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- [00:00]
iHeart Podcast Host
This is an iHeart podcast.
- [00:05]
Oracle Cloud Advertiser
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- [01:12]
Dani Shapiro
Call zone media.
- [01:16]
Zitron
Hello and welcome to this week's Better Offline Monologue. I'm your host at Zitron all side over on my premium newsletter. This week I reported out a troubling situation with AI powered coding environment Cursor, made by a company called Anysphere who unexpectedly changed their pricing in the middle of June as well as adding a $200 a month ultra subscription that, well, pissed everyone off and pissed off a lot of people for many different reasons. In fact, for some history, Cursor is or was the belle of the ball of the AI industry. They had $500 million of annualized recurring revenue, which means their highest month times 12, making them the first high revenue startup outside of Anthropic and OpenAI to actually show growth potential. There really is no one else like them out there at this number. I mean as alpha sense 400 million according to the AI database from the information. But everyone else is puttering around 100, 200 million ARR and raising far more money. Everyone was really excited about Cursor. They were growing fast. Everyone loved them and it was because their product allowed you to just build software just by typing stuff. And engineers liked it and regular people liked it. Not saying it was good or anything, just that people liked it. And they liked it because it gave you kind of unrestricted access to all of these models to build all this stuff. Now what if I told you that perhaps they had grown to that 500 million ARR number using techniques like allowing people to spend way more than they were paying for the service? Yeah, that's exactly what happened previously. Cursor's pricing was pretty simple. You had 500 fast completions, meaning that you could ask Cursor to do something using a model like Claude Sonet 4 or Opus 4 and it'd deduct requests from your allowance. The amount deducted was based on the model, with some models costing less than others, such as Anthropic's Claude 4 opus costing more. Once you were out of those fast requests, Cursor would then put you in the slow lane. The unlimited slowlane I should add, which nevertheless would let you use premium models. But you'd be put in the back of the queue and at peak times could be waiting some time before you get to your completion. You could also select auto and Cursor would select whatever was available. The best model for the job at the time, and never want to turn the best over to the company though. But on June 17, 2025, Cursor launched that $200 a month ultra plan along with a new and confusing Pro package. It's very muddied. A new wording around said $20 a month plan and how it would work going forward, claiming that they would be rolling out changes to make it more generous, but actually changing pricing to reflect new wording, offering unlimited agent requests and no real explanation as to what that meant, and no further mention of any request limits or what those requests or rate limits might be. The reality was of course far grimmer. Cursor users have found themselves heavily rate limited, especially on anthropic models, with the so called unlimited agent requests mostly pushing them towards Cursor's own Frontier model, which users claim is nowhere near as effective as models from OpenAI and Anthropic. On June 30, Cursor made another change to their product features, changing unlimited agents to extended limits on agents, further muddying pricing on a product that was once renowned for its simplicity and lack of limits. So this isn't good, is it? Silicon Valley's favorite coding startup has in the last few weeks completely changed how its customers interact with its product, both degrading the service and making it far more expensive in the process. They also allow you now to use usage based pricing. Now this is the funny one. If you pay $20 a month on cursor, they will guarantee you $20 a month of AI compute at least. So they're literally giving money away. They had a 20% fee on top of Compute, but wow, so you're making 20% margin? No you're fucking not. They're losing Money on everything. I'm sure of it. But it's strange. It's strange and it's bad. But this is also textbook and shitification. Cory Doctorow's term for when platforms offer a high quality product to gain a large user base, usually through convenience or great value, then degrade the service over time to make more money as a means of maximizing value for shareholders or making money themselves. It's also part of my rot economy thesis. The growth at all cost thinking has dominated the tech industry, and I'd argue, thanks to the proliferation of business idiots controlling everything, that they've drained some of the logic behind insurification away because very few of these companies actually have a plan for sustainability, let alone profitability. Generally, insertification gets people through the door and makes the service totally impossible to avoid. Makes it essential. That's really difficult to do with a paid software product like Cursor, because AI Compute is so fucking expensive. It's so expensive. So Cursor has decided to inshitify without making sure that they have something essential. But the thing is, I texted Corey about this. I think this actually is something quite different. I think this is the world's first chain in shitification. My belief is simple. Any sphere, which is the company that makes Cursor, by the way, is, despite getting $900 million in funding in early May, running out of money, or at least believes that continuing to operate its business in the way it did less than a month ago would cause it to do so. But why the sudden changes? Why the knife in the heart of their customers just after raising nearly a billion dollars? It's simple. It's a chain in shitification. Anthropic jacked up their prices and so did OpenAI. On May 22, 2025, a few weeks after Cursor raised $900 million, Anthropic launched both Claude Sonnet and Claude Opus 4. You might say Claude 4 Opus or Claude 4 Sonnet, I don't care. But these were too new. Powerful, as judged by benchmarks made specifically for large language models. And I should add that the Expensive Claude Opus 4 was more focused on coding benchmarks. This is an important detail. Now, eight days later, on May 30, 2025, a page on Anthropic's API documentation appeared for the first time called service tiers, adding priority tiers for enterprise startups that didn't want to, and I quote, sorry, I mean did want to, and I quote, provide a guarantee around the infrequency of server overloaded errors, even