OpenAI and Microsoft’s Grand Bargain, Sam Altman’s Next Three Years, A New Humanoid Robot

30:31Is he saying that OpenAI is going to be moving in that direction? Okay, that's interesting. Yeah, let me make a point here. On top of this moment that OpenAI has ushered in, Microsoft has become a$4 trillion company. NVIDIA has become a$5 trillion company. Google is nearing$4 trillion. Even Google, the much forlorn Google, is getting close to$4 trillion. It's just an absolutely fantastic earnings report this week. And OpenAI is like looking around and it's being like, well, NVIDIA builds infrastructure and NVIDIA designs large language models, the Nemotron models. It's saying, well, Microsoft has this cloud business and Microsoft is building its own LLMs.

31:12Amazon has this cloud business and Amazon is building its own LLMs. Google has its own cloud business and Google is building its own LLMs. Everyone seems to be doing well. We're building LLMs. Why aren't we a cloud? That's what Sam's saying. All right, listeners, I will step back from my earlier statements. I think Alex might have convinced me. Okay, I think there's something here. I think you're right that he is at least hinting at they want a piece of that entire infrastructure layer. What that looks like remains to be seen. And I'll say we're going to get into the ads conversation. To me, this is a lot more interesting and exciting if they're actually going to be going after all the large cloud providers versus just kind of giving us Sora personalized ads.

32:02this could be something that he starts leaning into a lot more now that we think about like what they have what what picture they need to paint to actually make it to an IPO now that i have made the case that this is the smart bold business decision and you know they may not make it make it there but this is certainly where they're heading i want to take a break and then on the other side of this break, sort of allow myself to unfortunately make the counter argument because we've been hinting at ads this entire time, but there is a conversation that OpenAI is going through a Facebookification process where all the executives have come from meta.

32:44They have putting in Facebook processes and they're chasing a Facebook business model. And so it is interesting to see on the ground how different this is compared to that memo that Sam Altman wrote. So let's cover that right after this. The holidays sneak up fast, but it's not too early to get your shopping done and actually have fun with it. Uncommon Goods makes holiday shopping stress-free and joyful with thousands of one-of-a-kind gifts you can't find anywhere else. I'm already in. I grabbed a cool Smokey the Bear sweatshirt and a Yosemite ski hat, so I'm fully prepared for a long, cozy winter season.

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34:36Again, if you're looking to invest in Bitcoin but don't know where to start, the Gemini credit card makes it easy. The Gemini credit card is issued by WebBank. In order to qualify for the$200 crypto intro bonus, you must spend$3 ,000 in your first 90 days. Some exclusions apply to instant rewards in which rewards are deposited when the transaction posts. This content is not investment advice and trading crypto involves risk. The Gemini credit card cannot be used to make gambling related purchases. And we're back here on Big Technology Podcast Friday edition with Ron John Roy of Margins. As we do every week, we break down the week's news in the first half.

35:12We went through the Microsoft and OpenAI agreement and Sam Altman's big plan for the future of OpenAI. And I stood on the table here and said they are making bold bets. They're trying to be a massive business, autonomous research, their own cloud. And then you look at what's happening on the ground inside OpenAI. and what we see there is a mirroring of Facebook in many ways that are making OpenAI's employees themselves quite uncomfortable. So here's from the information, OpenAI readies itself for its Facebook era. In the three years since OpenAI introduced ChatGPT, the company has seen an influx of leadership and staff from Meta, even as Meta has poached liberally from OpenAI in recent months.

35:57Of the people who list OpenAI as their current employer on LinkedIn, approximately 630 previously worked for Meta, which represents 20 % of the roughly 3 ,000 total employees at OpenAI. The contingent is so large that OpenAI's Slack channel has just, OpenAI has a channel, sorry, OpenAI's Slack has a channel just for former Meta employees, including one, of the current employees. As the Meta alums have arrived, it's become evident that some of OpenAI's latest strategies and initiatives do resemble the tactics Meta used to grow a corporate juggernaut. OpenAI itself is keenly interested in growing into a similarly gigantic form, an effort to satisfy investors and justify the half trillion valuation it received a few months ago.

