughout the country in the decades after. I feel something similar about like GPUs today. And also like specifically looking like more narrowly at like LLM in France market, like that's great. Like, you know, I'm very happy that, you know, there's a price war. Modal is like not necessarily like participating in that price war, right? Like, I think, you know, it's going to shake out and then someone's going to win and then they're going to raise prices or whatever. Like, we'll see how that works out. But for that reason, like we're not like hyper focused on like serving, you know, just like straight up, like here's an endpoint to an open source model. We think the value in Modal comes from all these, you know, the other use cases, the more custom stuff, like fine tuning and complex, you know, guided output, like type stuff. to an open source model. We think the value in Modal comes from all these, you know, the other use cases, the more custom stuff, like fine tuning and complex, you know, guided output, like type stuff. Or like also like in other, like outside of LLMs, like with more focus, a lot more like image, audio, video stuff, because that's where there's a lot more proprietary models. There's a lot more like custom workflows. And that's where I think, you know, Modal is more, you know, there's a lot of value in software differentiation. I think focusing on developer experience and developer productivity, that's where I think, you know, you can have more of a competitive moat. I'm curious what the difference is going to be now that it's an enterprise. So like with DoorDash, Uber, they're going to charge you more. And like as a customer, like you can decide to not take Uber. But if you're a company building AI features in your product using the subsidized prices, and then, you know, the VC money dries up in a year and like prices go up, it's like, you can't really take the features back without a lot of backlash. But you also cannot really kill your margins by paying the new price. So I don't know what that's going to look like…

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