during peak times. Hmm, that's not good. Anthropic service tiers require a multi month upfront commitment on how many tokens per minute your startup will use, but also at an insidious charge around prompt caching. Now, prompt caching is when, when you put something into a model, such as a code base in the case of a coding startup or I don't know a great deal of stuff about how a model want might want to act, you put it in the cache so that it kind of like ram, it just kind of reads off of it instead of rewriting and rewriting and rewriting. So they've added a vig to it or a tax, whatever you call it, a toll perhaps. And they're now charging and this is really fucking insidious. Either 125% or 200% of the cost of caching information that you need to access it more readily. And I should add, this is only if you want the priority tier. And another thing, coding startups are extremely prompt cache heavy. Kind of fucked up, right? Very fucked up. And they're not the only ones doing it. On June 25, 2025, OpenAI also launched Priority for API customers. They claim it's a pay as you go tier where you pay higher API prices for, and I quote, predictable low latency. However, despite this being pay as you go, the service is only available for their enterprise customers who have made an upfront commitment, much like Anthropic does. The difference being they are not trying to tax you on prompt caching. Now, Cursor CEO Michael Truhl also said when announcing their egregious $200 a month plan that it was only made possible by multi year partnerships with OpenAI, Anthropic, Google and Xai. In short, I think that $900 million that cursor got may have immediately been handed to or committed to the major model developers. They got looted, baby. Now what makes this weirder is that Cursor is also Anthropic's largest customer, with sources claiming that they're such a large customer that they're taxing Anthropic's infrastructure and making them run out of GPUs. Now, I should also add that Cursor isn't the only one that's recently dramatically changed their prices. Vibe coding startups like Replit and Lovable both have had to do so in the last month. And I think this is just the beginning of something really, really, really bad. I believe that Anthropic did this either as a deliberate attempt to price gouge its largest customers and or as a means of increasing revenue and its money losing software. These changes are deliberate, aggressive and targeted price increases and they were timed with the launches of Claude 4, Opus and Sonnet, which suggests that Anthropic's costs have dramatically increased with these models, so much that simply increasing the cost per million tokens is insufficient. It's my belief that the launches of both Claude, Opus and to a lesser extent Sonnet have caused an upheaval in Anthropic's costs and compute demands, which in turn forced them to start increasing costs on their customers. However, Anthropic has, I believe, realized that there is no real way to just increase the cost of Opus and Sonnet 4 further on just the amount of tokens that the customer might use and that doing so might push away smaller developers which wouldn't make them more money. So they decided to find a way to specifically exploit the finances of their largest customers coding startups in a way that wouldn't be immediately obvious or that would spook non coding assistant customers. Except I'm a crafty little fuck and I look at everything all the time. I do this for fun. I don't do this because I have to. Listen to me. Wario Amadei if you're listening to this, I'm watching you. I have archive.org and a million Diet Cokes. Anyway, last year I talked about the subprime AI crisis where almost the entire tech industry has bought in on the technology sold at this vastly discounted rate and they've hit centralized and subsidized it too. And I predicted one major thing that these model developers would eventually have to find a way to make their costs work. That they would have to find a way to crank up costs on their customers because otherwise they would just continue burning money. I still think they are doing so and I think that's what's happening here. I think Anthropic and OpenAI to a lesser extent have realized that they need to start making money back on these fuckers and they're doing it. Except the fact that the companies like Cursor and Replit have immediately had to change their prices suggests that maybe none of these businesses make sense. Maybe this whole time this thing was unsustainable. Maybe it turns out the generative AI doesn't have the kind of business returns you need to run a startup. If only someone had said something remem. Look, see, I fucked up saying remember. But I'm not editing it out. This is an honest podcast, but Seriously, everyone remember the pale horses. Rate limits, service interruptions, price increases, trouble raising funding, and trouble with money. The horses are drawing nearer. I'm telling you, we're coming to the end of this. I don't know if it will be soon. I don't know if it will be next year. But nothing about this suggests that things are going well.
- [12:00]
Ryan
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- [12:25]
Zitron
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- [12:30]
Dani Shapiro
Your entire identity has been fabricated. Your beloved brother goes missing without a trace. You discover the depths of your mother's illness. I'm Dani Shapiro and these are just a few of the powerful stories I'll be mining on our upcoming 12th season of Family Secrets. We continue to be moved and inspired by our guests and their courageously told stories. Listen to Family Secrets Season 12 on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
- [13:01]
Zitron
Did it occur to you that he charmed you in any way? Yes, it did. But he was a charming man. It looks like the ingredients of a really grand spy story because this ties together the Cold War with the new one. I often ask myself now, did I know the true Jan at all? Listen to Hot Agent of chaos on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
- [13:31]
iHeart Podcast Host
Summer's here and with the kids home and off to camp, it's easy for moms to get lost in the shuffle on Good Moms Bad Choices. We're making space to center ourselves with joy, rest and pleasure. Take the kids to camp. You know what? It was expensive, but I was also thinking, you have my kid. This is kind of priceless. Take her, feed her. Make core memories. I don't have to do anything. Main thing, I don't have to do anything. To hear this and more. Listen to Good Mom's Bad Choices from Black Effect Podcast Network on the iHeartRadio app, Apple Podcast, or wherever you get your podcast. This is an iHeart podcast.