36:46So Ranj, I mean, we've talked about it, you know, at length about all the OpenAI, although Facebook executives now working within OpenAI, does what they're actually doing in their hiring practices show a very different direction than the one Sam is talking about in his tweets and live streams? I think certainly, yes. I think it's telling and almost, I don't want to say funny, but like, I mean, and we've talked about this since the moment Fiji SEMA was hired, when the moment Pulse came out, certainly when Sora came out, like they're just laying this groundwork and infrastructure for just lots of ads.

37:26And I actually think they're going to have to release this ahead of any kind of IPO because, you know, online advertising, especially whatever that next wave of AI platform advertising is going to be very different than it looks today across and like any meta platform, Facebook, Instagram, or even a TikTok. So that is the next big market. They're incredibly well positioned, but it certainly doesn't square with any of the big, like no one is going to like to hear when you're painting this futuristic vision that it's just going to be a bunch of ads stuffed into whatever your feed, even though now it's not going to be a feed, but it's going to be like a chat conversation.

38:08So it's definitely not as grandiose, but it's certainly what's going to happen. Yeah. And when you look at the, and this is, again, I'm like, I made this whole case for like, all right, OpenAI is going for the gold and maybe they are, but I also think they need to build an intermediate business. And I don't know if this is going to really work out if they end up being an ads business above all else. But it certainly seems like they're going that way. We've talked about Pulse, which is this morning update that is available to Touchypt Pro users right now that is like an obvious media or ad product coming up.

38:43And there's also, this is from the information story, OpenAI employee worries range from the perceived shallowness and potential abuse of Sora, the company's new video app, which doubles as a social network and is rocketed to the top of the app store charts, to recent comments from OpenAI's leaders suggesting a growing openness to advertising as a revenue stream. I mean, Sora is almost case in point of like what happens when you merge Facebook ethos with an open AI ethos, right? It had a kind of disregard for, you know, typical norms like privacy, some good engagement stuff to get you like interacting with your friends, social components, notifications.

39:24It felt like they almost did the Facebook version of AI better than Facebook did. I mean, not only almost, they did. And you saw how flat Facebook's fell with vibes so yeah it is starting to look even the actually in terms of uh the logan paul like being able to use him as a cameo on sora jake paul oh sorry jake paul all right okay always get my pauls wrong um even jake paul like being used as a cameo and i remember like at first people were it was actually brilliant like at first a lot of people were kind of horrified that someone would let themselves have their likeness be used so openly and people kind of making fun of it.

40:04And actually to Sam's credit too, he did that. And it was such a perfect seeding of a growth hack because like when you open that blank start problem of what do I create, but suddenly being able to make fun of Jake Paul and Sam Altman is what everyone wants to do anyways, and is a deep human trait of all of us. So to enable that was a great growth hack and really feels like just classic Facebook product. So they're doing well. Now, remember, OpenAI started as a research lab and there have been people that have like sort of stayed there from those research days. But as they bring in these meta executives, some of their perspectives have flown in.

40:45Here, this is again from the story. In 2024, a long memo from Kevin And Wheel, a former Meta executive who was then serving as the chief product officer, caused a bit of a stir shortly after he joined. In the document, Wheel, who was known at Meta for his lengthy missives, detailed his goal of getting ChatGPT to a billion weekly active users and having it pass the toothbrush test, a term former Google CEO Larry Page coined to refer to products consumers use daily. Some executives, including Mira Moradi, who was then OpenAI's chief technology officer, chafed at Will's memo and felt the naked emphasis on simply increasing users rather than trying to build a quality product that could attract users was the wrong strategy.

41:28Very interesting culture clash going on within that company. And Mira is no longer there, so it seems obvious which elements of the company have won. Yeah, I like the toothbrush test. A product you use daily is a good kind of barometer or metric for this. And I mean, ChatGPT certainly has passed the toothbrush test. There's times when I actually wish they did not kind of engagement farm the hell out of it because it's a pretty compelling daily use product for anyone. But obviously, they need to kind of increase time on site, total chat interactions. And, you know, they're going to have those KPIs in a dashboard.

