OpenAI Saga Ends with Sam Altman Returning & Binance Pays Billions in Crypto Plea Deal

0:26Race the rudders! Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. On today's pod, Kim Kardashian makes her first private equity investment, and it is spicy. Then another crypto king has fallen. It's Wednesday, November 22nd. Let's ride.

0:50My friends know there's nothing I like talking about more than logistics, so let's do that with the holiday coming up. We're going to be releasing episodes tomorrow and Friday, but they won't be the typical news roundup. Tomorrow, we've taped an interview with a special guest that would have caused 15-year-old Neil to absolutely faint. Then on Friday, we're going to be answering all the questions that you've sent in for our mailbag episode. So thanks so much for doing that. Hopefully, nothing big happens in the news over Thanksgiving. Nothing happens. Everyone's sending those. Let's circle back after the holiday email.

1:21So I don't think anything's going down in the corporate world. Fingers crossed, though. Okay, Neil, time for our last Brex ad before Thanksgiving. We all have that one cousin at Thanksgiving who is embarking upon maybe an ill-advised entrepreneurial journey. Yeah, and you always have to make that small talk with them and tell them they're totally justified for quitting their 9-to-5. But you can do better than just small talk this year. You can tell them about Brex. Brex is an AI-powered spend platform that handles everything from corporate cards to bill pay. And if they've hired some employees already, Brex makes expense management a breeze.

1:56Okay, Neil, so get your practice in now. Oh, Airbnb for ghosts sounds amazing, Cousin Greg, but you should really check out Brex.com today. I'm Scott Hanson, host of NFL Red Zone. Lowe's knows Sundays hit different when you earn them. We've got you covered with outdoor power equipment from Cobalt and everything you need to weatherproof your deck with Trex Decking. Plus, with lawn care from Scott's and, of course, Pit Boss grills and accessories, you can get a home field advantage all season long. So get to Lowe's, get it done, and earn your Sunday. Lowe's, official partner of the NFL. How did I do?

2:35That was brilliant. Okay, I'm ready to do that. Okay, after the juiciest Silicon Valley soap opera in a generation, there has been a resolution in the open AI saga. Sam Altman, who was fired as CEO on Friday by the board, has been reinstated in his position after virtually every employee threatened to quit if he wasn't brought back. There are some changes, though. The board that booted Sam causing an international incident is gone and new folks are in place, including former Salesforce co-CEO Brett Taylor and former Treasury Secretary Larry Summers. I don't know how Larry Summers gets his weasels into everything, but he does.

3:10I am not going to recap all that happened because I practice self-care. But, Toby, what do you think has changed or will change because of this entire fracas? Is it even fair to call it a resolution? Yeah, I think the big scoop here is that Sam was pushing for more control, including the removal of the entire board that kind of staged this coup against them. But he didn't really get it if you dig into it. OpenAI is still using that same convoluted governance structure with the for-profit entity sitting under the nonprofit arm. And so now he's definitely going to face questions from investors about how are you going to make sure that this doesn't happen again?

3:47And he's looking to raise almost$100 billion or at$100 billion valuation. And so it is one of those things where how can you promise that you won't go under the same thing just because the people are different? They could easily stage this coup again. But I think at the end of the day, all of this came down to the employees themselves. And the emblematic thing that happened yesterday is the employees actually threw a party after Sam came back. They were hugging. They were drinking, celebrating. At one point, a fire alarm went off and fire trucks showed up at the office building. And it's fitting because they were the ones that threatened to quit in order to bring Sam back.

4:25And they actually got their wish eventually. The employees are the ones who come out of this like the big winner because their value was totally shown in this saga. Yeah. For me, I learned that the way you set up your company matters. I mean, we learned way too much about this company's governance structure. But I think a lot of founders or early stage startups out there are looking at the way they're setting up their board and they're thinking, am I set up for success? Look what just happened at OpenAI. Can I be summarily fired right now? It's definitely the least sexiest part about setting up a business.

