Race to the bottom

And I want us to get to talking about some of these features.

The whole third party lead situation is dying because it's a race to the bottom, right? So you're pouring the money in.

It's a race to the bottom.

However, when you have that connection on the social media and you stay connected with your staff and your staff stays connected with their customers and they see them as they're growing throughout their journey, when it's time for them to buy a car, you've already built all the equity.

And the relationship, because they've seen you every day.

You know what I'm saying? So those are the ones that, and what does the top performer do when they leave? It affects your bottom line because business goes backwards even further faster.

You know what I'm

saying? But what do you think, guys? What do you think about that whole model in general? Like, the kind of the race to the bottom, the cheapest car to the masses...

He said the honeymoon phase of being tied to one model maker is gone.

The head of another software company called Retool put it even more simply, "We want to find the cheapest models." So what does that mean? We're back to a race to the bottom.

So remember the test.

A customer who can leave in an afternoon without paying anything is not a loyal customer.

In the summer of twenty twenty-six, OpenAI released a new family of models built to be cheaper to run, and shortly afterward, it cut the price of them by nearly eighty percent and another by nearly twenty.

In late September, Anthropic answered with its own new family of cheap options, and the two things it promoted most were lower cost and better efficiency.

Now that's what a race to the bottom looks like.

You go this cheap, so I go that cheap, back and forth until no one's making any money.

Um, and then all of a sudden it was like, "Hey, well, now we're competing on leverage.

Now we're competing on price." And next thing you know, it's just a race to the bottom.

[laughs] And whoever had the- The cheapest amount of money would win in order to get market share and market share and market share.

And who the heck knows? But if you look on that balance sheet, I just can't imagine those were all that profitable towards the end.

It's just like what we're starting to see happen now with the housing market and the car market.

Once supply of something becomes abundant, in this case we're talking about short-term rentals, well then everybody is sort of in a race to the bottom.

Everybody has to start lowering their nightly rates because the bookings start to go down and Only the best properties with the best locations can still command the highest prices while everybody else is in the race to the bottom to just lower the price as much as they need to in order to keep occupancy going.

And by the way, it is super busy over here today.

It is a heat wave in the Bay Area.

And, and this is something even, like, recently that I've kinda heard about.

Like, I was at this, uh, event for, for 3PLs and, and a lot of the conversation was about, like, how not to get stuck into this race to the bottom, basically, on price.

Like, how do we actually...

You know, every 3PL is like, "Oh, well, we're, uh, we're-- we have partners.

And I mentioned before that viability is going to continue to be the sort of bogeyman and probably the main bogeyman now that other arguments are starting to be removed on whether or not we can develop or not in this country.

But yeah, one of the subplots here or the supposition is that with a lot of the bigger tier ones now, does their pursuit of better margin opportunity mean that they're going to get much more selective about the kinds of projects they take on? And therefore what's left to the others is maybe going to be the sort of race to the bottom kind of stuff.

I've heard stories in recent weeks, again, without which to break confidences again, of even frameworks bidding against each other for work and it becoming kind of more and more cost oriented.

So we're talking about building safety.

We're talking about kind of improvements in terms of output and pace and tempo and training and everything else.

But Yeah, we're still not helping ourselves in that kind of race to the bottom on costs.

So it's a tricky one, mate.

It's a really, really tricky one.

I think their price cuts were because of each other.

I think that they're just, it's a race to the bottom.

That's, that's where the money is, I guess.

Uh, it, like just everyone, yeah, "We'll, we'll cut our prices, lose money, but make it up on volume." And I think they're just doing whatever they can to keep afloat.

It's like much smaller slices of the pie.

So it's just gotta be like the most depressing race to the bottom.

And I kind of wonder, will the Brown brothers be doing this in two or three years or will they just like move on to some other, some other way of monetizing attention, you know?

Yeah, but that was like, there's a really depressing K chart here too, where, you know, like in 2023, they start testing AI content.

They go from like around like 10 to 12 companies at that time to now 25 plus.

So it's like the more that they've used AI, the fewer people, the more publications they've been able to buy up, like publications that are struggling in part because of AI slop and like changes made to Google.

So it just is this like really depressing race to the bottom.

I think that's one of the in your article that really struck me when you were talking to some of the former staff that used to work at some of these websites before it got bought up and sort of slimmed down a lot is that there was seemed like it seemed really depressing.