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Better Offline Podcast Episode Summary: The Talented Mr. Altman
Episode Overview Host: Ed Zitron Guest: Tom Dotan (Wall Street Journal) Air Date: Not specified Synopsis: This episode critically examines Sam Altman's rise in Silicon Valley as a prominent figure despite a lack of substantial achievements. Altman, the CEO of OpenAI, is portrayed as a manipulative figure who has navigated the tech industry through charm and connections rather than genuine innovation or success.
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Key Themes and Discussions
- Sam Altman's Background
- Early Ventures: Sam Altman was a college dropout with a failed startup (Loopt) and was fired from Y Combinator and briefly from OpenAI.
- Cult of Personality: He is described as a "confidence man" whose charm masks a lack of substantive skills and achievements.
- Praise from Peers: Despite his failures, peers and mentors in Silicon Valley, including Paul Graham of Y Combinator, have given him exaggerated accolades.
- Critique of Altman's Success
- Lack of Real Achievement: The episode emphasizes that there are no significant accomplishments tied to Altman; he is seen as adept at navigating the startup ecosystem rather than building anything meaningful.
- Networking Over Substance: Altman’s success is attributed to being in the right place at the right time and leveraging connections rather than pioneering innovations.
- Investment Practices and Self-Dealing
- Hydrazine Capital: Altman's venture firm invested heavily in Y Combinator startups while he was president, raising questions about conflict of interest.
- Financial Maneuvering: The discussion highlights Altman's use of debt to finance investments and the risks associated with it, including obtaining massive loans from JPMorgan Chase.
- Overlapping Interests: Altman's investments in companies that overlap with OpenAI (like Helion and Reddit) lead to discussions about potential insider trading and ethical concerns in his dealings.
- Speculative Nature of AI Investments
- Bubble Concerns: There is skepticism regarding the sustainability of AI investments, likening the current AI boom to previous speculative bubbles in tech.
- Future of AI: Discussions include the costs associated with AI development and the physical infrastructure required, raising doubts about the viability of current AI technologies.
- Cultural Reflections in Silicon Valley
- Meritocracy vs. Connections: The episode posits that Silicon Valley's culture favors those who fit a certain mold, overshadowing genuine merit and hard work.
- Public Perception: Altman is portrayed as a figure who receives uncritical acceptance from the media and investors, allowing him to continue despite questionable practices.
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Key Takeaways
- Manipulation vs. Innovation: Sam Altman exemplifies a trend in Silicon Valley where charm and networking are valued over genuine innovation, raising concerns about the long-term impact on the tech industry.
- Financial Risks: The use of substantial debt for investments in high-risk startups highlights a potentially dangerous trend in venture capital.
- Inevitability of Scrutiny: As the AI industry evolves, there is a pressing need for accountability and transparency among influential figures like Altman to prevent systemic failures.
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Conclusion In this episode of Better Offline, Ed Zitron and Tom Dotan provide an incisive critique of Sam Altman, questioning the foundations of his success and the ethics of his dealings within the tech ecosystem. The discussion serves as a cautionary tale about the allure of charisma in the face of substantive achievement and the precarious nature of the tech industry's current trajectory.
For more details, listen to the episode directly on [Better Offline](https://betteroffline.com).
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:00This is an iHeart Podcast.
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1:51New customer offer first three months only. Then full price plan options available. Taxes and fees extra. CementMobile.com Call Zone Media Hello and welcome to Better Offline. I'm your host, Ed Zitron.
2:12Better Offline The tech industry has craved a messiah since the death of Steve Jobs in 2011. But in OpenAI's CEO Sam Altman, I think they've discovered more of a false prophet. a seedy little grifter that uses his remarkable ability to impress and manipulate people, specifically in Silicon Valley, to mask a total lack of technical and business acumen. I realize this sounds a little dramatic and definitely a little inflammatory, but the error around Sam Altman has for years been that he's somehow a magical special creature, a man who, and I quote, is wise beyond his years and was so at the tender age of 19, and who, to quote startup incubator Y Combinator's Paul Graham, could be parachuted into an island full of cannibals and come back in five years and be king.
3:02In the next two episodes, I'm going to dig into Sam Altman's really specious success story, and it's one that was built on the back of being in the right place at the right time, deftly dodging accountability and responsibility in basically every job he's ever had, including, by the way, the two that he was fired from and the failed startup he had. And I believe he's used his political power as leverage to scare away anyone who's going to ask any nasty questions or, of course, dare to stand against him. In a stunning in-depth piece by Ellen Hewitt of Bloomberg, Sam Altman is repeatedly framed by his contemporaries as some sort of genius, without anyone ever asking why or explaining why, other than there's this vague sense of intellectual and philosophical superiority.
3:50With Y Combinator founder John Coogan claiming that Altman had, and I quote, an uncanny ability to listen intently and diagnose problems, and that he was, and this is a real quote, I'm not kidding, the Michael Jordan of listening. Sit with that for a moment, just sit with that.
4:10These laughable and completely stupid accolades aside, there doesn't actually appear to be a single story that I can find of some genius moment of clarity ushered in by Sam Altman. There are none of these fantastical situations where his remarkable mind brilliantly delivers the exact solution to a problem or some sort of concrete accomplishment that required these descriptive pre-natural levels of vision and clarity. No, I just found this torrent of platitudes about this man who always gets what he wants, which is, by the way, another quote from Ellen Hewitt's story. And he just appears to be this unstoppably pushy young man that excelled not necessarily at building things because he really has not built any great companies, nor have they done any great things.
