Artificial intelligence vendors love to talk about tokens and credits, but are these pricing models really helping customers—or simply obscuring the true cost of AI? In this episode, Ron and Ed take aim at the growing trend of token-based pricing, arguing that it shifts uncertainty and risk from providers to customers while creating unnecessary complexity. Drawing on insights from pricing experts, recent industry commentary, and their own experiences, they examine why cost-based pricing has long been discredited and why customer value—not vendor costs—should determine price.
The conversation explores alternative approaches to AI pricing, including tiered models based on speed, complexity, and service levels. Along the way, Ron, Ed, and Greg discuss the rapid decline in AI infrastructure costs, the emergence of lower-cost large language models, and why today’s premium-priced AI services may face the same economic pressures that have driven technology costs downward for decades. If you’ve ever wondered whether AI credits are the modern equivalent of arcade tokens, this episode offers a provocative look at where AI pricing is headed—and why customer experience should be at the center of it.
SHOW NOTES
Segment one
Uber burned through their entire AI budget for the year in April https://finance.yahoo.com/sectors/technology/articles/uber-burned-entire-2026-ai-180347400.html
What is token maxxing with respect to AI? https://en.wikipedia.org/wiki/Token_maxxing
On the emerging pricing for AI models: “If there’s anything you and I have railed against for 30 years, it’s cost plus pricing.” —Ed Kless
On AI pricing workarounds: “When your pricing model gets so friggin’ complicated that there is a shadow market, you’re out of control!” —Ron Baker
Segment two
AI Credit Monetization: From Hype to Concrete Blueprint by Michael Mansard of Zuora https://www.zuora.com/resource/ai-credit-monetization-from-hype-to-concrete-blueprint/
One of the big takeaways from the Zuora white paper: Many companies are adopting AI credits because competitors are doing it, not because their business actually needs them.
“Activity based accounting is just cost accounting with its own wacky assumptions. It’s all bad math.” —Ron Baker
“I’ve spent decades arguing against cost-plus pricing, and token-based pricing is simply cost-plus. So when I say token-based pricing makes sense right now, I want you to understand how much it pains me to type that.” The Case for Token-Based Pricing by Mark Stiving, Ph.D. (friend of the show) https://impactpricing.substack.com/p/the-case-for-token-based-pricing
Segment three
The Strategy and Tactics of Pricing: A Guide to Growing More Profitably by Thomas T. Nagle, John Hogan, and Joseph Zale https://www.amazon.com/Strategy-Tactics-Pricing-Growing-Profitably/dp/0136106811
From The Strategy and Tactics of Pricing: “The job of financial management is not to insist that prices recover costs. It is to insist that costs are incurred only to make offerings that can be priced profitably given their value to customers.” https://www.amazon.com/Strategy-Tactics-Pricing-Growing-Profitably/dp/0136106811
Hard to capture in notes as a tweet but Ron had a fascinating conversation with ChatGPT about why it can’t price based on value instead of AI credits. Check out segment three for his back and forth.
Segment four
Camtasia (video editing software) sent Ed an email this week letting him know that AI features are unlimited on his pricing plan. So….someone figured it out :)
“The AI Race Isn’t About Electricity” by Michael Hochberg https://thedispatch.com/article/artificial-intelligence-silicon-chips-asic/
Nvidia’s official corporate timeline (since 1993) https://www.nvidia.com/en-us/about-nvidia/corporate-timeline/
“I think these AI companies should create a better customer experience and capture customers first. Then optimize the economics later. It’s not like they’re not sitting on a ton of money.” —Ron Baker
Bonus Content is Available As Well
Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.
Click the “FANATIC” image to learn more about pricing and member benefits.