For those of us bottom feeding on cheap(er) AI services, we got a shock this week. DeepSeek increase the pricing of their model APIs in some cases by 14x. This means, of course, bills of $5 a month jump to $25, and $25 to $125, with no real change in functionality, just a straight increase. And, this is on the back of the peak time pricing, introduced a few weeks ago too.

Now I am not begrudging DeepSeek an increase their prices. The price was already low and by all accounts they do seem to have been struggling with capacity (and also looking for funding, so more revenue no doubt helps).

Even with the price increase they are still amongst the cheapest in the market.

But, this is happening elsewhere too. X.AI, in May this year, pushed users away from their extremely well priced “Fast” models to Grok 4.3, a 5x increase. It all points to a wider trend around AI pricing… it is going up.

The API economy

In our daily lives, most of us are using AI models now. If nothing more it is a much more efficient way to search for information (is it better or more accurate, that we can argue about another time). However if you are mainly using the browser or app based chat interfaces, with bundled pricing, you may be unaware of the burgeoning economy and infrastructure that is being built underneath. I know I was.

Beneath the surface of AI services is typically a myriad of APIs and API calls. These APIs are simply agreed data exchange formats that service can use to exchange information, to call out to other programmes and services. Some you pay for, some are free, but they are intertwined in modern AI infrastructure.

LLM Model, Web-search, Image creation, Email, Calendar, Weather, Daily Joke of the day… all can be linked to APIs… even the FCA is getting in on the act with the release of an API to access their Handbook.

Each of these have price points, data security considerations and with this complexity comes a requirement for some sort of active management.

• Do I need to be using the most expensive and capable model for simply moving a document?
• Do I use a particular image model to create a visual summary?
• Which gives me more accurate and current, up to date, information when searching?
• What data am I exchanging and where is it going?

Of course, it may be worth paying the price for a premium model, that does all this for you. I feel sure many will, and large providers are adding functionality at pace (eg GrokBot, by SpaceX launched this week… a bit like OpenClaw (now owned by OpenAI)).

However for those of us without oodles of cash to burn (ie many businesses and certainly me!) we will be left managing this complexity. Managing it well can have a dramatic difference to the cost profile (I was able to reduce cost by 80% with some optimisation).

Yet if monthly costs are now going to routinely reach £40 a month (or even £100+… I seem to be spending even more when you add in all AI services) per user, it does feel like the sun is setting on the era of cheap AI… winter is coming and we need to be prepared!

Going Local

So it is at this post we should ask the question… when do we move away from server based models to highly capable local, open source, models on our own, local, server.

These models are competitive, advanced and this is already possible (Ollama is super easy, and easiest, to try if you have not). However I have found without very a high end PC, memory and graphics card, running the most capable models are still slow in comparison to online versions.(ish)… and for higher end services such as web-search, image and video creation, in some cases not possible on my existing (dedicated) hardware.

This is really only a question of processing power, typical consumer and business PCs are just not fast enough. To build or buy, one that is currently costs around £5,000. Pricey, yes… but vs a steeping monthly AI bill… it is getting there for the small user.

I wonder, with the likely price escalation, as firms recover investment costs, if this is a trend will see as people react and adjust.

Nothing new?

I suppose in some ways this is nothing new.

Already in business we use different employees with different skill-sets (and price points) for different tasks. We match the resource to the task to optimise the cost profile, we give them the tools to communicate and measure performance for jobs done well… and we also look at building in-house, locally, vs using third party managed services (or not).

And, this returns to a recurring theme.

Despite all the excitement around new tech and AI, in some ways not much has changed. Much of the toolset we need to manage it we already have…

AI is not making good management, structure and process go away, in many ways it is making it even more important.

Something to think about back in the office this week. Have a good week, everyone.

[A quick event plug. We will be talking about many of these issues, including governance, standards and risks at our live events in Oct/Nov… more info here, come along if you are free -> Event page]

Last week I spent time building the FCA Consumer Duty Lending Simulator, really as a bit of fun to promote our new refresher course around Consumer Duty essentials. Running through the detail, there was obviously plenty to consider around good customer outcomes… but also rally struck me was fair value assessments.

This was because, coincidently, and rather unfortunately for the firm involved, at the time I also received my contract renewal documentation. The letter informed me that my premium (it was insurance related) would go up by 20% this year… so I looking and vs 2023 it had consistently gone, in total by 72%.

Now, I am a year older, we all know about rising costs, but does this really justify the 70% over 3 years?

Insurance of course is notoriously tricky and some of this can be within the hidden or explained away within actuarial calculations of risk… however if am able to get a better price elsewhere this is an indication that the risk has not changed to that extent and whether this really offered Fair Value (this sits squarely in Financial Services).

… and for reference annual average inflation for the period is 7%, even going back to 2020 it was only 30%.

With my renewal rage over, this made me think of a series of discussions from my interview series…. exactly the weakening of the social contract we are seeing play out.

• In the debt advice sector, a breakdown in the contract between employers and employees, with stable employment in exchange for employee loyalty (discussion with Lee Healey and IncomeMax here)
  In the enforcement sector, increasing aggressive behaviour towards field agents, with a belief that obligations for payment of council tax or other contracts never have to be met. (watch for my discussion with Sarah Naylor, at Dukes, coming out soon)
• In the airline industry, where fees for cabin bags are being use to drive revenue, as much as protect the space for others on the plane.
• And in financial services, where premiums can rise by 70% in 3 years.

… and don’t get me started on the size of chocolate biscuit bars!

