The AI lifestyle subsidy is going to end

Summary

Or, why your digital experiences are about to get worse.Whether you’re enthusiastically generating or reluctantly dismissing another pop-up for a useless chatbot, right now is the best it’s ever going to be. Oh, the technology is going to get better. But what about your experience as a user?We lose money on every sale, but we make it up in volumeIf you were alive in the bygone era of 2022, you might remember Derek Thompson writing about The End of the Millennial Lifestyle Subsidy:…if you woke up on a Casper mattress, worked out with a Peloton, Ubered to a WeWork, ordered on DoorDash for lunch, took a Lyft home, and ordered dinner through Postmates only to realize your partner had already started on a Blue Apron meal, your household had, in one day, interacted with eight unprofitable companies that collectively lost about $15 billion in one year.Derek Thompson via The Atlantic: The End of the Millennial Lifestyle SubsidyThe lifestyle subsidy was a great deal for consumers. Venture capital and zero interest-rate policy supplied a ton of money for any startup that could demonstrate strong growth - even if they were growing by selling customers $20 of services for $10. “We lose money on every sale, but we make it up on volume” was not just a surprisingly-old joke (first recorded in 1833!), but the real pitch to investors. Is it any different this time around? Interest rates aren’t what they used to be, but investors are still scared of missing out on the next big thing. That investor money is going straight into subsidizing the costs of LLM-based products. Today, dedicated groups are actively farming free trial accounts from AI startups and using them to resell access to Anthropic and OpenAI APIs. (Hopefully those startups realize, instead of happily watching their signup number go up). But besides unit economics, consumer AI applications present a new opportunity to control the way that people discover things.Search engines and social media aren’t as good as they used ...