BREAKING: Sam Altman fired from OpenAI, chaos ensues! | E1851

0:00Yeah, I'm just processing it as quickly as you are as it's coming. Yes. And so this would be the equivalent I think of Larry and Sergey being fired or Larry being fired and Sergey quitting moments later. That's basically what we've witnessed is a$90 billion company. It's had tens of billions of dollars invested in it. First fastest company to 100 million users. And let's be honest, it's changed. It's rocked the entire industry. It's changed the entire technology landscape. And it's obviously changed the world. So then the question becomes, why? What happened and why? This Week in Startups is brought to you by Vanta.

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1:19Go to equinixstartups.com to apply today. Hey, everybody. Hey, everybody. Welcome to an emergency podcast. This is an emergency breaking news podcast here on This Week in Startups. uh sam altman has apparently been fired from open ai open ai released a statement this afternoon and sam quickly confirmed that with a tweet saying i loved my time at open ai it was transformative for me personally and hopefully the world a little bit most of all i love working with such talented people we'll have more to say about what's next later minor disclaimer up top here i know sam socially we're not besties or anything but uh we were both sequoia scouts together both sequoia founders together and we've got you know literally hundreds of contacts together uh and um yeah i think he's uh obviously i've watched him from his first startup sunny uh through running y combinator investing in a lot of great companies to this point so this is kind of a shocking moment because we just had open ai's demo day sam was on stage this has become a 90 billion dollar company this is i think one of the biggest news stories of the year would you agree sonny oh definitely i mean the biggest story in tech this year for sure and you know hugely impactful because we have a giant ecosystem of you know maybe 5 000 plus companies that are being built in and around ai and many of which who are building on open ai's platforms and so this has pretty huge impact um to a number of companies depending on you know and we'll maybe talk about it here but what happens with open ai going forward and you know what's the next you know what are some of the next things because you know we just did this late breaking news gdb who was also one of co-founders greg brockman just quit um okay yeah yeah he was removed from the board yes um and so this is a very dynamic situation that we have to explain there is a board of directors and famously elon originally funded the company he left the board reed hoffman was on the board he left the board i think because of conflicts that was a couple of months ago but the board is made up of the founders of open ai the non-profit which became a for-profit company and then some industry experts um and as part of this action by the board uh greg brockman was stepping down or they said will be stepping down as chairman of the board and will remain in his role as company reporting to the ceo however moments ago he has quit which would to me mean sam and he are going to go start their own company and he is quitting you know in protest and that makes it super interesting wouldn't you say yeah i mean if you're microsoft you know you've put a lot of money into this company you've put a lot behind it you've launched you know just three days ago they had their big conference ignite where they launched a bunch of new um functionality that's built around open ai you know upwards of 10 different co-pilots and uh you know gpt4 offerings for their enterprise customers this has to be you know incredibly um kind of i guess worrying right you have the co-founders the ceo um you know he was i think greg was a president not the cto i think that was the who just took over um the woman who just took over for that so um yeah i'm just processing it as quickly as you are as it's coming yes and so this should be the equivalent i think of Larry and Sergey being fired or Larry being fired and Sergey quitting moments later.

5:06That's basically what we've witnessed is a$90 billion company. It's had 10s of billions of dollars invested in it. First fastest company to 100 million users. And let's be honest, it's changed it's rocked the entire industry, it's changed the entire technology landscape. And it's obviously change the world so then the question becomes why what happened and why well the board uh did this news dump on a friday uh which is always a classic pr move yeah um to you know miss the news cycle which is one of the stupidest things you could do because all it does is make everybody point out you're dumping this on a friday so it doesn't get news and it just creates twice as much news and then the truth is over the weekend people have time um and so and it really upsets journalists who now have to go to work on a friday night and leave their families or whatever plans they have they have to cancel i remember when i was running a magazine and gadget and you know and here here i am as running a podcast it's uh it does create this amount of chaos uh we are live on twitter spaces we're live on youtube we will take your questions as a programming note but here is what open ai's board said they fired sam altman for not being quote consistently candid in his communication now on a housekeeping basis we're going to do some speculation here one thing we're not going to speculate about is uh any of the you know gnarly allegations floating around uh about personal conduct yeah yeah i i we're not in the business of that uh and And, you know, we'll just leave it at that.

6:44On a business basis, consistently candid in his communications. What does that say to you, Sonny? Knowing what you know about startups and boards. Consistently candid in his communications. So this is more than one, right? Yeah. Instance. This is a pattern. This company is very complex, right? Because of, let's list out maybe some of the complexities that they've shared. And so we won't speculate. The company went from being a nonprofit to a for-profit, which there's a lot of complexity, I think, that comes from that, that I think hasn't been very clear to a bunch of different people. The company has had a few security leaks, one earlier this year and one earlier this week.

