Elon Musk Seeks $134B from OpenAI and Microsoft

0:00Welcome to the podcast. I'm your host, Jaden Schaefer. Today on the podcast, Elon Musk is trying to get$134 billion from OpenAI and Microsoft in what is called a wrongful gain. lawsuit. This is for his early investment in OpenAI as it was a open source, you know, company that was basically a nonprofit and then it switched to a for-profit company. So today on the show, I want to dive into this lawsuit, justifications, everything going into it, as well as we have nine new, I guess, like kind of big points, revelations, you could say, from diary entries, text messages, and late night emails. In the court documents, there's about 100 documents that were just unsealed in this Elon Musk versus Sam Altman lawsuit coming from the co-founders of OpenAI.

0:45So there's a lot of juicy stuff that just came out in this story. And I think a lot of implications for the AI industry overall. So today on the show, I'll try to dive into all of this without making it an article from People Magazine. So we'll try to get you the unbiased business side of this whole drama because I think it has a lot of implications for the AI industry. All right, let's get into it. Before we do, if you want to build tools without knowing how to code, without being a developer and using AI, I highly recommend you check out AIbox.ai. This is my own startup where you can use a powerful no-code assistant to help you build tools and you also get access to over 40 different AI models, all the top AI models from Google, OpenAI, Anthropik, 11 Labs, all in one place, audio, image, text, generation.

1:28So you can try all of the different, all the best models against each other side by side in the same chat like ChaiGPD, but just with 40 different companies. And it's 20 bucks a month. So if you want to get access to that, go check out AIbox.ai. I'll leave a link to it in the description. All right. So Elon Musk, he's just filed the lawsuit, which is seeking between 79 billion and 134 billion dollars in damages. This is an astronomical amount of money from OpenAI, but also Microsoft. He also tied Microsoft to this because they were the early investor in OpenAI, and they kind of had, I guess, some knowledge, and they were pushing OpenAI to be a for-profit instead of an open-source nonprofit company.

2:06So his allegation is that OpenAI violated their original nonprofit mission and that both organizations benefited financially from his early involvement, which, I mean, I guess there's like so much beef with OpenAI. I don't want to get into it, but I can sort of see where he's coming from on Microsoft because he did just donate money to OpenAI. And then Microsoft came in and made an investment in OpenAI and took like half the company. So, I mean, Microsoft most definitely has, you know, got a lot to gain from his donation. So if you look at all of his court filings, he's essentially arguing that kind of his financial and technical and reputation all contributed to OpenAI's early development.

2:42And to be fair, I think he did do a bunch of work at the beginning and he got on a bunch of the early founders of OpenAI. Like he went, you know, personally and headhunted and recruited them. He also says that he gave about$38 million to the company, which was about 60 % of their early seed funding. So, you know, more than 50%. But there was other people involved in this as well. And then he also helped with, you know, all of the staff recruiting, advising on, you know, scaling the business. He gave a lot of credibility to the project when it was really, you know, a new project back in 2015 and 2018.

3:14So he's claiming damages, and he's saying that these are all based on analysis by financial economist C. Paul Wazan, who essentially did some calculations on what Elon Musk is calling wrongful gains, which came from his contribution, his 60%, his$38 million that he put into the company. So his filing is estimating that OpenAI got about$65.5 billion and$109 billion in value from what he did at the beginning. Microsoft gained more than$13.3 billion and$25.1 billion, according to Paul Wazon's calculations. So Elon Musk is arguing that similar to early stage startup investors, contributors can realize returns far exceeding their initial investment if the company later achieves significant value, you know, the growth and evaluation of their company becomes worth a lot more.

4:07So OpenAI, of course, has disputed both the legal and the financial basis of everything that Elon Musk is saying. OpenAI has described this as sort of unfounded and says that Elon Musk was aware of their plans to adopt a capped for-profit structure. So that's interesting. Microsoft also denied that they did anything wrong. Their legal counsel said that there's no evidence the company improperly assisted OpenAI, and then both of them have asked the court to just limit or exclude Wazan's testimony. So this kind of economist that had that estimation, they both want Wazan's estimation thrown out, arguing that his valuation method is speculative and that it could mislead a jury.

4:48So there's a lot of drama going on, as you can see. What's interesting is most recently, we know that this lawsuit's been going on for a little while, but a bunch of internal communications from OpenAI's early years. There's more than 100 documents have all come out, including emails, text messages, and diary excerpts, which I thought was crazy they were able to get that in discovery. All of that was recently unsealed as part of the litigation, so all of those materials include exchanges between Elon Musk and OpenAI's leadership, as well as communication between Sam Altman, Greg Brockman, and Satya Nadella.

5:24So some of the documents, I think, are showing sort of these like internal debates about OpenAI's governance, their funding sources and the long term direction. The dire entries, which are attributed to Greg Brockman, show this discussion about some financial stability and leadership structure, while the emails from Elon Musk are basically expressing concern that OpenAI is going to risk falling behind competitors like Google. So there's a bunch of other communications that show Elon Musk is advocating for partnerships with Microsoft rather than Amazon, which is ultimately what, you know, OpenAI did when they did their 2019 deal with Microsoft.

6:02So I think all of these unsealed documents and records also have an interesting testimony from Satya Nadella, who's discussing Microsoft's investment relationship with OpenAI. And he's also acknowledging a personal respect for Elon Musk's approach to building companies. So right there, it's kind of, you know, him being like happy that Elon Musk is on board. There's some separate documents that show Elon Musk is requesting early access to NVIDIA computing hardware from Jensen Huang during OpenAI's early research phase. So Elon Musk is going and getting, you know, the latest NVIDIA chips. And so it feels like there definitely are a lot of these, you know, big players, whether that's the CEO of NVIDIA or the CEO of Microsoft who are impressed and talking directly with Elon Musk.

