Key Takeaways: Managing AI Costs with Ulrik Lehrskov-Schmidt
Big thanks to everyone who joined Office Hours last week. This was one of our most popular sessions ever, and for good reason. @Ulrik Lehrskov-Schmidt brought the heat with an absolute clinic on how to price, protect margins, and not lose your shirt as AI eats into cost structures. Breaking down my 5 top takeaways below for those who couldn't make it: 1️⃣ The "double hockey stick" is the real AI pricing trap We're all used to the idea that value is unevenly distributed across customers — some get massive value, most get medium, a few get none. What Ulrik nailed in this session is that AI introduces a SECOND hockey stick: cost distribution. He shared a real example from a client with a couple hundred million in ARR where 75% of their entire GenAI cost was driven by just 0.1% of users. Thousands of users driving three-quarters of all consumption. The critical insight: there's no natural law that says your value hockey stick is proportional to your cost hockey stick. You can build a beautiful AI product that turns dollars into dimes. Or you can be like @Steven Meyer at Placer.ai, serving customers ~$50K/week of value at $150 in cost. Most of us land somewhere in the middle, but you have to KNOW where, and you only learn by putting product in the market and measuring. 2️⃣ Define fair use in dollars, not actions This was the most tactical part of the session. Most companies set fair use policies as "more than 500 API calls per month" or some action count. Ulrik's argument: that metric will be obsolete the second your model changes or your prompt structures shift. Track REAL COST per user in real time, and trigger fair use at dollar thresholds. The framework: bucket your users (malicious vs non-malicious, new vs tenured, monthly vs annual, by vertical, whatever matters). Build your fair use policy along a dollar cost line. Then run different policies per bucket and tune to the margin you want. He has customers where they literally use fair use policies to "decide the margin of the product" — turn the dial, get the gross margin you want.