Andrew Maddox

Blog

  • Friday Links (Oct. 3)

  • AI Pricing Trends

    When Disney launched Disney+ in 2020, it came to market with a really low price: $6.99 per month. The strategy was obvious—use a bargain price to quickly build a subscriber base and compete with Netflix.

    It worked. Families eagerly added Disney+ to their lineup of streaming services, drawn by its deep library of shows and movies. But as the platform grew, investors started pushing Disney to make the service profitable. Over the next few years, Disney steadily raised prices. Today, the ad-free tier costs nearly three times what it did at launch.

    This story isn’t just about streaming. It’s a preview of what’s coming with AI services.

    ⸻

    The $20 Benchmark for AI

    When OpenAI launched ChatGPT Plus at $20 a month, it wasn’t the product of intricate economic modeling. Instead, it reflected an attempt to recoup some of the enormous costs behind the scenes—training models, running massive server farms, and paying world-class researchers.

    That $20 price point quickly became the de facto benchmark for consumer-facing AI tools, with Anthropic and others adopting similar rates.

    But OpenAI has been clear that its ambitions go far beyond the current offering. Its Stargate initiative involves building massive infrastructure, partnering globally, and spending billions on data centers. At some point, investor money won’t be enough—they’ll need sustainable revenue.

    And just like Disney, the path is clear: grow the subscriber base, then gradually raise prices once users view the product as indispensable.

    ⸻

    The Coming Price Climb

    Right now, $20 a month feels reasonable. But look ahead 5–10 years. As AI capabilities expand, it’s easy to imagine prices climbing to $50, $60, or even $100 per month.

    For individual consumers, that may be tough to swallow. A household with multiple subscriptions could find itself spending several hundred dollars a month on AI tools.

    For businesses, however, the math looks different. If AI can make an employee just 10% more productive, the return on investment is obvious. An employee earning $60,000 annually who produces the equivalent of $66,000 in value thanks to AI easily justifies a $100 subscription. For programmers or knowledge workers achieving productivity gains of 50% or more, companies might begrudgingly pay hundreds—even thousands—per employee, per month.

    The economics are compelling, and the pressure to raise prices is certain.

    ⸻

    AI-Adjacent Tools Will Follow

    This dynamic won’t be limited to large language models. AI-adjacent tools—platforms like Jira or Siteimprove—are racing to integrate AI features into their products. The added capabilities will deepen customer reliance. But once the early adoption phase passes, I expect these vendors to raise prices as well.

    It’s the same playbook: demonstrate new value, increase lock-in, then adjust pricing upward.

    ⸻

    The Staffing Equation

    All of this has implications beyond budgets. If AI makes employees 50% more efficient, organizations will rethink staffing structures. Efficiency gains don’t automatically translate into cost savings unless roles are consolidated or organizations grow.

    Take three departments, each with a similar role. If AI tools boost each person’s productivity by 50%, the organization suddenly has capacity for 4.5 units of work when only three are needed. The logical response is to reduce headcount—perhaps to two positions covering all three departments. But that requires some degree of centralization to realize these gains. Better options include company growth or redeploying personnel in areas of need or opportunity. There will be disruption of the workforce, but it doesn’t have to lead to layoffs.

    ⸻

    Planning for the Future

    The lesson from Disney+ is clear: early low prices are temporary. AI services are following the same trajectory, and organizations should prepare now.

    • Expect rising subscription costs—both for core AI platforms and for AI-enhanced tools.
    • Budget for increases of 50% or more annually over the next few years.
    • Plan staffing structures to capture the efficiency gains AI makes possible. I’m sure companies will prefer growth and redeployment, but that’s not always assured.

    AI will reshape productivity in profound ways. But as with streaming, the honeymoon pricing phase won’t last forever.

