Altman’s Testimony, AI SPV Drama, Ebay Rejects $GME Bid | Diet TBPN

0:01John Coogan:We have a great show for you today, folks. We have a bunch of guests and a bunch of news stories to go through. Of course, the trial is ongoing. Did you say that this might be the last week of the trial? I thought it was a four-week trial, but it sounds like it might wrap up in week three. Are they ahead of schedule? Yeah, Mike Isaac said it might end this week. I assume just because they're getting through the depositions, whatever, faster. Yeah, I mean, it seems like Ilya has gone, Mira has gone, deposition from Tonya and Siobhan Zilas. And then Sam's on the stand right now, I think. Mike Isaac is live tweeting it.

0:34John Coogan:So we'll run through that. Sam Altman took the stand in the OpenAI versus Elon Musk trial this morning. Just as a reminder, here's what's at stake per The Wall Street Journal. Musk is suing OpenAI and its leaders, Altman and Greg Brockman, for allegedly manipulating him into giving tens of millions of dollars to a nonprofit organization, only for them to turn the AI lab into a for-profit venture. Musk is also suing Microsoft, OpenAI's largest investor, for aiding Brockman and Altman in their alleged deception. So big turning point in the trial was last Wednesday when former OpenAI CTO Mira Morati and former board member Helen Toner gave testimonies about the events leading up to the November 2023 failed board coup that were critical of Sam Altman's leadership style and candor.

1:17John Coogan:They call it the blip where Sam was out and then back very quickly with a couple other people stepping into CEO for just a few days. But last week, OpenAI's side also began to land some punches on Musk. earlier testimony from Siobhan Zilas and Greg Brockman also had already suggested Musk was not just defending a pure nonprofit vision. He explored scenarios where OpenAI might become a part of Tesla, where Altman might help lead Tesla AI, and where Musk could retain deep control. Brockman also testified that Musk supported a for-profit conversion if Musk could control it, including a version tied to raising money for his Mars ambitions.

1:53John Coogan:Yesterday, Microsoft CEO Satya Nadella and OpenAI co-founder Ilya Sutskiver took the stand. Satya largely buffed OpenAI's side, defending Microsoft's partnership with the company and saying that Musk never contacted him to complain about the deal violating any agreement Musk had with OpenAI's nonprofit, despite Musk having Satya's number. Ilya testified that he spent a year compiling a 50-page document documenting Sam's manipulative behavior, but also said he never promised Musk that OpenAI would remain permanently non-profit. Also, it came out in the trial that Sutskiver's stake in OpenAI is probably worth around$7 billion, which probably complicated how the judge and jury feel about his own motivations.

2:35John Coogan:So the story is, since Maradi, first, the trial became a referendum on Altman's trustworthiness. Then it became a referendum on whether the 2023 board was brave or incompetent. Then Microsoft came in and tried to make it look like it was the stabilizing partner. Now Altman has to personally answer the core questions hanging over the whole case, whether OpenAI's evolution was a necessary adaptation to build frontier AI or a betrayal of the nonprofit mission. Musk says he funded. The trial is expected to conclude this week. And you can, of course, follow up. Max Zeff pulled out a quote from Ilya explaining why OpenAI has a for-profit.

3:14And he, I guess, yeah, was playing, I don't think intentionally playing into the meme potential, but certainly that's how it played out. Ilya said under oath in a federal court, if there's no funding, there's no big computer. Max F says in the running for quote of the year.

3:33John Coogan:If there's no funding, there's no big computer and you need big computer if you want big AI. Sam Altman takes a stand in Musk versus OpenAI. Mike Isaac has a live blog going on X under Rat King. Let's run through some of what Mike Isaac is finding. OpenAI begins questioning Altman And much in the same way that the plaintiff's side had questioned Elon Musk, establishing that Altman, like Musk, has been enamored with AI for years and wanted to build inventive things with it. This was a very interesting tidbit from that original, like, that viral quote from Sam where he's like, AI will probably destroy the world.

4:09John Coogan:That happened in 2015. And it was an answer to a question of, like, what do you think the key problems to solve are? And then the next sentence in that quote that always gets clipped out is like, and I'm starting a company. Oh, it's more of a nonprofit. to work on this problem exactly. But that doesn't make it in. So they were clearly both very interested in building beneficial AI, although they ultimately butted heads. And they were also very worried about Google. Altman email from 2015, been thinking a lot whether it's possible to stop humanity from developing AI. I think the answer is almost definitely not.

4:42John Coogan:If it's going to happen anyway, it seems like it would be good for someone other than Google to do it first. Altman said Musk once said he would potentially pass control of open AI to his children upon his death. I would love to know more about what that means, because if you fracture it into like 20 different children at a certain point, like that can create a whole different dynamic of like succession. Right. There's an old email that says Altman might have joined the board of Tesla as part of old AI discussions. also came with a nascent threat of Musk doing this AI work inside of Tesla. Very, it would be a shame if you didn't accept my offer sort of moves.