4:55But the way you structure your board and the way voting structures work really matters as we've seen. So I think that will be a reckoning across the Silicon Valley and beyond. It's so ironic, too, because there's a blog post from Sam Altman himself saying, do not innovate in your corporate structure. There's a reason why it's a boring part of the business. Innovate in your company, not actually how you set it up. And that actually came back to bite him in the end. So a lot of the debate around open AI has centered around long term existential questions like, will this tech eventually wipe out humans?

5:26And how fast should we be developing AI? And while the debate will only heat up going forward, there is a company making boatloads of money on AI here and now. And I'm talking about NVIDIA, of course. The tech giant at the center of the AI boom revealed that its sales tripled last quarter to$18.1 billion, smashing expectations by$2 billion. NVIDIA has a stranglehold on the market for the chips that train AI programs, and it has been the main beneficiary on the frenzy since ChatGPT was released last November. Consider that its AI chips did$3.8 billion in revenue a year ago, and now they bring in$14.5 billion.

6:04I can't do the math in my head, but that is exponential growth. All the while, it has left competitors in the dust. Remember Intel, that corporate giant that was once the world's largest chip maker? Well, NVIDIA's market cap is$1.2 trillion right now, which is a trillion more than Intel. Beast mode. Beast mode. We haven't talked about NVIDIA for a minute, but remember, in this AI gold rush, they are the ones selling the pickaxes. These chips enable all the big companies like Meta, like OpenAA, like Google to train their large language models. But you also have to remember that as recently as two years ago, sales of GPUs for playing video games on PCs were the largest source of NVIDIA's revenue.

6:43Now, if you compare it to data center revenue, which includes those chips, the gaming segment brought in$2.9 billion this past quarter. That was up 81 % from a year ago. The company's data center revenue,$14.5 billion up, I did the math, 279%. It's a wild turnaround for a company that used to just be kind of a smaller gaming company. And these things are expensive, these chips. I mean, there's this one order placed by an Australia-based company, and it amounted to$40 ,000 a pop for this H100 chip. And now NVIDIA is rolling out this H200 one, which apparently is much more powerful. So they control more than 85 % of the market.

7:22Everyone else was caught flat-footed when Chachi Beachy rolled out and did not have any of these capabilities. NVIDIA happened to have been making these chips for gaming, and they said, okay, this is perfect for your AI stuff. So they've just been printing money from this AI boom. Yeah, there are a few obstacles ahead, though. Mainly AMD is a rival chip maker. And then also, some of the export restrictions could limit sales in China, which is a big market for them. 20 % to 25 % of their data center revenue comes from China and other sanctioned nations. But still, to zoom out, NVIDIA is still up so much this year.

7:56Stock has gone up 241 % so far. So just, again, if you're going to sell the pickaxes, you might as well do it for the biggest gold rush we've seen so far. I don't think there's any precedent for a$1.2 trillion company to post 300 % revenue. I know. I don't think that's happened ever before. They'll probably go back to back, too. All right. You won't believe this, guys, but another billionaire founder of a high-flying company is stepping down. CZ Zhao, the founder and CEO of the world's largest cryptocurrency exchange, Binance, has pled guilty to money laundering charges as part of a$4.3 billion settlement with the U.S.

8:33Department of Justice. Attorney General Merrick Garland has been putting this case together against Binance for years now. and court documents describe a wide-ranging effort by Binance to evade money laundering laws, most notably ones that prevent financial institutions from doing business with criminals or terrorist organizations. It completes a pretty stunning fall from Grace from CZ, who is probably the most influential person in all of crypto. Despite the DOJ breathing down its neck recently, Binance was still a massive financial institution, trading on average more than$65 billion per day.

9:08So to see CZ step down and to see Binance hit with this fine, it was a very big deal, Neil. Right. At this point, the two biggest names in crypto, SBF and CZ, have both been found guilty of crimes. It's just kind of remarkable. I don't think that's ever happened before. But CZ and SBF actually have a history together because CZ was an original investor in FTX. And when FTX collapsed in 2022, everyone looked to CZ to bail him out. And CZ said, nah, man, you're on your own. But the duality of those two is very interesting in how the crypto industry has approached regulation, because SPF was going to Washington, D.C.