6:46He's pulling strings with them to make things happen. Elon Musk left OpenAI's board of directors back in 2018. Ultimately, he said that there was a potential conflict of interest with everything Tesla was doing with artificial intelligence. I think like there's also a lot of beef and kind of fighting that he was having with the leadership team at the time. I think probably that was maybe a good excuse. You know, it's also sort of plausible in a sense that when he's recruiting people to work in AI, we can see how cutthroat it is today with Microsoft and Google and OpenAI offering, you know, meta offering massive salaries and really fighting to get top researchers.

7:20So like, I'm sure there's a level of talent fighting that was going on there, even though it doesn't feel like self-driving and chat GPT overlap that much on an AI front, perhaps. In any case, since that happened, OpenAI then transitioned into a hybrid structure that included a for-profit subsidiary. Elon Musk has since, of course, founded XAI, which is a competing artificial intelligence company. Business Insider recently reported on a bunch of the documents that were unsealed in relation to this case, a bunch of new things. And one of the things that just, I guess, is kind of surprising to me was Greg Brockman, the CTO of OpenAI.

7:55His diary somehow got included in there. So there's a bunch of clips where he is like, you know, talking about being free and owning his destiny and you know what's going to financially help him make a billion dollars there was a deposition that happened the last year and Brockman said that his primary motivation was on the mission and the financial reward was a secondary consideration and then we have a bunch of these things he wrote in his you know journal which is kind of crazy he also wrote down a bunch of the pros and cons of breaking up with Elon Musk he said quote some chance that rejecting Elon will actually lose us Sam we'll find out tomorrow if doing an override all the way through is palatable.

8:33This is the only chance we have to get out from Elon. Is he the glorious leader that I would pick? And then he's also apparently in a separate entry, he's debating how OpenAI is going to move forward and actually become profitable. He said, if all comes down to the money, we can get it from Tesla, probably. We could also probably get it from Google, which is kind of interesting because Elon Musk wanted to fund this to be a counterweight to Google and he's considering getting the money from Google. In any case, this is definitely interesting. There's there's a lot of, you know, I mentioned the positive comments that Satya Nadella had made the direct quote that they found.

9:09Well, okay, so one interesting thing is like, apparently Nadella was like writing a book with some co authors and stuff. And he's been writing it for a while. And so it's kind of a book all about opening or all about AI, but like part of the deposition because okay, so it was called an inflection point mission transformation and the dawn of the next generation of AI. So this was back in July 2023. And Nadella was working on this. And ultimately, it got like camp, they never actually ended up publishing this thing. It was co-written by Harvard business professor Marco Incense T. In any case, they like got snippets from this book, this unpublished book was like all part of the discovery, which was also pretty crazy.

9:48And then of course, there was like the email I mentioned with NVIDIA CEO Jensen Huang, where Elon Musk emailed him and said, can OpenAI buy one of the early units? The team is asking me about this earlier today. And Jensen's like, I've not forgotten. I'll make sure OpenAI gets one of the first ones. So, you know, I mean, that definitely was a favor there. But one of the things that's interesting, there's all these snippets about like Elon Musk warning that Google is going to beat OpenAI if they don't change things. And then the thing that I thought was really funny was there was a bunch of comments in there about, basically OpenAI was trying to decide in 2016 if they should go with Microsoft or Amazon as kind of a good partner.

10:26And this is what Elon Musk wrote about it. He said, I think Jeff is a bit of a tool and Satya is not. So I slightly prefer Microsoft, but I hate their marketing department. This is like so funny. He's like, he hates the marketing department of Microsoft, but Satya is not a tool and Jeff's a tool. Anyway, it's hilarious. Elon always has a lot of strong opinions about a lot of people. But Altman was kind of agreeing with him and ultimately OpenAI made a partnership with Microsoft in July of 2019. So it seems that, you know, perhaps that had a little bit of, you know, there was a little bit of weight there.

10:58And then the final thing I will read is a comment from a text between Sam Altman and Elon Musk is one of the most one of the interesting things that also came out. it was Sam Altman texting Elon and saying I remember seeing you in a TV interview a long time ago maybe 60 minutes where you were being attacked by some guy and you said they were heroes of yours and a real and it was really tough well you're my hero and that's what it feels like when you attack open AI this was back in February 2023 and Elon Musk responded and said I hear you and it is certainly not my intention to be hurtful for which I apologize but the fate of civilization is at stake.

11:38So anyways, as you can see, the drama is never ending in this lawsuit and everything going down. There's a federal judge in California that ruled that Elon Musk's claims were plausible enough to be decided by a jury. So the trial is currently scheduled to begin in the spring of this year, unless they reach a settlement beforehand. If a liability is found, Elon Musk is going to try to get, you know, additional damages, including, you know, punitive damages or injunction relief. And, you know, the scope of any of those things hasn't really been specified. But it's interesting. Right now, everybody has stated that they are going to vigorously contest the claims as the case is proceeding forward.

12:18So it's gonna be interesting to see this isn't the end of the of the story, we're going to find out what happens if Elon Musk is able to get, you know, 134 billion dollars from opening Microsoft, or if this is kind of a big show, we'll see what happens here. Thank you so much for tuning into the podcast. If you enjoyed this episode, make sure to leave a rating review wherever you get your episodes. It helps the show get found by more amazing people like yourself. And as always, make sure to go check out AIbox.ai if you want to build AI tools, if you're not a developer, and if you want to be able to access over 40 of the top AI models for just$20 a month, you don't need subscriptions to every platform.

12:52It's all in one place. You can chat with all of them in the same thread. It's super useful, and I hope it saves you a ton of time. Thanks so much, and I'll catch you in the next episode.