7:33um you know the company has taken billions of dollars in funding in non-traditional ways um that means you know it's just you know typically when a company is financed money comes in shares come out but some of their financing is in terms of uh you know resources like you know credits or whatever it happens to be on clouds and they have a very complex deal with Microsoft that, you know, we don't even, we just know the surface of maybe at a high level. You know, a bunch of talent that has, you know, came out of Google, a bunch of talent that left and founded other companies like Anthropic. And so it's at the center.

8:16And then there's the, you know, we've talked about this in a regular pod. There's the data that the company has used, uh you know currently and in the past to train their models so there's a lot of information there's a lot of things that have already been out there with respect to what this company has been uh you know has had to deal with and which is to say if i may summarize when you make a startup and you're moving fast you may break things and sometimes you gotta break some eggs to make an omelet uh and so the broken eggs that could have been causing communications issues with the board uh as they put it um is maybe the training data that's a vector that's number one number two withholding information about a security breach uh or downplaying a security breach with a company like microsoft which is at the center of security because they have the largest footprint of desktops in the world i believe still by far and we all know if you've had a windows machine previously phishing viruses there's all kinds it's the biggest it's the biggest surface area so it gets the most attacks in fairness to them um so that's a second thing and then the third bucket uh would be who owns the company who owns shares in the company in the corporate structure.

9:38I will add a fourth thing to that, which is dealmaking. So what do we mean by dealmaking? Sam is a consummate dealmaker. He has been an incredible dealmaker at Y Combinator. I think he had an LP in Peter Thiel. That's what I was told. And he had made a lot of large bets doing SPVs or individual investments, special purpose vehicles in companies prior, like maybe while being at Y Combinator, maybe while being involved in open AI. And I mean, listen, what a great deal maker running Y Combinator also getting Elon to put$50 million reportedly into open AI as a nonprofit and other people like Reid Hoffman to join the board.

10:20So an incredible networker, incredible dealmaker. Now, why is that last piece important? This is a speculation part here, I'm going to do a little bit of speculation here in silicon valley we have a term it's called no conflict no interest what does it mean everything's conflicted here uh so you know i might be an l i'm an lp as one example in 24 venture funds yeah i might invest in a company one of the i might be on the cap table through another venture fund in a competitor so it's completely possible after i invest in i don't know company a that their competitor company b gets invested in by one of the companies on lpn uh people go from one company to the other you get the idea uh and so no conflict no interest well if sam's out there doing a ton of deals what deals do we know he's done i know for a fact that open ai gave preferential access to the api to many startups many y combinator startups so that was done and uh if you had a financial interest in them and you got them early access is that a conflict sure it is is that an awesome conflict if you have the ability to do it of course it is is it illegal or anything absolutely not yeah is it unfair to the people who don't have access probably but hey life's not fair right you have access to a supplier that supplier gives you that and then my understanding is he was the backer of humane world coin um in crypto and then maybe it was reactor company you know sure so which of these might have access to training data open ais tools or whatever and then he was doing some sort of deal with johnny ive uh or possibly doing something with johnny ive uh to do another thing that sounded like it would compete with humane, possibly as an AI hardware device.

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12:49And Vanta does more than just SOC 2. They also automate up to 90 % compliance for GDPR, HIPAA, and more. You can't afford to lose out on those major customers, the lighthouse customers, the big fish, the whales, because of silly stuff like lacking compliance. Just work with Vanta. I'm an investor in the company. It's a great company. Get your compliance automated. Get it tight. Tight is right. And close those big deals. Here's the best part Vanna is going to give you 1000 off because they love this weekend startups. They love startups vanta.com slash twist That's v a n t a.com slash twist to get a thousand dollars off your sock too I'm gonna go with that last bucket first What are your thoughts handicapping this that this had to do with his?

13:31You know extraordinary deal making and then maybe This comment he made where he does not own any shares remember he was in front of Congress he doesn't own any shares in open ai how does the ceo and founder not own any shares uh sac speculated it on all in we had a discussion about that and humane's launch just happened um and you know i think that might have been a little screwed up by this johnny ive news so here we are no conflict no interest sunny go well look um when you've created the technology that's been the most impactful since the launch of the iphone app store and the momentum it's working with, it's inevitable to your point that these conflicts are there.

14:12And it's probably almost impossible to disclose them at a pace to keep the board active. I'd like to add one other thing. The board of this company is a little bit non-traditional because it doesn't have what we would call typical board members that are venture investors or board members of public companies. It's a little, you know, Adam is there and he obviously runs Quora, but like the other folks are related, either work for the company and some external folks. And so I do think the ability for conflict to arise is really, really high with this, with OpenAI, but it may not be malicious. It just may be at the pace of everything that's happening.

