Tutorial — Choosing Cloud or Local Models
Augmented Traveler local tutorial. Back to AI Mind — Tutorials · the loop: AI Mind — Process · local set-up: Tutorial — Local Inference for Offline Venues · privacy: Tutorial — Privacy and Logging
A decision note written as a tutorial. It sets out how to choose where the language model runs: a hosted frontier API, a local open-weight model on the kiosk, or a hybrid. It gives the criteria, the options, a suggested starting point, and the questions the founders must settle. The decision belongs to the CEO and CTO, not to this page.
Draft. Written from provider data-usage pages read on 20 September 2026 (see Sources). Provider terms change; re-read them before signing. Not legal advice. The CTO validates the benchmark; counsel reviews section 3.
1. What the model actually does here
Our design limits what the model has to do (Tutorial — How the Mind Works):
- Authored answers cover the top questions with no generation (Tutorial — Authored Answers for Top Questions).
- For the rest, the model writes a short answer only from retrieved passages, in persona (Tutorial — Retrieval with Citations).
- The policy layer, not the model, enforces cutoff and refusals (Tutorial — Policy Layer with Guardrails).
So we need a model that follows instructions and sources well in a period voice. We don't need the strongest model for open-ended reasoning. That helps smaller local models.
2. Criteria
| Criterion | What to measure | Cloud frontier API | Local open-weight on kiosk |
|---|---|---|---|
| Quality | Golden-set score and blind historian review (Tutorial — Evaluating Answers) | Usually higher | Lower; retrieval narrows the gap. Measure it |
| Latency | Time to first token, 50 runs, at the venue | Depends on venue internet and region | Predictable; no network |
| Cost per 1,000 questions | Method in section 4 | Per-token fees | Hardware already bought; power and upkeep |
| Privacy and retention | Section 3 | Text leaves the site; needs a zero-retention agreement | Stays on site |
| Offline venues | Works with no internet? | No | Yes |
| Schools and under-13s | Provider terms plus COPPA/FERPA (Tutorial — Privacy and Logging) | Some providers restrict or add conditions | Fewest third parties |
| Maintenance | Who updates, re-tests, patches | Vendor updates the model; we re-test when models retire | We update runtime and model; we re-test |
| Licence | Terms of use; open-weight licence | Provider terms (incl. age rules) | Apache 2.0 for most families in AI Mind — Tutorials section 2; Llama licence has conditions |
| VRAM | Room left for Unreal, ASR, TTS, lip sync | None used | 10–20 GB used, or a second PC |
3. What the providers say about data (read 20 September 2026)
| Provider | Default | Zero retention | Minors |
|---|---|---|---|
| Anthropic API | Inputs and outputs deleted within 30 days; not used for training without express permission | ZDR by arrangement with sales, per organisation; covers the Messages API; some features excluded (Files, Batch, code execution). Flagged content may be kept up to 2 years even under ZDR. Some newest models ("Covered Models") need 30-day retention | Allowed with safeguards: age-appropriate protections, COPPA compliance stated publicly, disclosure that it is AI |
| OpenAI API | Not used for training unless opted in; abuse-monitoring logs up to 30 days | ZDR or Modified Abuse Monitoring by approval; about 15 endpoints eligible | Under-18 allowed with safeguards; personal data of under-13s only with zero data retention in place |
| Google Gemini Developer API (paid) | Not used to improve products; logged for a limited time for abuse monitoring | Abuse-monitoring logging can't be turned off on the Developer API; Google points to Vertex AI for guaranteed ZDR. Avoid Search/Maps grounding and caching | Terms forbid use in a service "directed towards or likely to be accessed by" under-18s. That rules out the Gemini Developer API for our kiosks unless counsel reads it differently. Vertex terms not checked (unconfirmed) |
What this means for us:
- Any cloud model needs a signed zero-retention (or equivalent) agreement before a public venue opens.
- Children will use the kiosk. Every provider's minors terms must be checked by counsel.
- ASR and TTS vendors have their own retention terms (Tutorial — Speech In, Tutorial — Speech Out).
4. Estimating cost per 1,000 questions
Work it out; don't guess.