9:49He was being very friendly with lawmakers, inviting regulation. And CZ was always seen as this more antagonistic figure who did not who pushed against regulations lived abroad was not really making overtures toward lawmakers as this wild west of crypto was running and it didn't matter either way they're both uh they've both been charged with crime yeah absolutely the crazy thing is it could have been worse first of all they're coming out of this alive which maybe wasn't going to be the case uh if you looked at some of the court documents that were leaking throughout this investigation and honestly part of the problem is the doj may have dropped the ball a little bit because this case got so big and so bureaucratically bogged down that they just decided we're going to hit them with a$4.3 billion fine.

10:33And that's the best we can do just because it did get so, so big. But then the other take I've been seeing is that if they had fully shut down Binance's U.S. operations, it would have kind of pushed Binance into this fully decentralized entity, which means it wouldn't really play by normal business rules in the U.S. anyway. So maybe that was part of the decision to just hit them with is fine because if you destroy like the current corporate entity then it really goes full crypto on you and it becomes even harder to regulate so i've been seeing a lot of things also some people are saying that cz going down could be a good thing because it represents kind of the bygone era for sure of crypto and now you're making way for a new more regulatory friendly crypto era so i've seen lots of we've heard that we've heard that for five years though that the bad actors of crypto were getting weeded out and a new era of people who were playing above board, playing by the rules is emerging, and it hasn't really materialized.

11:26This is only going to fuel the fans of critics who say that crypto has been used for terrorism financing because this settlement named Hamas, Al-Qaeda, Palestinian Islamic Jihad, and the Islamic State, and Iran and other sanctioned countries for the ability to transact on Binance, and they admitted to that, and Binance did not put in any sort of significant controls to stop this money laundering from happening. So the people like Elizabeth Warren and other lawmakers who have been trying to crack down on crypto companies for doing this are going to point to this and say, we need to do a lot more because the biggest company in the space basically facilitated a lot of terrorism.

12:04Yeah, this is going to give them a ton of ammunition for sure. All right, Neil, before we jump into the next half of our show, we're going to take a quick break.

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13:15Kim Kardashian is getting into a new spicy business. Well, kinda. Remember, Kim has a private equity firm led by her and a business partner named Sky Partners. And that firm made its first acquisition yesterday, taking a significant minority stake in the brand Truff, which is a maker of luxury condiments, most of which have traces of, you guessed it, truffle in them. Now, this is a match made in heaven. Truff actually started as an Instagram account in 2017 under the handle at sauce and mostly was one of those aggregator food porn accounts that we've all seen at one point or another. But eventually they evolved and decided to make their own high-end condiments.

13:54One of their founders jokingly calls them the Dom Perignon of hot sauce. And I say this is a match made in heaven because Sky's investing thesis is to target viral consumer-facing brands, then potentially leverage Kim's know-how to make them into the next great thing. Neil, I've seen these bottles everywhere on social media. Very sleek, very aesthetic. And I'm sure a lot of our listeners have too. Have you seen them? I have not seen them, but I learned. Maybe I have. I don't know. There's so many condiments these days, but this one costs apparently$20 a bottle. They got spicy mayo. They got a bunch of other stuff.

14:26I think this space is pretty good to be in. Everyone's really into condiments now. Everyone's really into sauce. And obviously everyone's very into truffles and a lot of other luxury. I've never heard the term luxury condiments before but maybe it's a thing no they definitely are and trough has become pretty main steam I mean for a company that started as an Instagram account now it has these great b2b sponsorship it's partnered with Popeyes Hidden Valley Ranch Taco Bell even the Super Mario's Brothers movie and they're in very very big grocery stores at this point too Whole Foods Kroger Publix and Target it's one of the fastest growing hot sauce sauce brands in the conventional grocery category.

15:04So I think this is definitely, though, we're seeing Kim's thesis of when she started out this company kind of coming to like. And I love this as their first target because it is such an internet native brand that has really used DTC and has really understands like the partnership landscape and has leveraged that to grow, which Kim obviously does as well. What's very interesting is that typically celebrities do venture capital, which is when you basically write a check to a founder and say, go have fun with this. I'm just using my celebrity to kind of showcase you. And you can just do your own thing.