14:53You got to put yourself in GM's shoes and think about how many inbounds you get on every single day. You know, there's 5 ,000 AI companies, right? And they all want to get access to OpenAI or do a partnership or get funding from OpenAI. OpenAI has funded companies as well. So there's so much that could be happening here that it's not on purpose, but just maybe even just hard to keep up with the disclosures. Could be. And it could be the board had, based on their phrasing here, a frustrating time with the second, third, or fourth time this happened. Maybe. yeah um and then there was this allegation like oh maybe he lied to congress when he said he didn't own any shares yeah like you could say and i'm going to do massive amount of speculation here sam could say i don't own any shares i sam altman i jason calacanis don't own any shares but a foundation controlled by sam or a fund controlled by sam that invested or bought secondary shares from other workers whatever it was could own an interest in open ai and so i sam don't own any shares but my foundation does right um so it's possible i've seen people you know use the technicalities of language to kind of justify things i'm not saying that's the case here but there's always been this very weird dynamic of he doesn't own anything in open ai and he's doing all these deals and how does he not own anything if everybody else does and then remember it was only how many weeks ago that they there was this breaking news about a secondary at 90 billion yeah that was the week before the opening i demo day i believe yeah well i just want to maybe say something on the other side then we can dive deeper into it i think in the congress statement, if we can pull it up, but if I recall, he did say, I've done well in other places.

16:54And like you mentioned, he's been involved in some of these record-breaking funds that have had hundreds of X return. And so it is potentially feasible that he does not have it in any kind of related entity or entity that's pushed off, but just he decided to give it all away as a donation to Stanford or, I'm saying Stanford because he went there, right? But like, you know, some place that he's very passionate about. It's possible, right? Now, I think - Yeah, sure. I think when it comes to, you know, thinking about like companies on the cap table, this company is not that big, Jason, right? So, and it's pretty straightforward for, you know, either the board or the general counsel the company or the outside counsel to understand every single entity on the cap table um and and then to come back and maybe ask like you know if you know sometimes people do have family trusts and whatnot and hold things in those places but so if someone makes a comment like that in a you know in front of congress i'm sure you know your lawyers would come back to you and say hey we know you know abc yeah be careful yeah well that and that this is again super speculation here um you know maybe he said that in good faith and then somebody said hey you know not exactly accurate and the press picked up on that that became a big discussion topic so maybe that was one of the things the board said with uh communication and maybe there are other issues like that um and so then we go to the security one so maybe you could unpack the speculation about security because the gpts got launched and then i remember seeing this headline that Microsoft took everybody at Microsoft, all their developers, off of OpenAI.

18:44Yeah. Well, let's maybe rewind back. So they had an incident, I would say, maybe March this year, where people's information was getting leaked. And look, they're growing fast, right? So it's kind of, I guess, you have to sort of expect it at the scale they're operating at. And then what sort of happened at the launch of the GPTs was people were able to go and look at the private information that folks were putting into the GPT to help build them. We did one as well. And so I think given how fast it was moving, how many GPTs were being created, it was probably a proactive move by Microsoft to say, hey, let's not allow our employees to rush into that ecosystem, fill it up with perhaps confidential documents and confidential text and pictures, whatever it happens to be that you want to use to create a GPT and not put it in there.

19:44because I think the experience as we did on the last pod is incredible and you could do something quite quickly and push it out there and have people start using it. But I think the security edges of it were still being kind of finalized and or hardened. Like we took the launch text and put it in there and we took it from the public website. But you might not have been as comfortable if we were taking private placement documents or something like that. All right. so microsoft put 10 billion dollars into this company they don't own a board seat that is absolutely bonkers but they do own 49 of the company uh so that's insane so this is also kind of a governance problem here who is on the board well you had greg you had sam they're both off the board um and then i think everybody else was independent yeah oh so ilia is the chief scientist and co-founder so that's yeah and then you had a couple of independent directors uh quora ceo adam d 'angelo uh a technology entrepreneur tasha mccauley and georgetown center for security emerging technology helen toner so the independent directors would have had to do this right because you you would have to leave sam out of this if it had to do with sam yep so then you have the five of them you need to have three to have a majority to do this uh so like and greg would i guess vote in favor of sam because he just quit and you would think that ilia would as well um so that would be two and then that means all three of the other ones had to vote to remove sam if it was in fact a five person vote um and now of course ceo adam went to yc i would think he would be very loyal to sam i don't know the relationship of these other two uh folks and you know how they wound up on the board but that is also an interesting rub here is getting rid of sam is an incredibly polarizing as we've seen just in a couple of hours the whole internet's like this is not cool i love sam he's he's very popular um and he was just on demo day so that's the thing i'm having this hard prop this you know this even closer to that yesterday he was at the apac uh conference right he was at apac representing open ai i didn't realize that yeah yeah yeah so this is probably all happening in real time yeah wow so while so i wonder if this goes back to the open ai day because that was a okay so let's talk about microsoft um satya nadella showed up right he was on stage and that was a little bit of a awkward interaction i think i wonder we'll look back on that and see if there's something there well no the interaction was good because what what sam did call out was hey people are any you know i had a tweet about People are speculating about the relationship between Microsoft and OpenAI, and he used that moment to solidify that the relationship is stronger than ever.