5:21John Coogan:The Tesla offer is interesting, says Mike Isaac. Musk offers a board seat. Altman says it was something he felt was to assuage concerns that Altman would have no direction over the development of AI if it were folded into Tesla. But Altman also said it appeared to be a nascent threat. If Altman had not accepted the idea, according to him, Musk hinted that he may have done work developing AI on his own at Tesla regardless. And Mike Isaac gives some more context here. He says, this sort of talk is fairly commonplace these days on the battlefield that is Silicon Valley. Mark Zuckerberg, Meta CEO, has in the past made overtures to companies he's interested in acquiring, though he is often more explicit about his intentions.

6:03John Coogan:If you don't take the deal, we'll come for you. Tony Soprano vibes. Altman is criticizing stack ranking of engineers across AI labs, something Musk loves to do across his companies apparently, and something very common across big codes like Meta and Amazon. And also Microsoft is known for the stack ranking. They almost like invented it or certainly popularized it throughout the 90s and 2000s, I believe. Altman says AI engineering labs need more psychological safety. You have to be willing to let a researcher go off and try something random in the corner, very bottoms up. This is where the deep research project came from and a bunch of other AI breakthroughs came from.

6:40John Coogan:Altman says there was a meeting at Tesla during the evening about folding OpenAI into Tesla for AI research. And then a long, long period of time with Elon showing us memes on his phone. And apparently the court reporter asked Sam Altman to repeat memes on his phone loudly. I don't know why they didn't hear it the first time. But Rat King, Mike Isaac, is one of us. I am going to have Sam Altman stating memes on his phone into a booming courtroom mic playing inside of my head on repeat for the week. Memes on his phone in all caps. Getting hungry. He only had a banana this morning. Mike Isaac is suffering.

7:19John Coogan:His stamina points are draining. And he says, LOL, email between Altman and Siobhan talking about how to handle Musk and Altman telling him about a Microsoft investment. So Microsoft's going to invest. How should we tell Elon? Altman narrates the email verbatim. Hopefully it's easy. Cross fingers emoji because you have to read it out. So really funny to hear cross fingers emoji in the court record. Allman is going through his real first postmortem of his firing, appears to have gone through all five stages of grief multiple times over the course of five days. What are the five stages of grief?

7:52John Coogan:Stages of grief. Cope, seethe. Cope, seethe, mauled. Denial, anger, bargaining, depression, and acceptance. Yeah, that is actually cope, seethe, mauled, munt, something. The five-day period is what is referred to internally at OpenAI as the blip, since it was a brief intermission for what it's worth. Altman said, I had poured the last years of my life into this. I was watching it about to be destroyed. There was something appealing about going to work at Microsoft. I was also very angry, hurt, and upset. It felt like an incredible betrayal. It was definitely one of the hardest times of my life.

8:33John Coogan:Altman finally broaches the issue of his widely rumored untrustworthiness. Clearly, there were misunderstandings and a breakdown of trust, he said. But with what comes of a bit of a practiced humility in his voice, quote, I was not trying to deceive the board. I feel badly for the misunderstandings, but that was never my intent. This goes to the heart of how Musk's counsel has tried to portray Altman across the entirety of the trial. a fundamentally slippery operator who says one thing to one party and something else entirely to others. OpenAI's rebuttal to that line of thinking has been to depict a board of directors at OpenAI rife with dysfunction.

9:07John Coogan:And as Microsoft Satya Nadella put it earlier in this week, directors who are operating from Amateur City. Interesting. Taking shots of the board. Okay, Sam is giving a full jury Sam treatment. Again, trying to bat back against Musk's picture of Altman as a serious liar. if I knew how difficult and painful this was going to be. I never would have tried, but I'm very glad I did. Opening eye is done. Cross-examination begins. Stephen Molo, lead Musk counsel, who has the flair for dramatic, will probably give us fireworks. And this is continuing. Says, oh my God, Molo, are you completely trustworthy?

9:42John Coogan:Altman says, I believe so. Molo says, do you always tell the truth? Wow, this is getting heavy. It's all about Musk counsel painting Sam as a liar. Brutal. Altman is on the defensive, but taking more of a muted tone with some attempted humility in his voice is very clear contrast with how Musk appeared combative on the stand. Interesting. Cross-examination is basically Musk's lawyer, Molo, reading off a list of questions saying, hey, bro, do you remember, do you remember all this messed up stuff you did? And Altman saying, no, I don't know. Not true. No? Absolute chaos. Well, you can follow along at Mike Isaac.