- Count tokens per question from 50 real logged turns:
- input = persona prompt + policy text + retrieved passages + question + short history (typically a few thousand tokens);
- output = the answer (short: 60–150 words).
- Subtract authored hits. If authored answers catch 40% of questions, only 600 of 1,000 reach the model.
- Cloud cost = generated questions × (input tokens × input price + output tokens × output price) ÷ 1,000,000. Take prices from the provider's pricing page on the day. Check if prompt caching lowers the input price for the fixed persona text.
- Add ASR minutes and TTS characters if those are cloud services.
- Local cost = (share of kiosk PC, or a second inference PC) ÷ expected questions over its life + power + staff hours for updates.
- Put both in Year One Budget — Draft as a line with the method written next to it.
5. The options
| Option | How it works | For | Against |
|---|---|---|---|
| A. Cloud default | Hosted API with ZDR for all generated answers; authored-only when offline | Best quality; least upkeep | Per-question cost; depends on venue internet; minors terms; data leaves site |
| B. Local default | Open-weight model on the kiosk (or cabinet PC) everywhere | Offline venues and schools work; no third party sees questions; predictable cost | Lower quality; we maintain it; VRAM pressure |
| C. Local default, cloud for hard questions | Local answers first; low-confidence questions go to cloud | Most questions stay local | Two models to evaluate; "hard" is hard to define; privacy only partly improved |
| D. Cloud default, local fallback | Cloud with ZDR; local model when the network drops or at school/offline venues | Best quality when online; still works offline | Two models to evaluate and keep in persona |
Benchmark before choosing: run the same golden set through one cloud model and two local models (from Tutorial — Local Inference for Offline Venues). Blind historian review of 50 answers from each. Record latency at a real venue.
6. Suggested starting point (for the founders to accept or reject)
Option D, with schools local-only, because:
- Mitchell and Mott are allowed to generate inside the fence; quality matters most there (Ground Rules — Historical Virtual Humans).
- Offline venues and schools need a local path anyway.
- The model sits behind one interface (OpenAI-compatible), so moving from D to B later is a config change plus a re-evaluation.
- Boston-class figures (thin evidence) use retrieval and canned bridges; they barely need a model.
If the benchmark shows a local model within a small margin of the cloud model on our golden set, choose B instead: it is simpler and more private.
7. Questions the founders must settle
- Is a signed ZDR agreement a hard gate before the first public opening? Which provider?
- Do we accept any venue data leaving the island? Do venue contracts allow it?
- What quality margin makes local "good enough" (e.g. historian scores within 5%)?
- Do school visits run local-only, always?
- Budget: second inference PC per kiosk, or share the 5090?
- Who re-runs the evaluation when a cloud model is retired or a new local model appears, and how fast?
- Do we publish which model we use, in the out-of-character segment and on the website?
8. Practice exercise
Take 20 logged Mitchell questions. Estimate cost per 1,000 questions for one cloud model and for a local model on a second PC, using section 4. Write both numbers and the assumptions on one page for the founders.
9. Check before the decision meeting
Sources
- Anthropic, API and data retention: https://platform.claude.com/docs/en/manage-claude/api-and-data-retention
- Anthropic Privacy Center, How long do you store my organization's data?: https://privacy.claude.com/en/articles/7996866-how-long-do-you-store-my-organization-s-data
- Anthropic Help Center, Guidelines for organizations serving minors: https://support.claude.com/en/articles/9307344-responsible-use-of-anthropic-s-models-guidelines-for-organizations-serving-minors
- OpenAI, Data controls in the OpenAI platform: https://developers.openai.com/api/docs/guides/your-data
- OpenAI, Under 18 API guidance: https://developers.openai.com/api/docs/guides/safety-checks/under-18-api-guidance
- Google, Zero data retention in the Gemini Developer API: https://ai.google.dev/gemini-api/docs/zdr
- Google, Gemini API data logging and sharing: https://ai.google.dev/gemini-api/docs/logs-policy
- Google, Gemini API additional terms of service: https://ai.google.dev/gemini-api/terms
- Full list: Sources — 2026-09-20