4:57It's mostly about, and I quote Ellen Hewitt again, Sam Orman bending the world to his will. If this all sounds familiar, by the way, it's because I've really said this before. Many CEOs, especially in tech, have this amazing ability to make these bold proclamations and have people pretty much accept them at face value, even by the media that's meant to hold them to account. With the earliest days of Facebook's metaverse pivot, probably the best example I can give you. I really encourage you to go back to the Rotcom bubble and the Facebook episodes to look into it. But even by Mark Zuckerbergian standards.
5:33Is that Kuberbian? We'll get to that later. Sam Altman exists in his own pantheon of bullshit. There are many, many, many examples of him saying that open AI, or I should be more specific, AI broadly, will do something it cannot and likely will not do, such as think for itself or be that super smart companion I keep quoting. And the fourth estate just kind of accepts it without any pushback. And this is really Sam Altman's history. Being in the right place, saying the right thing. And even when the thing in question is kind of hollow, people saying, oh, this boy's so smart. And there's just no limit, it seems, to this phenomenon.
6:15When Sam Altman says something or does something genuinely truly insane, like how he wants to raise$7 trillion for futuristic chips, which is, by the way, the combined GDP of Germany and France, or that he needs$100 billion from Microsoft to build a supercomputer for the future of AI, people just say, yeah, it sounds about right. Yeah, classic Sam Altman stuff is just the smart bloke going. The response is never to dismiss it and say this is absolutely bloody stupid, but to actually discuss it with a level of seriousness that just is not warranted for anyone, let alone Sam Altman. And that might be Altman's real skill, creating colopsia, the appearance of things being more beautiful than they really are, hiding the weakness of his arguments, and indeed, generative AI writ large, and beguiling those around him with this nasty, instinctual ability to tell them exactly what they want to hear, giving them the words to tell other people in his name, to get in exactly the room he needs to be in exactly the right time to connect with exactly the right people, all without ever having to actually do anything or create anything.
7:24Despite the fact that his location-based social network loop failed to get any traction, or build any meaningful product it appears, it allowed him to get in the door a famed Silicon Valley incubator Y Combinator and dazzle Paul Graham, its creator, who, for reasons I cannot understand, I've read so much of Paul Graham's stuff now. Paul Graham became convinced that Sam Altman was the future, and in turn helped Sam Altman get in on these huge VC deals in companies like Stripe and Airbnb, making him hundreds of millions of dollars. This is, by the way, a very Silicon Valley problem, and a problem with the value writ large, and a precursor to the growth-at-all-costs-rot economy that I talk about seemingly every minute.
8:08When you strip away Sam Altman's ability to convince people that he's smart, he doesn't appear to have done anything. He's done very, very little. He was a college dropout with a failing then failed startup. One where employees tried to get him fired twice because he kept diverting resources to other places and focusing on his own personal products and projects. And the reason I sound so flustered is this is Sam Altman's entire existence. In a podcast discovered by Ellen Hewitt at Bloomberg, Twitch co-founder Emmett Shear appeared from Altman's Y Combinator cohort, at the first one, and briefly, his replacement as CEO of OpenAI, described his surprise that Sam was able to close deals with Boost Mobile without any actual product.
8:53Yet because Altman fit a template, he resembled the kind of guy that got things done, powerful people in Silicon Valley have fallen over themselves to give him the opportunities that made him look like a kingmaker. And at some point, the funny thing is in the Valley is when you get to the prominence where people just feel like you should be in on these things. You are. That's why all these guys all kind of look and act the same and all get in on the same things. And honestly, I think the truth might be a little grimmer. Altman was, from a relatively early age, chosen by Silicon Valley to be their next messiah, which allowed him to wield this incredible power over the startup up ecosystem without really ever meaningfully contributing to it.
9:39His ascent to the apex of the valley and the budding flowers of a Sam Altman cult, which we see today everywhere, feels random and arbitrary without any real force behind it. Well, there's one thing though. Sam Altman, he's a master manipulator. He's incredibly adept at saying things that sound profound, like your rate of learning should always be high. And yes, that's a quote, as are the rest of these, and that each unit of work you do should generate more and more results, while also knowing that the self-reinforcing prophecies of the tech industry are what makes someone rich and powerful, rather than achievements or found a great companies or doing things for people.
10:21In essence, his whole vacuous platitude buffet, the kind that can be cut into 10-second clips for TikTok and YouTube and Twitter, they're really good ways to feel intelligent when people already want you to be and they're just really useful for tricking extremely disconnected and credulous morons people that don't really participate in the grander scheme of building software and hardware people like reed hoffman of linkedin of brian chesky of airbnb people that aren't coders or builders or anything they're just people that vaguely fell into success. Perhaps they built useful companies, but they didn't really make the companies.
11:04They didn't really do the work. Sam Altman is really good at saying the things that reinforce their biases and in the process kind of helps them disguise their nepotism and his real superpower, which is, by the way, another form of nepotism. Sam Altman didn't find the startups that made him so rich and wealthy and influential. He was being shown them by other powerful people that wanted him in on these deals so that he could give them advice based on a career of specious management bullshit. And because the Valley liked how he looked and how he acted, how he talked, the things he resembled, the things they were reminded of when they heard Sam Allman speak.
11:46And it's funny because a lot of these people, the Paul Grahams of the world especially, they're big-time meritocratic people. They love the meritocracy. Yet when you look deeper, the people succeeding are not actually building the things. Ilya Sutskeva over at OpenAI, he is the actual technolo-Jesus. He's the actual guy that, and by the way, no longer at OpenAI, that kind of deserves this. But Sam Altman's the one that got invited in early to Stripe and Airbnb and all these things. And as I'll get into, kind of rat-fucked his way around a bit. And nowhere is this more obvious than in Hydrazine Capital, Altman's venture capital fund that he created with the$5 million he got from selling Loopt, his failed startup, by the way, and backing, of course, from Peter Thiel.