10:17John Coogan:He has a whole thread and he's live posting. And I believe that there's a New York Times live blog as well that you can follow along with. Should we talk about SPVs? Yes, let's move over to SPVs, the special purpose vehicles. Pull up this post from banking. Rocking the valley right now. People are raking in the dough with SPVs. Yeah, so not everyone's happy about it. So, yeah, we can actually go down a little bit and pull up this post, which has since been deleted. Oh, really? The post said a few days ago, simply brokering an anthropic secondary deal made me more money than my entire net worth from working in my 20s.

10:57This is insane. It is especially insane because this is not legal. It is insane to post. Is it not legal? Yeah, so you need a broker-dealer license to broker securities transactions. Yeah, that's right. That's right.

11:12John Coogan:Well, she didn't say that she doesn't have one. She might. Very, very unlikely. It's very burdensome. Just the compliance to actually get your own broker-dealer. Even there's people that I know that just do secondary transactions. They don't even have their broker-dealer license. They work under a firm that does. They basically contract with a firm. So they're kind of almost like a real estate agent working under a broker. I'm smelling an intern challenge, Tyler. Get your broker-dealer license. Figure out a way to use AI to bring down the compliance burden. Slash goal. throw that slash goal down from me a broker deal.

11:48John Coogan:X high, X high 5.5 codex. Yeah. And try and try and get your broker. And so, and so let's see what it does. Yeah. Turns out that if you want to broker securities. Yeah. Transactions. Yeah. It is. There's a big regulatory burden for good reason. Right. We're talking about, you know, transactions that are at the scale of high-end residential real estate in this case. Yeah. You know, if this individual was maybe getting like a 5 % fee on the deal paid in cash, who knows? It could have been, you know. Wait, there is another take here, which is that there's the term brokering, which requires the broker-dealer license.

12:31John Coogan:But there is also the format where you set up an SPV. the SPV takes in money from an investor and then buys secondary from someone who has the right to sell it, maybe an investor who is not subject to the form that we saw Anthropic put out, right? And in that case, we'll get to that. We'll get to that. But hypothetically, there are SPVs that they are not technically brokering the secondary deal, but they are facilitating it. And they do take a fee, right? Because SPVs often have fees associated with them. And that does not require a broker-dealer license, right? So it's possible. But the straightforward interpretation of the post is that they had some sort of side letter, which was like, if I can find you a buyer for 100 million of your shares, you give me$5 million, right?

13:25That happens a lot, but it usually and hopefully is happening through legal channels. Yeah. Dealers. So this seemingly prompted both. Oh, yeah. I think this is what started it.

13:39John Coogan:Right. This must be what started it because that post really, really. More specific language on their site saying Anthropic said unauthorized Anthropic stock sales and investment scams. Yeah. And said, you know, basically saying any transfer or sale of Anthropic stock or any interest in anthropic stock that has not been approved by our board of directors is void and will not be recognized on our books and records um and so yeah typically um yeah typically like these are there there's so many ways to like transact without informing the company sure right A common one would be a futures contract, basically selling the right to the investment and the future performance.

14:27John Coogan:Yeah, and so I think the futures, the economic exposure enthusiasts, the futures contracts teams would say that, well, there was no sale of the stock. We didn't transfer the stock. And it's not a direct interest in the stock. And so it doesn't need to be approved by the board of directors. And the board of directors would say, absolutely not. That doesn't count. You think you found a workaround, and it doesn't count in this world. But that is going to be, you know, thought out. Yeah, so the funny thing is there's these sort of digital asset equivalents. Some of them put out comments. Basically, meme stocks around that are trying to track overall interest or the overall valuation of these companies.

15:14They sold off, which is funny because I don't believe they're actually tied to any real underlying equity. So it was purely sentiment-based.

15:22John Coogan:And even in the case that they were saying that they were tied, it was typically 1 % to 5 % of the fund in Anthropic or SpaceX. and they were already well disconnected from the fundamentals of the book value, right? Yeah, so I'm trying to think through how this plays out. And overall, I think the reaction from the internet was being more dramatic than maybe is necessary. Because already, if you're, let's say, an early investor in Anthropic, and you at some point sold your shares. You didn't go to the board and get permission, but you structured some deal to sell your shares. You get your shares back.

16:05That is so - Win-win. Waiting. Well, waiting for that. Yeah. On one hand, neither party, if you bought the shares or you sold the shares, neither party is that incentivized to go to Anthropic Board and be like, hey, I'm really sorry. Like we did this. It was against. Because on one hand, And there's probably some scenario where the investor or the Anthropoc employee could get their shares voided or reclaimed in some scenario. So they don't necessarily want to do that. The investor is like, well, I bought these shares, and now they're worth a lot more. So let's just be chill and let this play out, and we'll all forget about it, right?

