Even if compute costs drop by 10X a year (which seems like a gross overestimate IMO), you're still looking at 1000X the cost for a 2X annual performance gain. Costs outpacing progress is the very definition of diminishing returns.
Yes, that's exactly what I'm implying, otherwise they would have done it a long time ago, given that the fundamental transformer architecture hasn't changed since 2017. This bubble is like watching first year CS students trying to brute force homework problems.
O3 is multiple orders of magnitude more expensive to realize a marginal performance gain. You could hire 50 full time PhDs for the cost of using O3. You're witnessing the blowoff top of the scaling hype bubble.