15:40You're doing well. But the fact that she started a private equity firm is very interesting and speaks to her interest in really being hands-on because private equity firms, they take stakes in companies and they have a much longer time horizon than venture capital. Plus, they require a lot more hands-on work. Private equity people like to get in with the business and shake things up. So the fact that she's established a private equity firm kind of surprised people at the beginning and rather not and rather than rather than a venture capital firm, because that's that's, you know, much less hands on, much less intensive practice.

16:15The interesting thing is, though, that they still haven't technically closed their first fund. So this deal is probably funded personally by Kim and her business partner and maybe a friends and family around. So I actually do wonder that if fundraising has been such slow going for this actual fund, maybe they just say screw it to the institutional investors and they do just kind of make it their own. They just fund it themselves. I don't think that's possible. That's a lot of money. Yeah, it reduces the scale that you can do. But if they make smart decisions and they target smart brands, maybe we could see like a new era of private equity ushered in.

16:50If anyone would do it, it would be Kim Kardashian. Meanwhile, she has Skims, which is the shapewear brand that is getting into men's, and it's now valued at$4 billion, looking to IPO next year. So she's really busy these days. We're going to spend the remainder of this show talking about Thanksgiving. And to start, I want to talk about a match made in capitalist heaven. The NFL and Amazon are teaming up to hold the first ever Black Friday pro football game between the Dolphins and the Jets. It'll be streamed on Amazon Prime Video, no Prime membership required, and is sure to be an orgy of content and commerce, the likes of which is only surpassed by the Super Bowl.

17:26Amazon is going to infuse the game with exclusive sales and shoppable ads so that when you're bored of watching Tim Boyle get sacked for the eighth time, you can get a head start on buying your gifts from the broadcast itself. Amazon clearly thinks this is an opportunity to place itself at the forefront of a major shopping holiday. And for the NFL, this Black Friday game is another step in its quest to dominate the calendar. It already owns Sunday and Sunday night. It has Thursday night football and Monday night football. It recently moved into Christmas and Christmas Eve. And of course, it already takes up all the oxygen on Thanksgiving Day itself.

17:59As Cowboys owner Jerry Jones said in an interview last year, we get up and go to bed at night asking people to look at us. Don't turn away. Wait a minute. You're not paying attention. Look at us. I would say mission accomplished. This partnership makes just too much sense. What's the NFL's ultimate goal to take more of our time? what's Amazon's ultimate goal to take more of our money so obviously you mentioned it this is a match made in capitalistic heaven I do think it is a great partnership the only way that I do think it maybe goes south is if Amazon makes itself too conspicuous people do just want to consume the football game and they have pledged to make it feel like a normal Thursday night broadcast but if you see too many of these ads in your face asking you to take out your phone scan this QR code, I think it could maybe turn people against it.

18:46And Amazon bought the rights to Thursday Night Football for the next 10 years. So I don't think they want to move too fast and alienate this audience. So that's the only tightrope I think Amazon has to walk here. Do you think this is the future of commercials with QR codes popping up and commercials moving from kind of this billboard type thing where you're just, it's very high level marketing, where it's just kind of incept this brand into your brain rather than a point of sale where they're literally showing you a QR code that you can scan and then buy something right away. I mean, that's kind of a huge innovation or evolution in commercials.

19:18I do think it's huge, but remember, only Amazon can pull this off. So I don't think it's going to be a wide ranging industry shift because it's not like NBC can tell you to go to their e-commerce show or they don't have one. They're just a broadcaster. Amazon is truly the only one who can do both at the same time. It's in the lab working on its streaming and live streaming bets, but it also is very much in the lab on its e-commerce front. So I don't think that it's going to be a wide sweeping thing, but I do see Amazon obviously pushing the buck forward when it comes to these ads. And then I just got to talk about some of the corporate jargon that's been around this because it is tremendous.