42:09But my favorite part of this is the idea that maybe Mira Morati, this is why she doesn't even need a product and is raising a billion dollars with no product. So it does not actually get - If you can get a billion dollars for no product, go get it. Yeah, and that way the product is not going to be used in the wrong way and not going to be used for engagement farming because there's no product. There's no product. It's brilliant. It's brilliant. I swear, any VC who bought that. I mean, we will see something, but I don't know. I think that is the purest form of product that avoids all of this kind of like sullying of greatness is no product at all.

42:50You know, I think we'll try to do that with the podcast. You know, we will just not play and not record any episodes so as not to upset the balance of the universe. I think that's the only way. I think advertisers would be into that. I mean, they must. Or maybe we'll just get some VC funding. No, we could just get it. We should just get Mira and Elias to advertise on our non-show. No product, no show. No product, no show. future no ads god as we're all just downloading dave's hot chicken app for free sliders reference this week jensen and uh the ceos of samsung and i think i'm telling you one of their companies long time readers and margins will know of my i i love fried chicken and i use it to explain i've written a lot about fried chicken and private equity with popeyes it's a long-running thing I love when it shows up at the center of the great business stories and it continues to do so.

43:48That's forget, forget AGI or ASI, fried chicken is the barometer for where greatness in tech lies. So one more part of this story that was really interesting to me is at the very end, super buried. But I would have written an entire story based out of this. I don't know if they didn't have the sourcing there or what happened. But some employees have bristled at how post-training, when a model learns to follow instructions and respond how humans prefer, has started to emphasize engagement metrics. According to a former employee, they have felt the new emphasis is another sign that OpenAI is beginning to become another meta.

44:24We don't want to become engagement farmers, a current employee said. Wait a second. Post-training, core of the model, they're building in engagement hacking or emphasizing engagement metrics? That's a huge story. Yeah, I mean, but anyone who uses ChatGPT sees it baked into the product. We've talked about this a lot. I've complained about this a lot that you can ask a very straightforward question that has a very straightforward answer. And it has to ask you, would you like to do these other three things? And here's another chart or a slide or something like, you know, like the entire product is it's so clear what is happening and I'm sure it works.

45:08And I guess that really does kind of like solidify the medification of OpenAI where, you know, you can, when it's so baked into the product that you can viscerally feel it, I think it shows that you've been medified. Right. And you had talked pretty recently about how like OpenAI just wants to use its compute. And we had some readers being like, what is Ranjan talking about? And I think we're starting to get some illumination here, which is that they are chasing users. They want engagement. More engagement probably leads to more investment. They think they'll get the cost down eventually. And they have an IPO.

45:45And they sort of will figure it out after the IPO. Well, yeah, because 1.4 trillion in financial commitments around data centers and compute, they have to show that it's being leveraged and utilized in some way. Like we had talked about this in the Sora context, which is a very heavy compute usage. But to me, the pulse where it kind of works all night to give you an update of things in the morning, and it's just draining compute even as you sleep, like all of these products, typically you would think a company that's operating with some kind of margin is actually worried about, are we overusing compute?

46:29Every other enterprise in the world is definitely having conversations when it comes to AI around, are we doing this in an economically viable way? But OpenAI, they're building things that just, they're not worried about efficiency. They're worried about actually, does it use more compute? Because that's going to look great to the market. As counterintuitive as it shows, or as it may seem, it'll look good to the market, I'm convinced, to show we're actually using this kind of percentage of our overall capacity. And now on the flip side, you wonder, well, what's happening at Meta? Because Mark Zuckerberg's sitting over there in Menlo Park, and he's like, wait a second, OpenAI has the fastest growing consumer application of all time.

