AI: Value, Not Just Cost

Insights from Vishwanath Akuthota

The Untapped Well: Why We Should Pay for AI's Thirst-Quenching Power, Not Just the Digging

Imagine you're wandering through a parched desert. The sun beats down, your throat is dry, and the horizon offers no relief. Suddenly, you stumble upon someone with a well. They aren't just offering you the raw materials – the earth, the tools, the labor it took to dig that well. They're offering you something far more precious in that moment: water.

Now, would you haggle with them about the cost of the shovel, the price of the rope, the sweat on their brow? Or would you focus on the life-saving liquid they hold? In that desperate situation, the value of the water far outweighs the sum of its production costs. You'd likely pay a premium simply for the relief it offers.

This, in essence, is the disconnect we're seeing with AI. Businesses are often fixated on the "cost of digging the well" – the infrastructure, the algorithms, the processing power. They want to pay as close to that base cost as possible. But what they're often overlooking is the incredibly valuable water that AI can provide: the solutions to critical business problems, the efficiency gains, the new avenues for growth.

Think about the Fortune 500 company you mentioned, drowning in late payment penalties due to slow approvals. An AI solution, in this context, is that well in the desert. It offers a way to quench their financial thirst, saving them millions. Yet, the inclination is to only want to pay for the "running cost" of the AI – the equivalent of the ongoing effort to draw water – rather than acknowledging the immense value it brings by preventing those penalties in the first place.

This is where the concepts of price elasticity and risk sharing become crucial. Just as the price of water in the desert can fluctuate based on demand and scarcity, the pricing of AI solutions should reflect the value they deliver. Offering risk-sharing models, like "pay-per-saving" or "gain-sharing," is like the well owner saying, "You only pay me a significant amount if this water truly quenches your thirst and helps you survive." It demonstrates a strong belief in the AI's ability to deliver tangible results.

Sam Altman's approach with ChatGPT and the potential for high-value business agents gets to the heart of this. The $200/month for ChatGPT isn't just about the computational cost of generating text. It's about the value of having a tool that can significantly boost productivity, automate tedious tasks, and provide instant information. The potential $20,000/month business agents, while seemingly exorbitant, could be a bargain if they unlock substantial cost savings or generate significant new revenue streams. The price is tied to the outcome, not just the operational expense.

Ultimately, for AI solutions that go beyond simple, commoditized tasks, the focus needs to shift. We shouldn't be solely concerned with the cost of the "pipes and pumps." Instead, we should recognize and pay for the transformative "water" that AI can deliver – the tangible value, the strategic advantages, and the solutions to pressing challenges. Only then will the true potential of AI be unlocked and vendors be fairly compensated for the oases they create in the often-arid landscape of business operations.