Comment Re: Hold on to your papers... (Score 1) 116
You're entirely right, but Fixed vs Variable costs are a well understood distinction that OpenAI's bean counters aren't merely glossing over here.
If your up-front investment is $1M, each unit of output sells for $2000, and costs $1900 in operational expenses - Your profit is $100 per unit. Once you sell 10000 units, you've broken even and every additional sale is $100 in pure profit. Presuming you expect to sell significantly more than 10000 units, the initial cost is literally irrelevant over the long term.
For a more physical-manufacturing analogy, consider a modern chip fab costing double-digit billions of dollars to build, just to sell fancy chunks of melted sand for a few hundred bucks each. Yet TSMC is one of the most profitable companies on the planet, with net margins slightly over 50%.
If your up-front investment is $1M, each unit of output sells for $2000, and costs $1900 in operational expenses - Your profit is $100 per unit. Once you sell 10000 units, you've broken even and every additional sale is $100 in pure profit. Presuming you expect to sell significantly more than 10000 units, the initial cost is literally irrelevant over the long term.
For a more physical-manufacturing analogy, consider a modern chip fab costing double-digit billions of dollars to build, just to sell fancy chunks of melted sand for a few hundred bucks each. Yet TSMC is one of the most profitable companies on the planet, with net margins slightly over 50%.