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Adoption is driven by cost not openness

2026-08-01 · 22:03 UTC ·@johnloeber ·1 min read

Brief

John Loeber argues that the relevant competition with China is over cost rather than whether models are open or closed. He claims Kimi and DeepSeek succeed mainly because they are cheap, not merely open-weight, and that China’s cheap electricity and state-subsidy strategy lets it undercut rivals despite chip gaps. The central strategic question is whether the West can scale energy infrastructure—especially nuclear—to drive down electricity costs for training and serving models.

Why it matters

Adoption is driven by cost not openness: Kimi and DeepSeek are open-weight models but are widely used because they are cheaper and sit on the Pareto frontier compared with alternatives.

Key details

  • China's competitive edge is industrial-scale cheap electricity from a high-state-capacity buildout plus willingness to subsidize/dump products to win markets, even though it currently lags somewhat on chips.
  • The decisive factor is energy cost: the West must rebuild industrial energy capacity (notably nuclear plants per the author’s 'energy theory of everything') to lower training and inference costs and remain competitive.
Source evidence

Open vs Closed Models may be the Wrong Debate

If you are concerned about competition with China, then the thing that really matters is cost. People seem to be missing this.

Kimi and DeepSeek are open-weight, sure. But the vast majority of use is because they're cheap. Not because they're open. They're roughly on the Pareto Frontier, offering a comparable, lower-cost alternative.

If what you're worried about is whether the rest of the world will be reliant on US or Chinese models, and the political consequences of that (economic dependence, shaping public opinion, etc.) then it doesn't really matter whether the rest of the world is using US/Chinese models that are open or closed.

The rest of the world will choose among roughly similar models simply based on cost -- and that's an industrial capacity problem. How cheaply can you train and serve inference?

And this is where China has a significant advantage: lots of cheap electricity thanks to a high-state-capacity industrial buildout. They're a little behind on chips, of course, but making progress. And they've shown in every other industry that the state is totally willing to subsidize enterprises to sell product at a loss in order to win the global market. (On the "dumping" debate from a few days ago -- this is dumping. Releasing open-weight models isn't.)

The big, dispositive question for the future is whether the West can summon the industrial capacity to build energy sources at scale, and drive down the cost of electricity. I have become a subscriber to the "energy theory of everything": it really all seems to come down to whether we can build nuclear power plants again.