12:31Hydrazine invested 75 % of its funding in Y Combinator companies, including Reddit and Instacart, even after Sam Altman became the president of Y Combinator. Which is weird, because the other partners at Y Combinator like Gary Tan, they were forbidden from managing their own investment funds at the time, according to reporting from the Wall Street Journal. But I guess Sam Altman just felt right. It's cool that he gets rich, right? Not to say Gary Tan hasn't, but the other people just didn't seem to get these opportunities for some reason. Could be anything. And he became head of Y Combinator, by the way, despite being one of the, he was, Loopt was one of the first companies in Y Combinator.
13:14And to explain how this works, Y Combinator would invest a little in a few early stage startups, a much larger number these days. And the first cohort was one that included Sam Altman's Loopt. And he was made president of Y Combinator, despite the fact that Loopt was terrible. It didn't have a good product. They couldn't sell it. He retasked engineers at one point to work on a dating app somewhere else sam olman was a terrible ceo but you know what he's capable of saying stupid shit like and i quote competitors are one of the last monsters that haunt your dreams to new york magazine shortly before predicting that there was absolutely no reason to believe that we would not have a computer by 2029 that could replicate his brain you know what though putting that aside I do think Sam Altman's right on that one though in the sense that ChatGPT kind of seems capable of producing this kind of nonsense too but again because Sam Altman's the affable friendly amicable white guy who's known by the right people he keeps going he keeps on trucking and I think that Sam Altman is on some level he's a monument to the rot at the core of the valley and he's a product of this growing distance between the tech industry and actually creating things of value.
14:34While Y Combinator founder Paul Graham may be a decorated and successful computer scientist, by the time he made Sam Altman president of Y Combinator in 2014, he was already more than a decade removed from selling his software startup ViaWeb to Yahoo. As he drifted further away from actually building things on the computer, so too did Paul Graham's essays drift away from the philosophical measures of software development towards a far darker management philosophy, one where he admitted in a blog from 2003 that intelligence itself is not a factor in popularity because smart kids don't want to be popular, and that popularity is much more about alliances and doing things that bring you closer to other popular people.
15:19Huh. Maybe he did like Sam Altman for real reasons then. anyway two years before he made sam altman president paul graham would publish a piece called startup equal growth claiming that growth drives everything in this world and that growth makes the successful companies so valuable that the expected value is high even though the risk is too a statement that could only make sense if you believe that there will always be hyper growth companies and indeed that the opportunities for those high growth companies would keep emerging, say, for the next forever. None of these people ever thought about it.
15:55It's so strange to read this stuff. To go back even five years, but especially 10, and reading these things, and reading these people talking about how dogged Sam Maltman is, and how great he is at this, and then reading their other philosophies, and it's all stuff like, well, you see, intelligence comes from the mind, and building businesses, it's all about growth and business. and you read them and you're like, huh, are these people smart or stupid? I can't tell. They're using smart people language, but they seem kind of stupid. Maybe that's also the problem. Maybe the problem's just a little simpler.
16:33While Sam Orton was a specious opportunist and very much a manipulator, the time he entered Silicon Valley was this period where pretty much all you needed to do was sound smart and be in the right rooms. Companies were being created that could enter these giant markets and just dominate because all they really needed was money and enough handshakes. Altman is adept at using connections to make new connections, in finding new ways to make others owe him favors, in saying the right thing at the right time when he knew that nobody would think about it too hard, something he continues to this day.
17:11Altman was early on Stripe and Reddit and Airbnb, be, all seemingly brilliant moments of investment in a life of a man who's had many things handed to him, who knew how to look and sound to get put in the room and to get the capital to make his next move. It's easy to conflate investment returns with intellectual capital, even though the truth is that people just liked Sam Altman enough to give him the opportunity to be rich, and he took it. And he had the ability to hand them money too. In 2009, when he put$15 ,000 into Stripe, which I'll get to in a bit. He had 15 grand he could pull out in the middle of founding a startup.
17:47He was working on Loop for years at this point. Where did he get the 15 grand? I didn't have 15 grand sitting around then. Jesus Christ. He didn't, like, this is the thing. No one digs deeper into these things. No one asks where the privilege truly comes from. And when that happens, guys like this get popular. Now, look, those who might defend Sam Altman might suggest that he may not of being a creator, but he gave his time and his energy to those he backed. Maybe he was a value creator, right? Wrong. According to the Washington Post, Sam Orman's time at Y Combinator, it ended because he developed a reputation for favoring personal priorities over official duties and for an absenteeism that rankled his peers and some of the startups he was supposed to nurture.
18:35Much as he had, as I've mentioned, once diverted engineers at Loop to work on a dating app instead of working on the company he was running. To give Sam Altman credit, he really is able to talk for hours without saying anything. Just ask, LinkedIn co-founder of Reid Hoffman, an investor in OpenAI and early ally of Sam Altman, and a man who was critical to getting Sam Altman returned to the helm of OpenAI when he was fired, who also let Sam Altman ramble for over an hour on his podcast Masters of Scale, with Altman at one point saying that he was, and I quote, he was in a developing world country shortly after the iPhone came out, and despite their poverty, everyone had smartphones.
19:19Now, I just want to be clear, this is so obviously, completely, and utterly, stupidly false, it made me genuinely angry. Why? Because, what? So the iPhone comes out, So the rollout of smartphones in other countries has been incredibly useful. It's been great. It didn't happen in a goddamn year, Sam, you lying sack of shit. I'm sorry. I just really hate this stuff. I really hate that these people who can go around getting money seemingly at will just go on each other's podcasts and jack off and wank about this nonsense, who say these patently, obviously fake things. he probably saying his defense by the way oh it was four years later which might have made sense it's always vague with this goddamn guy it's always vague with these goddamn guys and it's just so offensive because regular people do not get these opportunities regular people don't get put in these rooms people that are undoubtedly smarter and more accomplished and harder working than sam altman but because sam altman fits the template he's allowed to go and he's allowed to be rich, a hundred times over.
