Regular readers will know that ever since Deepseek came out, with token costs of three to five percent of US models, and open source which you can run on your own servers, I’ve been saying that China would win the AI war.

Here’s another data point:

I Went From $3,000/Month on Claude to $5/Week on DeepSeek

And honestly? 80% of my work is identical.

For the past two months, I was burning $3-5K monthly on Claude Code. Every idea from design to development to testing – full end-to-end automation, even simulating users to test my products and provide feedback. Extremely token-intensive.

But Claude’s caching sucked, making it insanely expensive. Then I discovered DeepSeek V4.

The numbers: • Claude: $5 input, $25 output per million tokens •

DeepSeek: $0.28 input, <$1 output (with their current discount) • DeepSeek cached: $0.0002 – literally less than a penny The caching optimization is game-changing.

Once DeepSeek has seen content, it basically stops charging tokens. My result: $5/week vs $1,000/week for the same workload.

The Chinese have been optimizing for efficiency. Frontier models are a little better, at each generation, but the Chinese aren’t sitting still on quality either. What will happen is convergence: where all the models are about equally good. Until then, the Chinese models may be 3 months to 6 months behind, but that’s all and when they have the advantage of being, not just 95% cheaper as before but over 99% cheaper, and when they’re open source, so the vendor can’t just increase prices or restrict usage without users having any ability to run the model themselves, well, only an absolute moron would plan on using Anthropic/Claude or Open-AI.

The West is building vast numbers of data centers, far more than the Chinese, because nothing is optimized for efficiency. Our models use far more electricity, far more GPUs, and far more water. Additionally the Chinese are working hard on real-world AI uses: robotic AI, in other words, so that their AI can be used for actual production, and pushing on humanoid robots so they can take care of their old people, do household work and so on: Chinese AI is optimized to do shit work so you can read and write and paint, while Western AI is optimized to do creative work so you can shovel manure, do your own laundry and clean toilets.

I simply cannot fathom; I literally spent 5 minutes repeating to myself, “how can they be so fucking stupid?” what American tech leaders and the people throwing money at American AI companies are thinking. They lose money with every single query. Starbucks just got rid of their inventory AI because it couldn’t tell the difference between oath milk and cow milk even after months of trying to make it work. The only large use-case for American AI is programming and even there quality questions are rife.

But even if it winds up being as great as they say, they’re still going to lose, because it’s not going to be enough better than Chinese AI (if it’s better at all in a few years, which I doubt) to make up a 95 to 99% cost difference plus the safety that open source provides.

We are ruled by morons. Our rich people, whom we celebrate as brilliant, are idiots and fools. The moment Deepseek came out, the response should have been to figure out how it was so much more efficient and add that to American AI. No one even considered it, they just threw hundreds of billions of dollars more money at doing the same thing they were doing before.

You can’t look at American AI, as anyone who uses is, and not realize it’s massively subsidized and that at some point they’re going to have to charge the actual, real cost. As with everything else, the plan is to destroy alternatives, then once they’re damaged beyond repair (like Taxis and “rise sharing”, raise prices.”

But this won’t work with AI because the Chinese aren’t playing along and it’s software that can be run on any server, if you have access, and, again, Chinese models are mostly Open Source and way, way cheaper.

I’m shaking my head as I write this. This is the greatest mis-allocation of resources I’ve seen in my entire life. It makes the housing bubble (out of which we at least got some homes) look brilliant and wise.

Morons. Our leaders are morons. And this isn’t even a case of “well they’ll do well out of it and they don’t care about anyone else”, it’s a case of “they’re going to lose hundreds of billions of dollars.”

One more bailout. Maybe. This is the last time.

And the West is DONE.

Because we aren’t even ruled competent evil people. We’re ruled by utter idiots.

(I wanted to write that they’re the dumbest money in world history, but, alas, that still goes to the Dutch tulip bubble. Though, again, at least they did get a lot of beautiful flowers out of it, which is more than we’re going to get.)

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