47:13It has lots of my executives. It has a bot that's become not only informational, but something that's having relationships with many of its users. And people are getting less and less interested in having relationships with other people on social media. And they're very well capitalized. And so I've actually gone from being like, well, you know, Meta, not Google, might be the most under threat from this generative AI moment. And Meta, to Mark Zuckerberg's credit, is going to spend and try to stay in the game. and when it told wall street this week that it was going to spend a lot more in order to do it wall street did not like that and meta stock is down 12 and a half percent this week as of this recording i'm actually kind of curious what your perspective is on this meta situation is it an existential threat and how does the business get through if it's going to actually fight this way well i i was definitely thinking a lot about that why meta it was a negative signal to the market that they're increasing their CapEx spend, whereas Microsoft and Google, it was almost a show of strength to kind of continue that story on CapEx spending.

48:27And I think it's got to be because when Google or Microsoft spend more and even Amazon on CapEx, part of the assumption embedded in that is companies will use that and give them money for that capacity. Like it's not just training your own models. It's not just feeding your own product. It's you're building an entire infrastructure that people will spend money to be part of. Whereas with Meta, every dollar they spend, it only sees a return when it actually flows into one of their products. So it's a very different kind of spending than the other tech giants. So that was my read. I don't know, how did you think about it?

49:10No, that makes sense. But then it's also interesting. I'm actually curious what you think about the product side of Meta also. Because you're going to get less of an immediate reward for your spending and your product is under threat. It's a good point. But to me, I don't know. I think, okay, the product side, one, we've talked about this a bunch recently. I think Meta is going into the hardware business in a big way. I think they're going to go actually start competing with Apple. So the way AI flows into actual kind of more from the hardware side, I think they're going to have like a pretty interesting place in all of this competitively.

49:50But you can also look at like, remember, when iOS 14.5 came out, Meta, everyone said their ads business was dead. And they leverage like classic AI and machine learning to actually solve their ads problem and their ad targeting problem. So they have actually shown using AI to actually improve your own existing business. They probably showed that better than anyone. It wasn't an add-on or kind of like a tack-on feature. It literally transformed and saved the core advertising business. So I think they're in two businesses right now, advertising and potentially hardware. And AI can help both. Here's my new take is that meta might want to consider not developing its own models and just building products on top of others.

50:40I think I'm on. I agree with that because Lama always almost felt like almost a defensive posture or not defensive, like Trojan horse just to kind of scare the open AIs of the world. Open source, here you go. um so so i think it's never really been clear and clearly all the upheaval with at fair and now what's it called again tbd oh yeah that's the super intelligence lab is now yeah the super intelligence lab like it's clear that there has not been a straightforward straight line path over there in terms of model development right okay uh we should also talk about this AI wobble because, you know, this week, obviously, we got a lot of numbers about whether the AI investment is like seeing return.

51:33And I mean, some investors are making this argument that like, well, unlike, let's say the dotcom boom, where you laid all that fiber and 95 % of it was dark. Now all the GPUs are being used. So therefore no bubble. But what's your perspective on the AI wobble? Yeah, this is my favorite phrase of the week. I hope everyone, it was just in the Goldman Sachs morning briefing newsletter from like a managing partner and CIO of a fund I had not heard of, AI wobble. The idea that like, you know, so much of the current market action and growth is completely centered around AI, but the idea that there is a much more immediate actual kind of return potential here, I think is how I view the market.

52:24So comparing this to internet bubble 1.0 has never been the correct corollary for me. So I'm loving this AI wobble. It's not a bubble. We're going to get a bit of a wobble. Maybe when OpenAI announces their trillion dollar IPO and we actually look at their balance sheet and P &L, but I think it's going to be a wobble. My one question is, I mean, this is going to come up in a conversation that Nick Clegg will have here on the podcast coming up in a couple of weeks, but he's the former president of global affairs at Meta. All this money is going into this AI model development with the belief that if you reach AGI or super intelligence or whatever it is, that you can, you will, and you and you alone will possess it.

53:12And there's been no evidence to show that once a company builds a model of that nature, that they can hoard that intelligence. Well, that's why Sam's doing it for the public good. It's for the public good. But if that's the case, then all that money is going to light on fire if you can't hoard intelligence. Interesting. Well, yeah, I think, I mean, Alex had a tweet in our prep doc that was very interesting to me because Sundar basically like proudly saying 150 Google Cloud customers processed 1 trillion tokens and then had some kind of standard case study metrics about email open rates and stuff like creating campaign efficiency.