20:28And it really shouldn't come as a surprise that Reid Hoffman of LinkedIn, investor in open AI and so much, had such affection for Altman. After all, he's the founder of LinkedIn, which is basically the one place that you know you can go to read 600 words that mean nothing. These massive, cringeworthy paragraphs broken into a staccato style that hurts the brain and the mind, but makes people who don't really know why they're doing their job or care about what they're doing very happy because it makes it all feel far more important than it really is. Moving on through Altman's power structures, another of his close friends is Airbnb CEO Brian Chesky, who helped, by the way, also get Sam Altman put back in OpenAI.
21:13And he's helped Altman peddle these vague, rubbish promises about artificial intelligence, at one point with Chesky calling it bigger than the internet, mobile, and cloud combined, and saying that AI will, by the way, non-specifically change Airbnb, which is a company that has, and this is what kills me as well, only got worse over time. I think Airbnb really crested about four or five years ago, and then it just became the same but worse over time. Put my grievances to the side. And as you can kind of tell what I'm getting at here, Altman's used his political maneuvering to become super rich, and he's grown, according to the Wall Street Journal, a portfolio of more than 400 companies worth nearly$3 billion.
21:59Now, what's really worrying is that he's partially funded it with hundreds of millions of dollars of debt, of loans from JPMorgan Chase. Now, almost anyone can see why this is insane. Borrowing money from a bank and putting it into an industry where the majority of companies fail. It's just completely bonkers. I don't understand what's going on. Well, I mean, I do, which is the rich reinforce the rich and they put money with people who don't necessarily qualify for it and aren't necessarily smart or good at stuff or have done things, but because they're in the right company, it works for them.
22:40A regular person, they can barely get a mortgage, let alone what's likely, I'm guessing by the way, a low interest rate loan to sink hundreds of millions of dollars into companies like Helion, which is a nuclear fusion company that Sam Altman put$375 million into in 2021. He serves as both the chairman of Helion's board and potentially one of its largest customers because OpenAI is now and just announced a deal with Helion. And I quote Matthew Conitzer from the register here, to get access to Helion's not-yet-possible nuclear fusion-driven electricity generators. Just, it's so cool that that, and tons of people reported that without Matt's necessary bile there.
23:26I love the register because they're willing to say stuff like this. Nuclear fusion has not happened yet. That's a sci-fi thing that he has put all that money into. Nevertheless, plenty of people credulously accepted this and were like, Sam Altman, they're doing a deal, OpenAI. OpenAI and nuclear fusion. Just to be clear, there's no deal there, the nuclear fusion. Oh my god. The Wall Street Journal also reported that OpenAI is happily cutting multiple deals with other things that Sam Altman's invested in, including Reddit, which Altman owns hundreds of millions of dollars of stock in, thanks to an investment from Hydrocyne Capital when he worked at Y Combin AI.
24:02along with AI device companies limitless and humane, the latter of which Altman owns a 15 % stake in, according to the journal. It's just obvious naked self-dealing, the kind of stuff that should be something that disqualifies you, that gets critiqued further than, of course, the journal. And I'm not seeing it. I'm not seeing enough of it, at least. But I wanted to dig further into this investment portfolio, So I sat down with Tom Dutan of the Wall Street Journal to kind of go through it.
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27:03So in your story, you were talking about how Sam Altman had this massive credit line, I think from JP Morgan. Is this standard for investment? Have you seen this before? No, it's incredibly not standard. And in the course of reporting out this story with my colleagues, we talked to a lot of venture capitalists and investors, other kinds of investors and founders in the tech industry. And they either had never heard of something like this before or found it to be so incredibly risky, not just investing in startups off of credit, but using as collateral your holdings in privately held tech companies.
27:39Both of those things together, you do not see that very often in the tech industry. And why don't you? Just to be clear, why is this usually a bad idea? Because it's incredibly risky. I mean, if you think about an investment in a startup, what percentage of startups not only don't get acquired or go public, but straight up fail, will go to zero? The numbers, I don't want to quote a specific one, but it's like the majority. And that's kind of the way the venture capital system works is that you invest in a bunch of unprofitable or zero profit, zero revenue companies, hoping that a few home runs or grand slams or whatever is enough to justify your entire fund.
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28:20But if you were to use those holdings in those kinds of companies in which a huge majority of them go under, and then a huge majority of them do go under, and suddenly you are having to use as collateral holdings in a company that is worth zero, you're in big trouble. So yes, it is not done very commonly. Very strange. And it seems that strange financial relationships are kind of Altman's modus operandi. So tell me about Hydrazine. Sure. Hydrazine was a fund that Sam started around the time that he joined Y Combinator, the accelerator incubator in Silicon Valley. And he got some funding from Peter Thiel for it.
29:00And basically, it was a way for him to invest in other Y Combinator startups. So it was largely using outside money, but it was like just an access line to capital that he could put into these seed stage investments in startups. As I've mentioned previously, since leaving Y Combinator, Altman's investment portfolio has ballooned to hundreds of startups with billions of dollars.
29:26How many of these companies have you seen that have a direct relationship with OpenAI that he's invested in? Well, in the story, we laid out a couple of clear overlaps between, you know, open AI as a business and companies that he's invested in. Like the most obvious one that we that we brought up, I shouldn't say obvious, but the most like apparent one of this kind of overlap was Helion, which is this nuclear fusion energy startup that he's put hundreds of millions of dollars into. and they worked out a deal as we broke in the story for Helion to provide, be the energy provider for future open AI data centers.