16:46But there is a scenario where the seller tries to then make the case of, oh, actually, I'll just give you the money back because now the stock is appreciated so massively. Sure, sure. There might be a weird, but what ends up happening is like there's sort of this like legal tension, right? Tension between both these parties. And then there could be some incentive. Again, the person that bought the shares of the lower valuation wants to just let it ride. But then somebody might be like, well, I kind of would happily ride up another 20X or something like that. But then if this starts going, if once it goes into like an actual complaint or a lawsuit, then it becomes public.

17:24and then you have this third party in there which is an anthropic which is like um gonna just be like hey like you guys have been messing around like this isn't this isn't cool this is against um against uh you know multiple sort of agreements and and terms so anyways it's gonna be very messy right so there's there's there's already been this is also these blog posts are

17:46John Coogan:not new rules it's merely they are publicizing rules that are probably already in the stock documents yeah because if you invested earlier you an employee yeah you should know all this yeah which isn't a surprise right well it's possible that very early investors don't have transfer restrictions for some reason i don't think so no no it's pretty standard no you always you always set this up up as a company because imagine you have an early angel investor and your company does well and they just sell it to somebody who you don't like like part of the reason to be private is you just mean like every deal is unique and every deal gets negotiated points and there might be at some point when some investor and employee was like, I'm not joining unless you give me this.

18:27John Coogan:And they're like, okay, yeah, we'll pay you less, but we'll give you this. Yeah, maybe. There's always like horse trading, like double trigger, single trigger. Yeah, but it would be like maybe 1 % of the stock. I agree with you. I agree with you. Who knows how many transactions there's actually been? I don't know. There could be like, when you actually look down through all the trees of spvs and a lot there could be what what a lot 10 over yeah 20 000 it's not it's not like taxi cab driver telling you about the spv that they got into yet but it's like close to it i mean there was the story of the guy who was like selling his house for anthropic secondary right like there's a lot of examples of this like oh that's bad too imagine imagine the the record updates, you'll be able to look at the deed or whatever and be like, oh, who's the new owner?

19:17Oh, you work, you're an early... So that whole transaction doesn't really work.

19:23John Coogan:Oh, yeah, and that's extremely public. Yeah, yeah, yeah. That's way more complicated, yeah. Well, let's break it down for the Frog and Toad fans, the children in the audience, because Frankie over at Paradigm put it in terms even a child could explain, potentially a four or five-year-old. And so if you're familiar with just Frog and Toad and you don't know anything about all the buzzwords we've been dropping for the last five minutes, you can think about it this way. Frog and Toad, the loved children's book. Frog put the shares of Anthropic or OpenAI in an SPV. There, he said, now we can transfer these shares freely.

19:57John Coogan:But Anthropic can still exercise its transfer restrictions, said Toad. That is true, said Frog. The Frog and Toad. It's a great one. Ankur says, if Anthropic deems all secondary sales of Anthropic stock should be voided, does that mean the original buyer retains financial interest even after selling it away? Lawsuit territory. Yeah, there's going to be a messy thing. People have been talking about unwinding SpaceX AAA or SPVs for a long time. Yeah, that's going to be a billion dollar. That's going to be almost a billion dollar industry. Yeah, we need to get the Macram clip up again. It goes viral every time we talk about SPVs.

20:33John Coogan:what does Mike Isaac say? He says, yeah, look, all the priv codes draft this language to scare employees who don't know better from trading on secondary markets and from buyers seeking those shares. And yet SPVs find a way. Funny to see the saber rattling in Twitter accounts doing hyperbolic posts, though. And so it'll be interesting to see like how far does the legal implications, How far do they actually go? Well, over at a different AI lab, Mira Marati, who was just, was Mira on the stand? She was actually testifying in person or was she just video deposition? When I saw her, which was last Wednesday, it was just deposition.

21:13I don't believe she actually has testified in the trial yet.

21:16John Coogan:It was Siobhan that was on the stand. Correct. Got it. Okay. Well, Mira is cooking over at Thinking Machines Lab. TML launched interaction models with a delightfully concise YouTube video that we should play so that we can watch this. Miramirati says on X, today we are sharing our work on interaction models, a new class of model trained from scratch to handle real-time interaction natively instead of gluing it onto a turn-based one. Let's play the video. Hey, I need your help with something today. You ready? Absolutely. I'm ready. What's up? Yeah, so we're giving an announcement today, and I've got two of my friends coming to help Every time one of them enters the frame, I need you to say friend.

22:01Look at those speakers Got it. Absolutely insane setup audio file. So we've got a new system for full duplex audio and video Which means that you can stream input into it in real time and it can respond to you even while you're speaking to it simultaneously How does that sound? Sounds like a solid setup. Full duplex with real-time interaction is super useful.

22:28John Coogan:It seems faster than the original voice mode, which was lamented by the viral Instagram reel producers. Can you translate to English in real time for my friend and for audience? Absolutely. I'll translate as you go.