23:08Fast forward to this week, Microsoft has Ignite, and they launched upwards of 10 new products built on OpenAI. So I feel like they had just squashed all the rumors that were out there about the potential tension between the two companies. there was also a tweet where sam said we're not like sandbagging any of their software products with chat gpt but this also is i think the collision course that the two firms are on microsoft wants to build a copilot into the desktop of windows yep um chat gpt is an amazing app and it's 20 bucks a month and so microsoft has all the data we're going to use on our desktop and then um you have open ai with this app that has 100 million users some many millions of them i believe paying 20 bucks a month yeah 100 million weekly i think they said at at uh 100 million weekly users i wonder how many are paid i'm going to go with three percent so maybe one two i'd say one or two million people are paying one or two million people are paying 20 bucks two million people 20 bucks a month 400 it's a half billion dollars and then maybe a half billion dollars in um uh api calls so then the next speculation is is this financial is this financial but before we get to that there's a collision course isn't there microsoft wants consumers and business users to this and chat gpt and open ai are selling the same thing yeah so how does that work in your mind who wins if it's built into the desktop how does open ai compete or if open ai has a superior app and everybody gets used to using it there how does why does microsoft own 49 of this it's like it's like mac and it would be as if microsoft owned 49 of the mac os or something or the iphone It's so conflicted, right?

25:10Let me give you a possible way, and I'd love your take on it. I think if you look at OpenAI in two distinct ways, let's look at OpenAI as an API and an API for product-led growth. So for Silicon Valley plus, or not Silicon Valley, anybody, any entrepreneurs out there that wants to build, they can go get the API and build something around it, right? They can add a feature to their product or they can basically make a product from the ground up using OpenAI. And we've demoed a bunch of these type of things, right? Things that are standalone, things that are features. And that's like the product-led growth of it.

25:47What I would say is if you look back to the era of cloud, there were businesses that were built cloud native. And then there were other businesses that just lifted and shifted to the cloud. And so the way I've been kind of thinking about it is Microsoft picks up the business that is like enterprise, more enterprise-y. That's like, hey, you want to put this into your product. You're a customer of ours already. But anybody that is trying to do something product-led, they go through the OpenAI path with the OpenAI APIs. So I feel like it was, you know, even though you can kind of see a conflict there, but they have two different competencies, right?

26:26where microsoft really owns the enterprise and all you know c cio cto types and and open ai owns the startup ecosystem and products that's one way to think about it yeah i just there's so much consumer going on at microsoft that's not appreciated by people like us who are in silicon valley because we're all mac heads yeah and you never see a windows laptop here but then everybody's using windows and you look at your google analytics you see just how many people who actually use windows uh and also xbox you know and other products they have yeah i'm leaving i'm leaving the zune and the surface out of that yeah yeah but that's one and that's one where you can see tremendous conflict because microsoft lost the search war search is fundamentally changing and you know they they want to win and they've even they went out of their way to eliminate bing from the branding this past week and relaunch the product just as co-pilot right windows co-pilot and so that's an area where you can imagine there could be you know some some substantial conflict between the businesses um you know going directly after the consumers all right microsoft according to reports found out about this one minute before open ai published their statement this must have been if the board took this action how many days have they been dealing with this issue before taking this action would you say in your professional experience running companies yeah well like think about let's go to a company you were close with a bit uber right when they you know they they had to deal with like um some issues there were some issues yes some and issues Yeah.

28:12It was a multi-month process. Close to a year, yeah. Yeah, that involved external firms, that involved, you know, external counsel. And even they brought in some external people, I think, right, that weren't even board members, right, I recall. And so, it's really incredible to think about how quickly that this has happened, outside of it being like something that's so black and white, that's like, you know, criminal or something like that, like something that's not subjective. that's it's the only way you can think about it moving so quickly i don't think this could be criminal because they said it was an issue with communicating with the board yeah uh and so that is that's somewhere between like uh an ethics or an honesty problem okay uh so but maybe they're trying to protect themselves from future lawsuits so the board has to say something in some ways a bit neutral because if they were to say we fired this person for doing x y and z bad things then all of a sudden the lawsuits come out and they're like well the board is in charge and they said this person did it so that's why a lot of times it's the services were no longer needed we decided to part ways they want to spend more time with their family and then all the craziness comes out by the way in 72 hours i guarantee you will have all the details of this everything will leak we'll know exactly what's going on.