30:03So these data centers, when they're built, and I guess when nuclear fusion exists, you know, would be powered by clean nuclear fusion energy. And so that's something in which Sam obviously as one of the largest, by far the largest investor in Helion, you know, there's an overlap there between that and open AI's business. And then the other one that also kind of stuck out to us was Reddit, where he is one of the largest outside shareholders in the company. And OpenAI announced a licensing deal with Reddit a couple of weeks ago. And, you know, Reddit stock popped on announcement of this deal. And Sam, as a major shareholder, saw his net worth increase, you know, within the course of a day.
30:46I mean, that's kind of how it goes when you hold stock, but notably on announcement of this deal. Surely any future deals between OpenAI and Reddit would mean that Sam Altman would be, there must be some kind of insider trading. How is that possibly legal? I mean, I don't know. I don't want to get into what's legal or isn't legal. It's questionable. Yeah. I guess what was interesting to me and to the other reporters about the way that Reddit and OpenAI announced this licensing deal was they didn't say that Sam recused himself from the conversations between Reddit and OpenAI. They said something to the effect of this deal was spearheaded or the person who was in charge of this deal was OpenAI's COO.
31:31And I don't know what to make of that. I feel like the language of Sam recused himself would have been easy enough to do, but they didn't do it. They chose not to do it. uh also feels like saying brad light cap took the deal that doesn't feel like a disconnection from sam altman yeah and it isn't regardless even if he wasn't involved and you know you could make a fair argument that like open ai probably should be licensing data from all of these you know providers because that's what they're using to train their models but the fact is they didn't um sam didn't recuse himself and you know whether it's his fault or not or this was intentional or not, the fact of the matter is he owns a sizable, like disclosed percentage of Reddit through various holdings.
32:12And like those, you know, those shares went up on announcement of the deal. So with Helion, back to the nuclear energy startup, have they actually built anything yet? No, no. I mean, I don't want to discount anything that Helion does because who wouldn't want nuclear energy to exist, right? Like that's, that's obviously a great boon for humanity to have nuclear fusion you mean yeah sorry so nuclear fusion yes uh like that would be a major technological breakthrough that would be a you know a sea change in how you know we derive energy from the grid and whatever but uh you know aside from a couple of announcements in terms of partnerships or or future purchase agreements between helion and microsoft and and you know the thing that we reported helion and open ai uh this is not like they have not achieved it yet these guys are not out there selling, you know, nuclear fusion energy to the mass public.
33:08Well, I think what gets me with that is Sam Altman puts$375 million into this company. He got them into Y Combinator, if I remember from your reporting. He has been embedded with them. Now there is this deal between Helion, a company that is yet to build something, and OpenAI that they will theoretically do something in the future. It just feels like, I know we're not talking in legalities here, but it feels like there is just so much self-dealing here. It feels like he has been self, Altman has been self-dealing for years. Yeah. I mean, I guess to make the argument that Sam or OpenAI or other people in that circle would make is like, Sam is a prolific investor.
33:51He's been doing this for as long as he's been in tech. They say he's kind of slowed down quite a bit, you know, maybe numbers would show a different story, but regardless, he, you know, this is a thing that he does. And like, if you are going to be running, you know, the most consequential tech company at the moment or startup at the moment or open AI, there's just bound to be overlap between a vast investment empire and an open AI. So that's like the argument to the contrary, you know, self-dealing, I guess that's the interpretation of the reader. Yeah, I think what it is is that it doesn't feel like this would be tolerated in any other industry.
34:32Politicians own stock, for example. I realize it's not an industry. And they are heavily criticized for it. But it almost feels like, and perhaps you can speak to this, it feels like Sam Altman gets reported on differently than many entrepreneurs and many investors. And I really do put the journal to the side here. I think the journal and the Washington Post have done a very good job scrutinizing it. But it feels writ large, like he's given a much rosier and easier ride than most. it's hard to know with sam right i mean he's such a figure at this point which is kind of funny to me because like i've been reporting on tech for let's say 10 years or so and and sam's always kind of been around uh he's just this person that we all kind of knew as reporters because of you know his role at y combinator and showing up at sun valley almost every year um and you know now open AI being this big deal that it is.
35:27He's this figure that everyone kind of has dealt with at certain points as a tech reporter. And there's just so many opinions on him. I mean, you know, I think there are people maybe like you who see him as this nefarious character, self-dealing, someone who isn't really above board. But, you know, you report a story like this and you talk to founders and some venture capitalists and they love him. They think he's, you know, a great investor, a brilliant business person, has incredible insights. And, you know, is this also kind of futuristic thinker who's kind of in that Elon Musk vein, thinking 10, 20 years down the road and at a scale at the trillions of dollars level that they find very, you know, alluring and exciting.
36:13And so, you know, it's always hard to know when you do these sort of stories, like what you're going to get in the course of reporting, because you can talk to a certain group of people who think he's borderline criminal. And to be clear, I'm not saying that, but there are people - Yeah, yeah. Just citing someone. Yeah. Yeah. And people who think he's the Nikolai Tesla of our time. What are you going to do? So here's my thing with that. Is he that successful a businessman though? He's very clearly a successful investor, but as a businessman, the company he's been attempted fired from looped fired from y combinator fired from open ai he seems like a very effective politician and a very good deal maker but i wonder how much of this because you say he's slowing down i wonder how much of his success can be attributed to the fact that he just was inside of y combinator and had the money to play at the time because you've been around long enough.
37:15So go ahead. Yeah, no, look, it's a fair point. And I think like, look, the numbers probably speak for themselves in terms of his net worth, right? You can stack the deck however you want in Silicon Valley to say someone is or isn't a good investor. Like when you have deal flow, when you have access - No, it really is a scoreboard situation. Yeah. Well, no, but I'm saying like you can have access to early stage startups better than other people and you're just going to be getting first looks at uber and stripe he's not an uber i'm just giving an example yeah like if you know stripe yeah yeah or stripe or airbnb which he is in like if you're in that inner circle of people who see these companies on the way up and like you know i don't think it takes a brain genius to look at something like uber and be like oh well i bet that's probably going to be a pretty big deal one day so i'd like to invest in that.
