How do you estimate the true cost of self-hosting an LLM versus paying per-token API?
The per-token sticker price masks the real decision. Self-hosting only pays off past a volume break-even most teams misjudge. Here is the back-of-envelope a staff engineer does on the whiteboard.
Updated Sep 2026 · Grounded in real GenAI, LLM, and AI/ML engineering interview loops and written to a senior-engineer editorial bar.
The per-token sticker price masks the real decision. Self-hosting only pays off past a volume break-even most teams misjudge. Here is the back-of-envelope a staff engineer does on the whiteboard.
Lead with where the obvious approach breaks, because that is the judgment they are screening for — most candidates jump straight to the happy path and lose the room.
Then walk the failure back through the pipeline in order, naming the one metric the customer's exec sponsor actually cares about before you propose the fix.
