AI is a Compensation Scale Expense

**Ray Rike** (0:08)
Welcome to the AI to ROI, the Big Story edition of the podcast. I'm Ray Rike, founder and CEO of Benchmarkit, and I'm joined by my Big Story co-host, Peter Buchanan.

**Peter Buchanan** (0:21)
Yep, I'm Peter Buchanan. I am the founder of Newplan.

**Ray Rike** (0:24)
So Peter, you know, this week, we published a pretty interesting edition of the newsletter all about AI and budget. And to me, this is something that every CEO and CFO should be thinking about. Majority of them probably already are. But I think it's a financial do or die. And that is, where is the future AI budget going to be coming from?
How do we track the cost? How do we track utilization? How do we track business impact? And who is responsible for managing all that?

**Peter Buchanan** (1:02)
Wow. Well, the short answer is, for most enterprises right now, is that nobody is really tracking it very well.
And so we're going to walk through why that's a problem, where the evidence shows up in earnings reports and financial statements, and what the path forward looks like. So we're going to follow the structure of this week's newsletter, which is the AI to ROI, Big Story. The AI budget dance is underway, which Ray and I co-authored. We have five sections to our podcast today, each one building on the last. So let's get started. So the headline in the newsletter is that token prices are down 98 percent, but enterprise AI bills are up 320 percent, Ray. So how does that actually work?

**Ray Rike** (1:50)
You know, Peter, you know, because what I have done for a living for the last almost six years is benchmarking.
And a couple of years ago when you and I first started talking about AI to ROI, I really had this hypothesis that AI costs are going to grow rapidly and organizations, companies aren't ready for it. And one of the common things I was told and I read on LinkedIn is don't worry about it. Just like every other technology revolution, the per unit token costs are going to fall, which they are, but in my opinion, it's masking a real explosion in total AI spent. And that explosion is because a lot of companies and a lot of departments are experimenting.
Utilization is going way up. We think about AI coding assistance. And now I think like 84% developers of the US are using them. And we're just beginning this AI deployment generation. So usage is going up much faster than the costs are going down. But let me focus on cost for just a minute. Like if you look at GPT-4, which by the way, it seems so old now.

**Peter Buchanan** (3:11)
It does. It's a year old.

**Ray Rike** (3:13)
Yeah, but you know, the cost in late 22, early 23 was about $20 per million tokens.
And it's down to on average 40 cents per million tokens. So that's a 98% price reduction. And the next web published an article just a couple days ago that the average enterprise AI budget has grown from 1.2 million in 2024 to 7 million per year in 2026 So it's growing dramatically. And in that same report, it talked about how a single chat bot prompt, hey, Claude, tell me how to write this email. You know, in early 23, that cost about 0.4, which was pretty good. But now we're doing these holistic systemic end-to-end workflows and we're just starting that journey.
And in 2026, per the next web, the average cost of that is $1.20. So 30 times more than what a chat prompt cost three years ago.

**Peter Buchanan** (4:19)
Right. So there's this Goldman Sachs report decoding the agentic economy. And they project that AI will dive a 24x increase in global token consumption by the end of the decade. That's 120 quadrillion tokens processed per month, which sounds like a lot of tokens. So enterprise workflows, not consumer chat bots, or even just you and I asking questions of Claude, that's about 70% of the project volume by 2040 So these numbers describe this absolutely gobsmacking trajectory.
So what does it look like when the trajectory meets an operating budget? We've both been CEOs before.
You are still the CEO and this would keep me up at night, I can tell you. So there are three situations in the end of 25, beginning of 26 that show what happens when CEOs and CFOs don't pay attention. So let's go through those because they're pretty shocking.

**Ray Rike** (5:32)
I just had to comment that 120 quadrillion tokens process monthly. I'm like, so when does Elon Musk become a quadrillionaire?

**Peter Buchanan** (5:43)