38:03But, you know, I think to his credit, maybe his investment in Stripe was an incredibly risky one for him personally. I think it was like$15 ,000 or something. And, you know, he probably didn't have a ton in his bank account at the time. So that was a pretty... When was that? Early, early days. I mean, they were in, it was in 2009, actually. Paul Graham... Oh, so before he sold Loob? Yeah. Yeah. I think it was around the same time. um because that's what i'm saying there is not really much of a risk if he hadn't but i feel like he sold loop later because that but nevertheless it is fair enough i don't know if sam would have been out on the streets um you know if this if this investment hadn't turned out but uh you know in a world of investment where people get congratulated for you know going all in on something or you know being willing to bet it all on an unprofitable you know unproven startup you know people give sam a lot of credit but yeah i don't know i think you bring up a good question which is like if you have access to an airbnb in the earliest days or or a reddit or even a company that like rippling which i don't know if your you know listeners know about but it's this very successful now hr startup um that sam has has invested in and also made an offshoot of gusto when it's complicated yeah yeah basically i don't know how interesting this is but whatever You know, there was a kind of a big scandal a bunch of years back with this company called Zenefits, which was accused of shirking regulatory requirements for training its workers on.
39:43Anyway, it was a big scandal a couple of years ago. And the CEO of that was pushed out very publicly, later replaced by David Sachs for what it's worth. And he went on to start this other company that was basically a direct competitor to that. and it's called Rippling and it's done really well in terms of building up its valuation. And Sam is one of their earliest investors. And I think, you know, part of his... Parker Conrad. Parker Conrad is the guy's name. Yeah. And anyway, Sam has made a bunch of money from that, or at least, you know, his investment is valuable from that. And my point is basically like, when you're in this inner circle, you have access to these companies and you can make these investments.
40:18Whether, you know, he is like standard deviations, a better business person than anyone else in tech, I don't know. It's not for me to say, but he is on paper, his holdings are worth billions. So I guess you got to give him something for that. So you mentioned in the story that Hydrazine, Sam Altman's firm, bought a portion of startup shares owned by Paul Graham versus Y Combinator. Would those have been Paul Graham basically doing the same, like he might have been investing in these companies too, or is this just early days Y Combinator shares? These were shares that were owned by Paul Graham, as we reported.
40:55And so it was probably a transaction for him to kind of take some money off of the table and offload them to hydrazine so he could be, I guess, a little bit more liquid. But yeah, these were Paul Graham shares that ended up being bought out by the hydrazine fund. It's interesting because there's so... It feels like Altman at times doesn't have a focus, though, because he's done all of these investments and you, within the reporting, within the Washington Post's reporting as well. There's this idea of him being absent, absent from Y Combinator, absent from Looped at one point, retasking engineers to work on a dating app separately.
41:33It almost feels hard to tell whether Altman is focused on anything other than just the number going up. But here is the real problem I see. What happens if, and we mentioned this earlier, these startups go to zero and he has this these massive credit lines yeah like this it feels like house of cards yeah i i think uh you know these people tend to be okay in the end i find so you know i don't know how many people are really all that worried about you know sam's credit line and stuff and you know obviously when interest rates go up these things tend to be a lot riskier than they were going into it um you know i can't go into all of the details there but yeah there's a reason why using, you know, privately held shares or private, you know, you know, shares in privately held companies as collateral is not commonly done.
42:26I mean, I talked to someone in the course of the story who was like shocked that someone would do that kind of thing. But, you know, again, to this Silicon Valley mindset in which risk, you know, quote unquote risk is really promoted and celebrated around here. That kind of thing is seen as like an example of how aggressive and cool Sam is that he's willing to kind of take a risk on something like that in order to put more money into, well, I guess you could, some people would say put more money into the ecosystem. Other people would be like, give himself more examples to get rich. Yeah. And it's, it doesn't actually, this is a question.
43:01Did you see a lot of, it was the general pattern of what you've seen a lot of smaller investments across a lot of companies or big fat ones generally like the 375 million in Helion. That one is a standout, the 375 million in Helion. But, you know, again, without going too specific into the numbers, because we didn't put them in the story, but, you know, some of them are in the, you know, millions and tens of millions, you know, whether that's all his personal money or money that's raised through, you know, various LP funds that are, you know, in which there's capital put in by LPs can get a bit complicated.
43:37But no, this isn't, you know, one of those angel investors who's putting$10 ,000 in a bunch of different companies. I mean, when he really believes in a startup or he really thinks they're going to go somewhere, the number is in the millions and tens of millions. So a slightly different tack here. Everyone is saying that OpenAI is the future, that ChatGPT will be in everything. You've been reporting on the enterprise for a long time. Do you think that's actually the case? Do you think that this company is really, I know they're making billions of revenue, but do you think they're ever going to go into the green?
44:13Do you think this is for real? I don't know. I mean, I guess I'd actually maybe even push that back to you because, you know, you're someone who's, you know, been around tech and, you know, reporters. And I mean, like, it's incredibly hypey right now. Like, of my time, you know, covering this industry, I've never really seen the level of hype. You know, crypto, obviously, was a interesting moment in terms of there are people who believe that the entire financial system was about to be transformed because of these, you know, the blockchain and, you know, there was the on-demand era, you know, cloud.