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30:57What do you think of this other theory that they're just blowing through money at an alarming pace this was another concept hey they keep lowering the api cost they're burning through tons of money he said recently they're going to need to raise tens of billions more and that maybe they were having cash flow problems and because there was an email that went out that said you have to pay for your api calls ahead of time yeah i think that wasn't real i didn't i didn't get that email so well they said it was going out to select people so i'm wondering if it was going out to people who were spending five thousand dollars a day on the api or you know a hundred thousand dollars a month and they said hey you got to pay in advance maybe because they thought they would get stiffed or maybe they thought yeah uh maybe cash flow problems i can't imagine they would have cash flow problems it's only a couple of hundred people right at the company so and 10 billion raised yeah and even if you had that you don't publicly fire your ceo that's you know in this kind of manner right like i think there's usually again all these things have a process behind them you know look you've been you've dealt with a lot um sure a lot less right and so um oh i guess the email is really just got a text from my co-founder saying we got that email so it is real we did get it okay so So let's speculate a new then.

32:17Yeah. Under what circumstances a company tell everybody using its API, they need to fill up their credits in advance. That's kind of standard, isn't it? Like, don't you buy Zapier credits or some credits in advance, but I guess for AWS, they have your credit card and they just bill you at the end of the month. So both of these things can be true, right? Both models exist. Yeah. Yeah. I guess, you know, like that's not so crazy. I mean, to put that out today is a bit crazy, but, you know, a lot more weird stuff is happening right now. So that's kind of really interesting to think about. All right.

32:53There was also a unverified anonymous Reddit comment. Again, unverified. Could be fan fiction, but it's interesting. claiming somebody claiming to be uh from opening eye is saying um i feel compelled as someone close to the situation to share additional context about sam and the company engineers raised concerns about rushing tech to market without adequate safety measure safety reviews in the race to capitalize on chat gpt hype but sam charged ahead that's just who he is wouldn't listen to us that's cotton von brand not the wouldn't listen to but charging ahead he does believe in speed he's said that very publicly when he was running yc and he's right startups go fast uh his focus increasingly seemed to be fame and fortune not upholding our principles as a responsible non-profit i've heard that i think that's a lot of jealousy too yeah um you know it's very rare for somebody to get catapulted to this level of notoriety on a global basis and to be meeting with heads of state etc he made unilateral business decisions amid aimed at profits that diverged from our mission when he proposed the chat gpt store and revenue sharing across the line this signaled our core values were at risk so the board made the tough decision with my ceo greg also faced some accountability and stepped down that doesn't make much sense that yeah i think this is uh what the kids say i think this is cap i'm gonna go with this this is cap you're not supposed to say that but yeah yeah um i mean facts are cap uh all right Yeah, yeah, yeah.

34:29I'll bring up something. So impact to the company, I want your take on this. Founder-led to now not founder-led. And we've seen that many times in Silicon Valley. What's your take? Oh, this is a great, great point. I would say that losing the founders is obviously disastrous. the lead that chad gpt has is not de minimis so you have to hold these two contradictory thoughts in your head sam was not writing code i wonder i don't know if greg's writing code or not he was he was right he was right all the time yeah yeah so just on one thing jake hell he was posting about a bug fix like two days ago yes okay so like this is where this is where you have to like pause for a second and think it through so if i was on the board i'd be like who's writing the code who's the figurehead sam's the figurehead sam's cutting deals do we need any more deals doesn't sound like we need many more deals we got microsoft we got 10 billion you know there's uh tons of interest in this company we got a billion dollars in revenue they must be close to profitable with a billion in revenue i would think they're close to profitable i don't know what they're spending on servers etc but putting capital expense out of this with 300 people and a billion in revenue you know it's 3 million per person now i know they're spending millions of dollars per developer upwards of 10 billion i heard with um stock options etc so yeah this to me sounds like greg there is the uh yeah greg fixing a bug so greg is a big loss sam would be a gigantic loss two years ago but today with everything set up the way he organized it probably he's got so many deals done it probably won't affect the company in the in the short to midterm in the long term sure what are the next three deals you need his strategy you need his you know networking to do deals master negotiator you know this deal that they have well i mean i think we're going to find out more about the deal with microsoft but that deal in many ways like either it's the greatest deal ever the worst deal ever but my feeling if i would bet is the greatest 11 or like oh my god they they took you can tell it's a great deal because when you first hear it you're like oh my god they made microsoft look foolish then you look at microsoft stock price and i will i'll ask my producers to tell me what microsoft stock price went up you know since they announced the 10 billion dollar investment i'm guessing it's gone up 100 billion um so yeah cloud computing has revolutionized startups over the past decade we all know that but reality is a fully cloud based solution is not right for every startup.

