[gomox]

I can't imagine the hoops an accountant would have to go through to argue training cost is COGS. In the most obvious stick-figures-for-beginners interpretation, as in, "If I had to explain how a P&L statement works to an AI engineer", training is R&D cost and inference cost is COGS.

[drob518]

I wasn’t using COGS in a GAAP sense, but rather as a synonym for unspecified “costs.” My bad. I suppose you would classify training as development and ongoing datacenter and GPU costs as actual GAAP COGS. My point was, if all you focus on is revenue and ignore the costs of creating your business and keeping it running, it’s pretty easy for any business to be “profitable.”

[DenisM]

It’s generally useful to consider unit economy separate from whole company. If your unit economy is negative thing are very bleak. If it’s positive, your chance are going up by a lot - scaling the business amortizes fixed (non-unit) costs, such as admin and R&D, and slightly improves unit margins as well.

However this does not work as well if your fixed (non-unit) cost is growing exponentially. You can’t get out of this unless your user base grows exponentially or the customer value (and price) per user grows exponentially.

I think this is what Altman is saying - this is an unusual situation: unit economy is positive but fixed costs are exploding faster than economy if scale can absorb it.

You can say it’s splitting hair, but insightful perspective often requires teasing things apart.

[gomox]

Got it, it's just an awfully specific term to use as a generic replacement for "cost" when the whole concept of COGS is essentially "not any cost, but specifically this kind" :)

[jgalt212]

there's not a bright line there, though.