44:51I didn't really cover tech at the time. And, you know, that sort of proved out to really be in a very specific way transformative. I don't know with this one. I mean, I think the technology as it stands right now is very problematic in terms of its shortcomings i think hallucinations are a major issue uh if it's going to be as valuable as search which is like the most successful product you know tech has probably ever put out um and the other issue is the cost of training and deploying these models is tremendous i mean like you said like i cover the enterprise so part of my beat is writing about the cloud and data centers i mean to me one of the biggest things that's going on right now is this multi-billion dollar build out of data centers that's happening at an unprecedented level across not even the country but the world in order for there to be enough uh you know ai warehouses data centers you know outfitted with nvidia chips to train and and inference um you know deploy all of these models that's crazy i mean because that is all done in advance of there being enough demand um to justify these investments right i mean like this is all because you know for a huge portion of last year, there was more demand than supply when it came to compute.
46:06And so all of these tech companies started saying, well, we need to build out in advance of this demand being unending and increasing. And it's like, well, okay, that's fine for now. But if in the future, it doesn't, if this turns out to have been a fad or the years that it takes for this to be a widely a widely used technology is way longer than it is. You know, it could be one of the bigger boondoggles I think we've seen in tech, you know, like all these data centers that were built out that lay unused because there's not enough people wanting to use ChatGPT or any of the kind of similar products.
46:44Is that happening now or is that something you fear for the future? More for the future. You know, I think the demand is still fairly high right now. And if you talk to startups like ai startups they'll say it's still hard for us to get access to gpu clusters uh for us to train models or you know things like you know the the technology we want to deploy is still much slower than we want because there isn't enough compute but um yeah jury is still out i sorry i know that's a really lame phrase but but like no no no for real that's good though because what happens if the demand never arrives though does this stuff get repurposed?
47:20Does it get sold off? Well, I think you actually saw a kind of interesting thing happening with crypto, which I actually wrote a story about that with Berber, Jen, my colleague on this story, who was the lead on the Sam Altman piece. With crypto mining, there were a lot of companies at the height of, and specifically Ethereum mining, that were building up these rigs these these mining rigs that were um had gpus at the heart of them uh that were necessary when people thought that was going to be profitable basically like wasn't core weave which is yes the listeners a huge soon-to-ipo multi-billion dollar gpu provider weren't they previously crypto yeah 100 they're a fascinating company i i love core weave because yes this was a company that is started up by people in finance basically like traders um like energy traders uh i shouldn't actually don't know if there's energy, but people with like a very financial background who realized like this amazing arbitrage that was happening in crypto and Ethereum mining, which was that like the value of mining when Ethereum prices were high is greater than the electricity it takes to consume to do the mining.
48:30And so when that was at its peak, they were, you know, they were doing pretty well. And then they read the writing on the wall that, you know, Ethereum mining was probably going to decrease in value. And they made an early switch to like retrofit all of their mining rigs into ai compute and that was before chat gpt and you know open ai became a household name um but anyway i bring up that whole story because um what a lot of ethereum miners started to realize when there was this kind of shift in the nature of ethereum mining that basically meant they didn't need gpus like these very powerful gpu rigs to do the mining is they were stuck with these kind of useless machines.
49:09And so a lot of them have tried to like jump over into AI compute and providing, you know, training and inferencing. And so it was an interesting example of like one trend jumping into another. And so I don't know what that could mean because the theory of mining is just not even close to the scale that we're talking at here with AI. But, you know, tech seems to find a way. I don't know. I don't have a good answer for it, but it would be a crazy outcome, honestly. We're talking$30 billion a year of investment in infrastructure from a single company alone in building up data centers. So if that ended up not being necessary, yeah, I don't know what to do with those things.
49:53Yeah, it feels like what I would worry about is the physical GPU equivalent of 2022, where you had all these companies in 2021 who hired everyone everywhere and then they went oh crap better fire them but it almost feels like it could cause i think nvidia feels like they would be or amd to an extent micron i guess but would be most at risk from this because if there's just thousands tens of thousands hundreds of thousands of blackwells or what have you sitting around unused, it feels like it could be catastrophic. Yeah. I mean, at least NVIDIA is selling stuff, like at least they're pushing product, you know, like at least they're manufacturing or designing things that are manufactured and selling to the people who are paying cash for them.
50:42So that's, that's better than some crypto or sorry, that's better than some AI companies that it's really just on like on hype and a hope and a prayer. But yeah, I mean, like as we're recording this, NVIDIA is in and around a$3 trillion company. It's more valuable than Apple. I mean, that's crazy. Yeah, there's a lot going on in terms of the expectation of this sort of not stopping anytime soon. Do you think the AI boom is a bubble? Oh, yeah, 100%. Like, I don't I don't even think that's a controversial statement. Like, I think Sam, go ahead. Yeah, no, I think Sam would even agree. And like most people that I talked to in AI, I think it's a bubble.
51:21Because look, the nature of that doesn't mean that everything's going to go to zero and and that you know like the huge run-up in value that we've seen with microsoft and nvidia is going to all you know disintegrate if it takes a lot longer or it doesn't even catch on with ai but yeah i mean you're seeing money and and my colleague berber wrote actually a good story about this a couple weeks ago i mean you're seeing startups that have no you know no revenue really or or not even a product raising at valuations in the billions i I mean, that's the very definition of a bubble. So yeah, I don't even feel like I'm going out on a limb saying that.
52:00So I will push back on that. Not to say you're not going, like, I believe you are, because if you look around, and this is crap on this one, I think, it feels like AI is humored on a level in the media right now that I have literally only seen on the metaverse, where it was just this concept, not saying that AI is useless, generative AI has uses, but it feels like everybody is giving Sundar Pichai, for example, the benefit of the doubt about Google search, or at least they were until it told you to eat rocks. But especially with ChatGPT, they're just kind of assuming these things will happen. And I don't know what it is.