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38:38Whoever announced AGI first rules the world and your share price goes to the roof. I said it differently. I said, if AGI took over, this would be the first thing it did. Microsoft gets 75 % of open AI profits until it makes back its$10 billion investment. I forgot about that. Remember that condition? Yep. This is a master negotiation. He got the valuation he wanted. he wanted an absurd sky high valuation he got it he got the 10 billion and then he just said yeah make your money back but you can only make 100 times your money i mean he's a master negotiator and so yeah losing him just to wrap on that thought i don't think this is agi but that's another interesting point um could they have discovered something and hit it from the board that's like some crazy science fiction movie there are things that are happening in the safety zone that they didn't disclose to the board I love that speculation it makes for a great movie but it doesn't make I don't think we're close to AGI so I don't think this is I don't think we've achieved general intelligence yeah and again if that had happened let's just double click into it for completeness you wouldn't fire the people right away right you'd want them around the opposite yeah yeah like the opposite yeah you'd kind of lock them down a little bit you wouldn't be like oh you're fired you know yeah um you know i'm i'm going to stick with my original thought that there are some conflict of interests now that we've walked through all the possibilities i'm going to stick with conflicts of interests is my 80 concept here there are some conflict of interest that the board got tweaked about and there were multiple ones no conflict no interest that may be you know including his shares in the company um that caused this when you go through all this for you what's the most likely scenario security conflicts of interest personal issues conflict conflict of interest personal issues is i conflict of interest i think okay yeah if we take personal issues off the table yeah for obvious reasons we would never want to speculate about anything like that um yeah that makes the most sense to me And like, you know, you already touched on it.

40:53OpenAI is investing in companies. These guys are investing in companies. They're trying to start new companies. It's every, you know, as an investor, it's a bit of a nightmare, right? Because you're kind of sitting there looking at all things happening. And it's the pace is so quick. Like, think about, you know, how much has happened with this thing is just approaching 12 months. so um you know probably anywhere from 25 to 100 companies that they're involved in and and you know partnered with i'm gonna go 80 i'm gonna go 70 chance conflict of interest i'm gonna go 20 chance of um a security breach cover-up weird situation that occurred 10 something i can't think of yeah that's i'm going with that and again taking aside any personal stuff can we bring someone on up from uh the uh the audience yes you have a specific person you want to bring up i just you know the first person on my list jared who's the vp of ai at versell would love to hear what they're saying so jared's coming up oh what a great question what do you think you're you're really well aware of the ecosystem sandeep um well yeah look i think one of the things just building on what we just said about, you know, Sam and team, they were able to push the boundaries really, really far, right?

42:13Because when you have already had success, plus you've seen a ton of success, you're able to, you know, push. And I think that's one of the reasons OpenAI is where it is. I think now what we're going to see is a chance for maybe some of the other folks to catch up a little bit and that is good from a competitive standpoint but but in terms of pushing the frontier like that whole agi conversation we had we probably slow down there a bit so we see we initially see a catch-up of other players while all this you know dust has to settle and to just repeat the yeah so just to repeat the question for the youtube audience and for the this week in startups episode i didn't know it's going across the question was how would this affect the ecosystem and the march towards artificial general intelligence um yeah i agree with you i think this gives um you know whatever their lead is you give the lead uh open ai's lead 18 months 12 months is what most people would say i think so let's just put it out they have a one-year lead if they have a one-year lead i'll give them 18 months actually they have an 18 months lead this is going to cut it in half they're gonna have a nine-month lead so everybody else gets to catch up right now they're literally popping champagne corks at google big and then i'll give you the second order impact you know sam and greg are going to go raise they're going to announce a 10 billion dollar raise from a sovereign wealth fund tomorrow like within 48 hours i think on monday because if you're firing him i don't know what no compete he has or if he agreed to some sort of non-compete with a non-profit or if he has an employment agreement if he's not getting equity what how does he have an employment agreement so this is where weird governance or where corporate structures can actually cause real issues i.e sam bankman free now this is not fraud um but you had no board there or elizabeth holmes had a bunch of like 80 year old former generals that know nothing about blood and chemistry and biology so this is what bad governance does and so even good governance can cause tons of problems in terms of the race toward artificial general intelligence it's going to happen folks it's just a matter if it's three five seven or ten years you know it's going to be one of those numbers uh anything else to add to that sunny or should we let another person speak yeah let's go to the next one okay multi-part multi-part question jared says first up sunny he believes it's a commercial interest uh kind of conflict um like we do number two he's wondering with greg leaving what happens to the engineering team do they start bolting what are their non-competes deals look like now remember again this is a california company they put their office in san francisco there's no non-competes in this you know i mean new york state and some of the northeast i think massachusetts boston obviously these non-competes up there one of the reasons people speculate that the the west has done better than the East Coast on technology is the non-compete issue.