19:51It even may be more cringy than choiceful, but the Amazon is talking about eventizing the day. It makes sense, though. Actually, it's better than choice. So I take back my words. Eventizing makes sense. Like making this this. I mean, I mean, making it into an event. Right. Right. Black Friday has always been an event, but now Amazon wants to just dominate it even more. It's like Singles Day in China. It already has been eventized, but adding football into the mix is only going to make it bigger. Okay, with this being the last of our live-ish shows for the week, I'm going to do a quick preview of everything you need to know about Thanksgiving, from the travel to the cost of the meal.

20:26First, driving. I'm sure it's on many of our minds, considering 55.4 million Americans are projected to drive at least 50 miles from home for Thanksgiving, including myself up to Massachusetts this afternoon. When shouldn't you drive? Well, exactly when I'm going. The worst time to be on the road will be between 2 p.m. and 6 p.m. today, according to Enrix. Whoops. In terms of flying, a much smaller number of people are expected to fly than drive, 4.7 million, but that is still a huge number and the highest since 2005. Are you nervous, Toby? I pre-scheduled an Uber today for two hours before I need to be at the airport.

21:02So yeah, Neil, I'd say I'm a little nervous. OK, let's talk about what's open and what's closed on Thanksgiving. Before COVID, it seemed like all the trends pointed to retailers opening up on Thanksgiving night so you could pregame Black Friday. But since the pandemic, that trend has thankfully reversed. Truly, that was cursed. Big box stores like Walmart, Target, Costco, Best Buy and department stores are going to be closed on Thursday. And so is Walgreens, which is facing a lot of heat from workers and will close for the first time in the company's history on Thanksgiving. Yeah, hopefully we don't see any of those storming through the doors of Walmart at 4 a.m.

21:36videos anymore. Well, that'll certainly happen. Oh, boy. While we're on the topic of what's open and what's closed, let's talk markets. The stock market will be closed on Thursday, but will be open for a half day on Friday if you want to lose some money before the weekend. I hate that they do this to us. It gives us just enough time to make bad decisions before the weekend. Just shut it on Friday as well. OK, but what about your meal? How expensive is it going to be with inflation and all? The good news is less expensive than last year's record. The American Farm Bureau Federation said the average meal with the turkey and trimmings will cost 4.5 percent less than in 2022, mainly thanks to turkey prices dropping 5.6 percent.

22:14Avian flu wasn't as bad this year. There's more supply, right? You are. You are in the weeds with the turkey. Yeah, apparently avian flu was very bad last year. Wiped out a lot of the turkey supplies. So they loaded up on turkey supplies this year. I don't know exactly what that means in practice, loading up on turkey supplies. But the avian flu was not as bad this year. So now there's a glut of turkey, which has driven down prices 6.5%. So if you haven't ordered your turkey already, first of all, you're very behind the ball. Start de-thawing it now, please. It's probably going to be less expensive than last year.

22:44And so is whipped cream, cranberries, and a bunch of other Thanksgiving treats. I really only care about the prices of sweet potatoes and marshmallows for the sweet potato casserole. Oh, and cream of mushroom soup also as well. I'm sure we've got a few Macy's Thanksgiving Day Parade fans in the house. I know my mom is one of them. The 2.5-mile parade route this year will feature Cher as the headliner. Well, besides Santa, of course. And will kick off at 8.30 a.m. on NBC. Toby, do you watch this? I toss it on. You know, it's good background. Maybe when I'm falling asleep after Thanksgiving meal.

23:14And then finally, besides Macy's Day, the Macy's Parade, and football, there's a bunch of stuff to watch. The Squid Game reality show on Netflix comes out today. that Financial Times gave it a great review. It said it was irresistible. I can't believe that because there's no stakes involved. I mean, there is the money, but there's no life or death, which is what made Squid Game great. So I'll have to see Financial Times. I mean, there's plenty of reality shows that don't involve life or death. That's true. People watch them. And then you have Napoleon in theaters with Joaquin Phoenix and Maestro starring Bradley Cooper as Leonard Bernstein comes to select theaters.