52:37It feels almost like the... Why do you think people are giving it so much space and believing that it will grow exponentially? Well, actually, I have two answers to that. I mean, one is like you are surrounded as a reporter by your sources. The people that you talk to day in, day out, who, you know, try to let you know what's going on in the space are people that a lot of the times are big believers in any new trend in technology. And so it's kind of easy as a reporter to hear about this stuff and want to at least explain it to readers, not necessarily be part of the hype. I mean, that's not our job, but at least say like, well, this is why Anthropic is getting billions of of investments or obviously open AI or anything like that.
53:20Um, I think if I had to just personally guess on a lot of this stuff, you know, it's been a bit slow in terms of transformational technologies in a while. I mean, honestly, you could maybe look back to probably the iPhone as the last thing that like fundamentally upended the way we live our lives. Um, you know, in the enterprise, I guess you could look to the cloud, although most people don't care about that. Um, um but you know with ai and you know these kind of seemingly magical interactions that you've had with chat gpt where it can you know write poems and and you know create images and and you know sora and the video stuff and you know whatever you want to call that you know her like demonstration from open ai like it it demos very well um it sounds like the kind of promise of ai of creating something that approximates human intelligence.
54:15Right. You can fill in the gaps. Yeah. It just like, it feels like the future. I'm not at all saying that it is, but like in terms of like other technological trends that we've seen in the last decade or so, like this one comes closer to science fiction than anything I've seen. I'm not saying it is, but like, it looks like it on paper. And so it's a lot easier, I think, to get caught up in the hype than you may have been in like, I don't know, Uber for X or like instant delivery or something.
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56:15The Wall Street Journal also reports that OpenAI has established, and I quote, a strengthened conflicts policy and a new independent audit committee that reviews potential conflicts, which the journal also notes has yet to disclose any details about what those policies might be. it's also important to remember that when sam altman returned to open ai he appointed a new board of directors made up of this avengers of capitalism i've called them before people like fidget cimo ceo of instacart which is a company that sam altman invested in to a board that also already included dan adam d 'angelo of quora which is another company that sam altman invested in oh oh sorry sorry i forgot there's one other guy that sam altman added back to the board when he became CEO.
57:02He's a guy you might know. He's called Sam Altman. It's so good watching all this happen. It's so fun. It's so great watching all of this naked, self-dealing, corrupt nonsense happen. And everyone's just like, this guy is the future. Sam Altman's the man. And I think the frustrating part of watching the Sam Altman story unfold is that at no point anybody appears to interrogate who this person was and whether they might be fit to task. There are credible allegations of abuse from his sister, Annie Altman. There are real things happening here, business things, social things, horrible things, and no one's goddamn doing anything.
57:43And maybe that's it. Maybe Altman's skill isn't so much creating things or any real legacy, but it's just a result of the momentum one gets when you've made enough money for people and enough money yourself that people no longer bother to check and would rather just find convenient platitudes and stories about the clever things you've said rather than think about it for too long because maybe the truth's just a little disgusting and the problem with someone like sam altman is that they'll eventually get to the point where they can do real damage i don't know like today like becoming the figurehead for the entirety of Silicon Valley and the entire artificial intelligence boom and the CEO of its largest player.
58:29Altman is a marketer at best, kind of a management consultant, but let's be honest, history shows he doesn't really manage anything. Now, I think he's the Michael Jordan of bullshit, the Michael Jordan of empty promises, except he's never had a situation before where these promises were actually connected to something he was responsible for. And what's scary is, like I said, this guy is the CEO of OpenAI. And he has made all of these promises for everyone in artificial intelligence, even those not making generative AI. So everyone is putting the expectations of Sam Altman, who is building, and by which I mean having other people build a technology that doesn't do the things he's promising, on the entirety of the AI industry so that the people buying AI who don't really know what they're talking about go and use generative AI and then they say, wait, this doesn't do the thing.
59:21Do you not see the problem here? Do you not see that Sam Altman is leading tech to ruin? He's promising these things that generative AI cannot do. He is making these statements that are boosting stocks, that are, honest to God, impressive here, tricking Fortune 100 CEOs into investing money in tech that will not do what it says. And when the ruination begins, it's going to be terrible for the Valley. Funding will be even harder to get. And in the next episode, I'm going to explore Sam a little more. And I'm going to really look at what happens to an industry when they so doggedly follow and support and appreciate such an obvious false prophet.
1:00:16Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matt Ossowski. You can check out more of his music and audio projects at matosowski.com. M-A-T-T-O-S-O-W-S-K-I.com. You can email me at ez at betteroffline.com or visit betteroffline.com to find more podcast links and, of course, my newsletter. I also really recommend you go to chat.wheresyoured.at to visit the Discord and go to r slash betteroffline to check out our Reddit. Thank you so much for listening. Better Offline is a production of Cool Zone Media. For more from Cool Zone Media, visit our website, coolzonemedia.com, or check us out on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
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1:02:00No pressure, just possibilities. Visit buyatoyota.com for a great deal on an efficient Toyota today. Toyota, let's go places. Stop settling for weak sound. It's time to level up your game and bring the boom. Hit the town with the ultra-durable LG XBoom portable speaker and enjoy vibrant sound wherever you go. Elevate your listening experience to new heights because let's be real, your music deserves it. The future of sound is now with LG XBoom. And for a limited time, save 25 % at LG.com with code FALL25. Bring the boom. X-Boom. This is an iHeart Podcast.
From the publisher
Sam Altman has used his power and influence to become a multi-billionaire with stakes in hundreds of startups, but behind the curtain, he's never run a successful company, fired from both Y Combinator and, briefly, OpenAI. In this episode, Ed Zitron digs into the history of Silicon Valley's most popular confidence man, and talks to the Wall Street Journal's Tom Dotan about Altman's many, many investments. EPSIODE LINKS: https://tinyurl.com/betterofflinelinks
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