53:52But when you actually map out the numbers there, that's less than a million dollars using their own token cost per enterprise. So you're at 150 million in revenue, which is 0.3 % of GCP's overall annual revenue. So the scale is interesting to me where, I think that it just reflects like no one has any idea what the economics of any of this are. Like what's it, we've talked about this at length. How do you value a company? This isn't software. This is something different. Maybe it's more industrials. Maybe it's more traditional retail, like apparel retail even, the actual kind of economics of generative AI, no one knows.

54:37And this was such a perfect encapsulation of it where Sundar is just like bragging on Twitter. And then when you actually just calculate it out based on their own numbers, it's kind of underwhelming. Okay. Yeah, it's going to be fascinating to watch. I mean, obviously the stakes just get, they get raised higher every week this week. We even talk about NVIDIA hit$5 trillion. It's like an afterthought. Afterthought. It took three months to go from$4 trillion to$5 trillion. I'm more concerned about Jensen's fried chicken order in Korea than the extra trillion in market cap. All right. So let's close with this story about this new humanoid robot, the 1X Technologies Neo.

55:19Joanna Stern from The Wall Street Journal wrote, I tried the robot that's coming to live with you. It's still part human. She describes her experience with it. the five foot six inch robot, shuffled to the dishwasher, pulled the door handle and slid a fork, tines up naturally into the silverware holder. Then it grabbed a towel to wipe the counter. Later it folded my sweater and fetched a bottle of water from the fridge. It was wild to watch. Sure, Neo nearly toppled over while closing the dishwasher, took two minutes to fold a shirt and twisted its arm, attempting to dance the Macarena. But, oh, she goes, I didn't mention Neo had a human puppet master controlling it with a VR headset.

56:02You like this? It's a person using VR to control a robot in your house? You like this? No, I actually don't like it. I was just saying that for the sake of argument. Well, Ranjan, now you have to make the case for it. You kept the listeners on the line the entire show saying you were going to like this. Now you're out. Okay, here's what I like about it. Okay, now we're talking. Yeah. To me, I respect and like a startup going for it. Everyone has painted the picture, Elon more than others, that humanoid robots, remember Optimus, haven't heard much about that recently. This is the future. I like that a startup is actually like pre-order.

56:46It's not perfect. There's a person who's going to be looking inside your house all day long and controlling this remotely, but we're going for it. We're doing it. If this is truly the future, we're going to at least take a shot and try to do it. That's my positive case. And I think it's, I respect it. People allow real humans in their house during the day. So this idea, I mean, the thing that got me was he was like, this robot is training. It needs to learn the use cases in your house. We'll collect data and then eventually we'll be able to automate that it's the second part of that that i'm not 100 sure like people have done this with chatbots the the l the pre-llm chatbots were like we just need to collect data on what people want and then we'll find a way to build that and they couldn't until the technology breakthrough happened so this idea that they're building a company with a direct shot to like a humanoid robot that works to me is is not promised but But yeah, I guess, okay, I'm coming around to you here.

57:47Kudos for trying. Well, do you know what? But to take the other side, because that's really where my mind is. I think I have said this in past episodes. I just never thought that the form factor of robotics needs to be humanoid. Like it makes everything more difficult. And I would rather, I wish, and I know I've lost this battle. I've given up. Everyone wants a humanoid robot. I rather would have a laundry folding robot in one corner of my house, like the Roomba vision. Like you didn't need a humanoid robot to hold a vacuum cleaner that you already have to vacuum your house. Just make a little disc-like thing and it actually works great.

58:32So I would rather have a series of robots around the house specialized for their task rather than needing this kind of – Actually, it looks kind of cool. I'll give them. It's like, looks like what we all imagine a humanoid robot to look like with like a, this weird mask type blank mask face that someone somewhere is looking into your house through and controlling through VR. It looks cool, but I just know humanoid robots. It's maybe it's not too late. Yeah. I mean, I will tell you that my reaction when, so Joanna made a great video about this and my reaction when like the human, the human behind the robot started speaking was like can you can you please shut up like the guy's name was touring that was his first name wow it was his real first name was touring oh really um yeah okay the teleoperator but i'm also concerned about this future where people in wealthy countries are buying these bots for like 30 000 and then paying like a service fee of like$100 a month.