45:14So what do you think? Is this going to be a bunch of people leaving OpenAI? Well, so in terms of the engineers, let's go to that one first. Recall last week, and I don't know if we touched on it, but we definitely had it in the docket. There was an article saying that these folks were being offered upwards of$10 million. dollars. And so I think what's happened is, you know, the war for talent for AI researchers is really, really heavy. And so depending on what happens next, that's what will impact the engineers. It does feel like the folks have been moving around in like groups, like the folks that went over to Anthropic, the folks that went over to XAI.

45:55And so it is feasible if I were to bet that if folks aren't happy with whatever direction the company's going in and they haven't been able to properly participate in whatever monetization structure exists from the cap table because of you know all the wonkiness that's created that you know i think one of the things elon said very clearly about why creating xai was in order to have the ability to recruit people to offer them equity that could grow so that could be something for a bunch of folks um now was greg passed up for ceo is that why he quit he didn't get the ceo's thought i wonder let's take another question just speculating here let's take another question from our amazing audience carried interest okay an anonymous account uh so great comment uh so uh the speaker was saying hey i've never seen this kind of dramatic firing dramatic firing equals personal misbehavior misadventures is you know gnarly uh inappropriate stuff uh and so maybe we're glossing over all that i gave three disclaimers during this i don't want to talk about that kind of stuff if that's in fact what happened we'll find out in due time and that'll make this really easy to understand um but yeah sure it's it goes without saying that's a possibility so i think it's it's kind of boot and what's the point of speculating about something as egregious and ugly as that when we have no information uh speculating about the business stuff and the downstream impacts i think that is you know very valid for us to discuss here on this week in startups okay next person all right we have uh travis okay so the question uh and the comment was i wonder if this was an international espionage security breach that occurred and then that is why that's like such a heavy thing that this um happens so swiftly i think it's a pretty travis uh asked us that question what do you think i mean it's like we're saying earlier hitting agi it's a it's a more fantastical concept here but you know sometimes something weird and fantastical that those things do happen right i mean how many conspiracy theories you know like yesterday's conspiracy theories become tomorrow's pulitzer prizes right there was a conspiracy theory that the church was covering up for sexual misconduct by priests and then all of a sudden boom it was a pulitzer for you know i don't i don't think that's the case here obviously but um you know what do you think is that a possibility this um foreign espionage uh i mean you got to think there are actors who really would love to have the code base and data and everything well when when it came to just to you know talk through that the u.s government probably is is uh you know happy with sam right he's been the one um in in amongst a bunch of other people talking about uh regular you know regulation right and we had bill gurley on with us a couple of weeks ago and talking about regulation so i don't think it would be u.s government but maybe some other governments are not happy with what's happening with regulation and sharing of technology so that's possible i i could you know i it's it we could put it on the bingo card like i guess we have to create one of those now and see where this where this lands absolutely all right uh 2 000 people watching on youtube 5 700 people on our twitter slash x spaces apologies elon apologies elon it's gonna take even it's gonna even take me a while to not say twitter after 20 years of being on twitter on our x spaces let's take another call another call keep it can we get a tight question tight question so we can take two more okay so this happened fast greg was stripped of his chairman title uh microsoft didn't know that's a lot to happen in a short period of time there and then who wins sunny who wins what who does this help most google in the shortest term google i think right and next microsoft honestly because what really why does microsoft benefit from the leadership change here because they have more control?

50:10I think going back to that point, we were talking about master negotiator. Like, you know, who would you want to sit across from the table, Sam or someone else now, in terms of, hey, this has all happened, the funding requirements, the resource requirements, and how you can basically, you know, strike a better deal for yourself or maybe even buy the company. Wow. That's mind-blowing. So Microsoft now, now here comes a conspiracy theory. so if this is a coup of some types let's say sam tripped people then stab him in the back you know he makes a mistake of some kind let's say the security mistake a conflict of interest mistake whatever it's something that's not like unforgivable but maybe some people are like hey we let's we got to come for the king but we best not miss and then microsoft's like oh power vacuum hmm maybe it's time for us to buy all this up and then yeah the non-profit will get a bunch of money and they can give it and kumbaya save the whales pretty interesting concept yeah so that's an interesting point microsoft couldn't buy had a hard time buying a video game maker how do they get this through regulators that's a really astute point and i think the way to get it through is to just get the code base to get the weights get the talent and then you don't have to buy the company you just sucked up without buying it for those listening on the youtube caller says hey when you sign up for enterprise on open AI gives you a choice to go to Azure with Microsoft or to do open AI, open AI tries to steer that to get you on the newer models.