  • Friday Links

    • Cloudflare Introduces NET Dollar (Sep. 25, 2025)
      Cloudflare plans to launch NET Dollar, a USD-backed stablecoin, to facilitate instant and secure transactions for AI agents. It will enable microtransactions and rewarding creators, developers, and AI companies for unique content and valuable contributions, ultimately fostering a more open and sustainable internet economy.
    • Simon Willison: GitHub Copilot CLI is now in public preview (Sep 25, 2025)
      With options for GitHub Models, Claude Sonnet 4, or GPT-5, the tool integrates with existing GitHub Copilot accounts for billing.
    • Simon Willison: gpt-5 and gpt-5-mini rate limit updates (Sep 12, 2025)
      OpenAI increased rate limits for GPT-5 and GPT-5-mini across various usage tiers, allowing for more tokens per minute, putting  OpenAI ahead of Anthropic but lagging Gemini.
    • European Digital Rights (EDRi): Chat Control: What is actually going on? (Sep 24, 2025)
      A contentious EU proposal dubbed “Chat Control,” a draft Child Sexual Abuse (CSA) Regulation, would mandate scanning private messages—even in end-to-end encrypted services—using AI filters. Critics argue it amounts to mass surveillance and undermines privacy. The proposal faces legal and political hurdles, including resistance from the EU Parliament and some member states.
    • Google: The Digital Markets Act: time for a reset (Sep 25, 2025)
      Alongside Apple, Google is also advocating for the EU’s DMA to be replaced with something that causes less unintended harm to users and businesses.
    • WSJ: The City Leading China’s Charge to Pull Ahead in AI (Sep 12, 2025)
      Hangzhou, China, is emerging as a key AI hub driven by supportive government policies, established tech companies like Alibaba, the new DeepSeek model, and a growing pool of talent. This transformation highlights China’s ambition to lead in AI technology development.
    • Ars Technica: Apple demands EU repeal the Digital Markets Act (Sep 25, 2025)
      Aside from the fact that the article title is an absurd overstatement, the core idea is true: Apple is lobbying for the EU’s DMA to be scrapped and replaced, arguing it has made it too hard to do business and innovate in Europe.
    • WSJ: AI Agents Are Getting Ready to Handle Your Whole Financial Life (Sep 17, 2025)
      As usual, concerns about risks and regulations exist, but financial institutions are developing AI tools that can analyze portfolios, execute trades, and provide financial advice, potentially democratizing access to financial expertise.

  • Thursday Links

  • Wednesday AI Links

  • Tuesday AI Links

    • Sam Altman: Abundant Intelligence (Sep 23, 2025)
      Sam Altman imagines a future with virtually unlimited computing power, unlocking AI potential to solve big problems without having to prioritize. While I’m in favor of abundance, generally, Altman’s overly effusive take on technology seems more inspirational than grounded in reality.
    • NY Times: Why A.I. Should Make Parents Rethink Posting Photos of Their Children Online (Aug 11, 2025)
      AI apps that generate fake nudes are making “sharenting” more dangerous, as anyone can easily create and distribute nonconsensual images of children using photos found online. Perhaps we need to go back to 2×3 photos in our wallets. Good grief. 
    • WSJ: Farmers in India Are Tracking Monsoon Season With the Help of AI (Sep 15, 2025)
      AI is enabling more granular and accessible weather forecasting, as demonstrated by a project in India where AI models from Google and the European Center for Medium-Range Weather Forecasts provided specific monsoon predictions to millions of farmers.
    • Interconnected: What I think about when I think about Claude Code (Sep 12, 2025)
      “You just loop one minute composing a thoughtful paragraph to the agent, and three minutes waiting, gazing out the window contemplating the gentle breeze on the leaves, the distant hum of traffic, the slow steady unrelenting approach of that which comes for us all.”
    • NY Times: How People Are Using ChatGPT for Financial Advice (Sep 13, 2025)
      “Ms. Donohue said she wasn’t surprised by the advice the chatbot offered, but she was pleased by how quickly — within seconds — it generated a tailored budget for her.”  Like many tasks, AI tools remove the drudgery of creating a budget, a net benefit for users. But there’s always the risk of bad information, something folks will need to be aware of.
    • WSJ: Hard Drives Are Making an AI Comeback. Yes, Hard Drives. (Sep 19, 2025)
      AI’s need to store vast amounts of data, including self-generated content, fueling higher demand and rising prices for high-capacity drives.

  • iPhone Air

    Watching Apple’s introduction of the iPhone 17 lineup, I was impressed with the incredible thinness of the Air. This screenshot from the product website really illustrates how compact the design is:

    And yet there’s the camera and the plateau as they called it.