59:34And then on the other end, you have just like warehouses filled with like thousands of people in the Philippines that are just like operating these bots for them as like virtual housekeepers. And I mean, maybe that gives, you know, some, you know, create some jobs in the Philippines, but it just feels dystopian to me. I don't like it. I mean, I'm not to be even overly cynical, but that's how a lot of globalization worked. I mean, call centers are basically like a early precursor to that. So so I think that side. But I don't know that the ability like how easily could the person on the other end just fuck up your house?

1:00:16Like that's a very good question. Like how they say what's stopping them? Is there? Yeah. Now they say they say they have zones. They have like zones that the robot can't go into. And like the robot can is able to lift certain like very heavy weights, but like, you know, they say it's not going to be able to, they're not going to let it. Let's be honest. Like there's probably a way around it. If you give a person with a robot in your house, like free reign around your house, there's definitely going to be one who's like, I don't like the person who's like employing me. I'm going to smash some frames and stuff like that for sure.

1:00:51And then of course, you know, we have cloud outages all the time. So for me, the biggest worry is like, you know, humanoid robot holding my baby gets hit with an AWS cloud outages happen and the baby drops. Anyone who lets that happen. I'm just telling you, don't let me into your house through the guise of a VR controlled humanoid robot. Because we'll smash your shit up. I am not the teleoperator. you want. Only mischief can take place at that point. But I, again, respect them actually trying to make this a real thing rather than just endless talk and demos. They're trying. So congrats to you, One X Technologies.

1:01:41If you came in here trying to make a convincing argument for the Neo robot, I'm not buying it. Especially not letting you in my house with the ability to lift heavy things and smash my stuff up. You know, one more positive thing. The company's name is kind of awesome too. 1X Technologies. Is that like a play on like everyone wants 10X, everyone wants 100X, but you know what? We're 1X. Dude, that is a great name. Okay, I suddenly believe in this technology. Yeah, I think 1X, you know, it's real. It's on the ground. It's happening. We don't need your 10 or 100X. Our robots are only 1X and we're okay with that.

1:02:20Are you going to dress up as the Neo for Halloween? I wonder if there's going to be, if we're going to see a Neo robot out there, but that's it. I hope we do. To whoever is dressing up as Neo, meaning you put together that costume in the last two days, I salute you. More so than the robot itself. You know, I've had a week to prepare, so I can tell you what my costume's going to be. The Dave Hot Chicken Sandwich. My wife will be the ketchup bottle The app The app I do the new couple Halloween One two is One person is the Dave's Hot Chicken app And the other person is Sora Oh Sora Number one and number two Alright Ranjan I think we should say farewell Before this really goes off the rails I think it's time 1x Technologies Alright everybody have a great weekend And we'll be back on the feed next with M.G.

1:03:17Siegler talking about potential open AI, IPO and everything else around that. So thanks to you, Ranjan. Thanks to everybody for listening. And we'll see you next time on Big Technology Podcast. Did you know your credit card points and miles can lose value to inflation? Credit card companies often reduce the redemption value of your points and miles. Now, imagine a credit card with rewards that can grow in value. With the Gemini credit card, you can earn Bitcoin or one of over 50 other cryptos instantly with no annual fee. Every swipe at the store or gas pump earns you instant rewards deposited straight to your account.

1:03:52Plus, sign up now for a$200 Bitcoin bonus to kickstart your rewards. Visit Gemini.com slash card today. Check out the link in the description for more information on rates. Again, if you're looking to invest in Bitcoin but don't know where to start, the Gemini credit card makes it easy. The Gemini credit card is issued by WebBank. In order to qualify for the$200 crypto intro bonus, you must spend$3 ,000 in your first 90 days. Some exclusions apply to instant rewards in which rewards are deposited when the transaction posts. This content is not investment advice and trading crypto involves risk.

1:04:28The Gemini credit card cannot be used to make gambling-related purchases.