It feels like we are currently in a downward loop. Even in politics, this is happening. Popularism rising across all parties… resulting in reactions and policies squarely aimed at benefiting one group at the expense of another.

It is all short termism, a scrabbling over dwindling resources, with little balance. I fear the rush to the bottom will continue.

So where do we go from here. Well I think Fair Value offers us a sliver of light.

• Are we offering fair value for our customers, from our products.
• Are we acting in the best interests of our employees to treat them well and provide development.
• And, as customers, are we showing loyalty to firms that provide good service and a quality product at a fair price point.

Now I am not saying we should just give product away, never increase prices, or not complete to increase profitability. There will also still be a need to have difficult conversations and make adjustments in staffing, the world of business cannot stop…

However, I suppose this is an argument for us to be just fair in our approach, to ensure avoid seeing Customers, Employees and Firms as resources that can be exploited. It is trap, that in the long term does not make things better. By winning short term… we could in fact end up dead last.

… with AI, robotics, around the corner, and the potential for even greater societal change, this retaining our humanity, and staying in balance, could be just about to get even more important.

So, my thought for the week… have a good week everyone.

[on fair value… this weeks image is from a trip to the local cricket… £3 a ticket, it was value fair – yes, I got sunburnt!]

Once again the World Cup is over, and I am rattling around the house wondering what to do with myself in the evening. There have been some good matches and certainly plenty of intrigue, together with change. We have had hydration breaks, a new extended 30-minute half-time show and, of course, plenty of discussion about VAR. It certainly felt bigger, louder and more commercial this time around.

But, what struck me, was not just the increased commercialisation, but the level of controversy and emotion surrounding the competition.

A louder World Cup

Now there is always controversy at a World Cup. Penalty shoot outs… a failure to spot handballs (that still hurts), dives resulting in fouls and fouls resulting in well nothing… depending the side we are supporting, there are always plenty of disputed refereeing decisions (‘we was robbed’). But, year, these arguments sounded a little louder.

Maybe it was because social media it seemed was filled with debate, and conspiracy theories; referee bias, VAR decisions, player behaviour and how individual matches were being managed. The social feeds were buzzing. Even decisions to show celebrities during games, managed to draw the ire of supporters.

Negative emotions ran high, and probably higher than I can remember for previous tournaments.

It seemed like, we all increasingly got drawn into a world of goodies and baddies…. my team vs yours, my tribe vs the others, for teams, players and supporters

But, how much of this was happening naturally, vs how much this was being amplified…

Controversy keeps us watching

Controversy creates engagement, engagement draws an audience… and the bigger the audience the more money is made. Certainly there was a lot of attention and engagement this time around.

Now of course, in the cold light of day, after a cold bath, most of us don’t approve. Aggressive behaviour on or off the pitch is not acceptable… But, with emotions are riding high, it is hard to get sucked in and football punditry loves it too.

A disputed decision gives commentators (and us) something to discuss before, during and long after the final whistle for the match. It generates television coverage, online clips, newspaper headlines, podcasts, social media posts and endless conversations between supporters.

The wheel turns and driving more passion in the supporters, resulting in us being more emotionally invested in the outcome. Supporters of one country start backing another, not because they particularly want the team to win, just because they desperately want someone else to lose.

It is an increasingly divisive and toxic mix.

A calm discussion about a reasonably well-refereed match does just not generate the same engagement as anger, injustice and accusations of bias. We may say we all dislike the controversy, but it certainly does keep us watching.

Competition changes us

Competition is exciting because people care about the result. Players want to win. Supporters want their team to succeed. Passion, the anticipation of success, the comradery of failure, is all part of what makes sport worth watching and keeps us coming back for more.

There is nothing wrong with striving to win, being assertive, ambitious or determined. The difficulty comes when assertiveness becomes naked aggression. When the desire to win becomes more important than how we get there, how we behave.

The opposition are seen not simply as another team, but the enemy. Referees are judged as corrupt rather than mistaken. Supporters on the other side are lowlife rather than just people experiencing what is the same match from a different perspective. It is all too easy to excuse poor behaviour from our own side while condemning exactly the same behaviour from someone else. We have lost sight of the bigger picture

It in these moments, it is worth taking a step back. The desire to win should not remove our ability to recognise humanity. Is putting this aside just to win, really winning? And at what cost?

Heroes and villains

This of course does not only just apply to football. The same tensions exist in business, particularly when we think about leadership, competition, and how organisations grow.

How controversial should we be to attract attention? How aggressive should we be to make money? At what expense of employees, customers and even those around us in the industry is acceptable? There are always trade off’s, where do we draw the line?

We all need to work hard to grow, express our views, challenge poor decisions and compete to succeed, but like we saw this world cup, taken too far, can easily slide into aggression. A focus on winning becomes a desire to defeat, embarrass or diminish someone else. Colleagues become obstacles. Competitors become enemies. Customers become numbers. The objective becomes so important that behaviour which would once have felt unacceptable becomes gradually justified.

And again, this is when we need to step back and remember the wider picture.

Businesses are not only just systems for generating revenue, they are communities of people, customers, employees, competitors and suppliers.

And, businesses are not judged solely on financial performance (even if we think it is). Customer treatment, employee treatment and industry reputation matters too (without if you lose business).

So after watching this year’s World Cup, in all its entertaining, emotional and occasionally infuriating nature, it is also time to pause for reflection, check my emotions, take a step back and look at the bigger picture.

Yes we may want to win, but if it costs us our humanity it is not worth it.

Something to take back to the office. Have a good week, everyone.