Recently Meta made headlines with unprecedented, massive compensation packages for AI model builders exceeding $100M (sometimes spread over multiple years). With the company planning to spend $66B-72B this year on capital expenses such as data centers, a meaningful fraction of which will be devoted to AI, from a purely financial point of view, it’s not irrational to spend a few extra billion dollars on salaries to make sure this hardware is used well. A typical software-application startup that’s not involved in training foundation models might spend 70-80% of its dollars on salaries, 5-10% on rent, and 10-25% on other operating expenses (cloud hosting, software licenses, marketing, legal/accounting, etc.). But scaling up models is so capital-intensive, salaries are a small fraction of the overall expense. This makes it feasible for businesses in this area to pay their relatively few employees exceptionally well. If you’re spending tens of billions of dollars on GPU hardware, why not spend just a tenth of that on salaries? Even before Meta’s recent offers, salaries of AI model trainers have been high, with many being paid $5-10M/year, although Meta has raised these numbers to new heights. Meta carries out many activities, including run Facebook, Instagram, WhatsApp, and Oculus. But the Llama/AI-training part of its operations is particularly capital-intensive. Many of Meta’s properties rely on user-generated content (UGC) to attract attention, which is then monetized through advertising. AI is a huge threat and opportunity to such businesses: If AI-generated content (AIGC) substitutes for UGC to capture people's attention to sell ads against, this will transform the social-media landscape. This is why Meta — like TikTok, YouTube, and other social-media properties — is paying close attention to AIGC, and why making significant investments in AI is rational. Further, when Meta hires a key employee, not only does it gain the future work output of that person, but it also potentially gets insight into a competitor’s technology, which also makes its willingness to pay high salaries a rational business move (so long as it does not adversely affect the company’s culture). The pattern of capital-intensive businesses compensating employees extraordinarily well is not new. For example, Netflix expects to spend a huge $18B this year on content. This makes the salary expense of paying its 14,000 employees a small fraction of the total expense, which allows the company to routinely pay above-market salaries. Its ability to spend this way also shapes a distinctive culture that includes elements of “we’re a sports team, not a family” (which seems to work for Netflix but isn’t right for everyone). In contrast, a labor-intensive manufacturing business like Foxconn, which employs over 1 million people globally, has to be much more price-sensitive in what it pays people. Even a decade ago, when I led a team that worked to scale up AI, I built spreadsheets that modeled how much of my budget to allocate toward salaries and how much to allocate toward GPUs (using a custom model for how much productive output N employees and M GPUs would lead to, so I could optimize N and M subject to my budget constraint). Since then, the business of scaling up AI has skewed the spending significantly toward GPUs. I’m happy for the individuals who are getting large pay packages. And regardless of any individual's pay, I’m grateful for the contributions of everyone working in AI. Everyone in AI deserves a good salary, and while the gaps in compensation are growing, I believe this reflects the broader phenomenon that developers who work in AI, at this moment in history, have an opportunity to make a huge impact and do world-changing work. [Original text: https://t.co/5wQe7foww8 ]