    The technological world continues to get faster and smaller. More processing speed using less power in physically smaller chips. But cameras and lenses continue to be governed by the laws of physics and the realities light.

    It’s a helpful reminder that AI tools will get better, cheaper, and faster, but their contributions to the physical world will continue to lag.

    AI chatbots — check.
    AI assisted coding — check.

    AI designed, build and operated factories — not likely by 2027, even if some folks dream of that future.

  • Un-Social Media

    This is the bonkers opening of Meta’s response to the FTC’s claim of monopoly status for the company:

    Today, only a fraction of time spent on Meta’s services – 7% on Instagram, 17% on Facebook – involves consuming content from online “friends” (“friend sharing”). A majority of time spent on both apps is watching videos, increasingly short-form videos that are “unconnected” – i.e., not from a friend or followed account – and recommended by AI-powered algorithms Meta developed as a direct competitive response to TikTok’s rise, which stalled Meta’s growth.

    Only 7% of Instagram consumption is social. Facebook’s older audience falls in a still not-so-social figure of 17%.

    Only 12 short years ago, Zuckerberg had a different focus:

    For almost ten years, Facebook has been on a mission to make the world more open and connected.

    Perhaps Meta’s shift reflects the company’s core value: making a profit. Early, it was profitable for Meta as people shared photos and made connections. Now, it’s profitable for the company to show compelling human content (a moniker I greatly dislike) amongst their impressive ad network. I suspect that most of this user generated content will be replaced with AI-generated pieces, a change that will almost certainly make the company even more profitable.

  • Perplexity is using stealth, undeclared crawlers to evade website no-crawl directives

    The Cloudflare Blog: Perplexity is using stealth, undeclared crawlers to evade website no-crawl directives (August 3, 2025)

    Internet utility, Cloudflare, accuses Perplexity of obscuring its browser user agent (the way browsers describe themselves to web servers) in order to skirt firewall and robot rules. CF penalized Perplexity by removing it from the list of verified bots.

    We received complaints from customers who had both disallowed Perplexity crawling activity in their robots.txt files and also created WAF rules to specifically block both of Perplexity’s declared crawlers: PerplexityBot and Perplexity-User. 

    Cloudflare then ran tests with new, secret websites to confirm this sneaky behavior.

    To Perplexity’s credit, I don’t think many people using the web would expect to be blocked from visiting a website, so perhaps there is some gray area here. Is a Perplexity truly a robot or is it fundamentally controlled by a human?

    I don’t like that Perplexity is being sneaky, but I also think these new AI tools push the envelope of how the web is glued together. Technology and standards will have to evolve quickly.

  • America’s largest power grid is struggling to meet demand from AI

    Reuters: America’s largest power grid is struggling to meet demand from AI (July 8, 2025)

    PJM Interconnection, America’s largest power grid, faces strain due to surging data center and AI chatbot power demands outpacing new plant construction, leading to projected electricity bill increases and internal turmoil.

    New projects totaling about 46 gigawatts – enough capacity to power 40 million homes – have been cleared in recent years, “but are not getting built because of local opposition, supply chain backups or financing issues that have nothing to do with PJM,” Shields said.

    While new projects have been approved, delays, state-level energy policies, and other issues prevent them from being built quickly enough to meet the skyrocketing demand.

    PJM has lost more than 5.6 net gigawatts in the last decade as power plants shut faster than new ones enter service, according to a PJM presentation filed with regulators this year. PJM added about 5 gigawatts of power-generating capacity in 2024, fewer than smaller grids in California and Texas.

    In 2022, PJM stopped processing new applications for power plant connections after it was overloaded with more than 2,000 requests from renewable power projects, each of which required engineering studies before they could connect to the grid. PJM says its interconnection queue has not led to the supply shortfall.

    PJM also moved to fast-track connections of 51 power projects to its system, but many of those are still expected to take until 2030 or 2031 to come online.

    Delayed auctions and interconnection processes have exacerbated the situation, prompting criticism from stakeholders like Pennsylvania’s governor who is considering leaving the grid if costs aren’t lowered.