51:41But maybe the way Microsoft takes us all over and you know, does the second act of this coup. And this is a coup of types, or it's either going to fall into the category of a coup, or it's going to fall into the category of, you know, a fall from grace kind of situation. If it is a coup, yeah, they have that possibility to just take over the enterprise business as part of their negotiation with open ai to give them the next slug of capital give them access to these servers so man this is uh one of the most dynamic situations i've ever seen in my career um we'll do another emergency pod a quick breaking news breaking news yeah yeah so kara swisher let's uh let's kara swisher yeah i got she hates me i used to be friends with her now she hates me i don't know i know but but we got to bring it up because okay what did she say like It says scoop a lot more departures of top folks at OpenAI tonight.

52:35And Sam will make a statement. But as she understands, it was a misalignment of the profit versus nonprofit adherence at the company. Developer day was an issue. Yeah. And sources tell me the profit direction of the company enrollment and the speed of development, which could be too risky. So this kind of lined up with that hacker news post. The Reddit. Yeah, the hacker news post. And the Reddit. both of them were kind of in that zone so yeah moving fast and breaking things i guess um is going to be the speculation for a lot of folks um and then which is also we said it was this corporate structure is rife with conflict so yeah that was our position from the beginning conflicts of interest the board member thing and you go like look maybe just all the non-employee board members non-profit board members say hey what's going on here this doesn't seem very non-profit-y right well and here's the thing you could all get pinched and this is where having these kind of crazy board structures you bring some people onto the board to be independent directors they start getting counsel you got lawyers one set of lawyers says in one ear you know we're the original lawyers and sam wanted to do this and you know now sam's not in the room it was a little aggressive there are these things we warned him about but he wanted to go forward anyway and you know our advice was maybe a little more research but sam went for it and then somebody else in the other ear says hey if sam went for it and it's and you guys get pinched you're all going to jail or you're all gonna you know this could pierce the veil or you guys could be involved in lawsuits forever even if it doesn't pierce the corporate veil you know the the irs is a humorless group of career individuals and the government does not like when people don't pay their taxes I know this is a newsflash to many people listening here on the live stream in the pod.

54:21You really don't want to play games with giving the government their fair share. And if everybody's selling in secondary, you know, the secondary thing comes to mind here. Okay, we're going fast and loose. Maybe we interpreted the law. Remember, Elon said, I have a lot of questions about this. Like, how does this work? And if I think Elon said, like, if everybody could build a nonprofit, do a for profit, and make a bunch of money and then not pay taxes like maybe we should all be moving towards this and uh you know i kind of looked at that too i i i didn't ask lawyers but i was asking folks like who want to be b corporations and all this nonsense silliness kumbaya save the whales nonsense like if you're gonna build a company just be a moronic capitalist then give your money away when you sell your shares you don't need to kind of pollute the waters of capitalism with non-profits and make some weird frankenstein corporate structure and they made a frankenstein corporate structure just like firefox had a frankenstein corporate structure and that led to i can tell you i would guess tens of millions in legal bills over the last decade to just navigate the fact that firefox was a non-profit that was throwing off hundreds of millions of dollars in search revenue from their search deal with google so there is some history here and yeah that would would the the the there's a lot of going back to this decision and who made that decision and that decision could get you pinched and then if people can get pinched you know what they do they flip self-preservation is a very powerful instinct yeah i mean the you know kind of i think it was our top one it's just like something in this area of structure and conflict and um yeah it's like seemingly like and you said it 72 hours we're going to know everything that's happened like look we might even get it before then all right we got to redo we got to redo our percentages security breach conflict of interest with sam's deal making the non-profit for profit structure other take a moment i'm going to give 10 to security breach 10 to other i'll go 50 50 on the rest so 40 40 i got 40 the original sin of the non-profit for-profit franken structure the frank i'm gonna go i'm gonna i'm gonna go 50 frank and structure 30 conflicts in deal making 10 other 10 security breach what do you got sonny i'm gonna i'm gonna take a page out of elon's books was he always pull up occam's razor right sure the most obvious answers and so i'm gonna go 90 uh you know corporate structure profit non-profit franken structure franken structure and five percent conflict of interest and put everything else in five percent okay there you go yeah um time is going to tell uh thank you to everybody who came on the spaces give me a thumbs up if you like this maybe we'll do more of these apparently a large number of people did seem to like it so thank you for the thumbs up everybody sorry we couldn't get everyone up as a speaker yeah but I think this was fun there's a lot of people to choose from the UI needs to do something that helps you filter it somehow well what I would like to do is you know when it has requests if I go to the request tab I'm going to talk to Elon about this on the request tabs when you get too many requests I know that sounds obnoxious I know I I mean I'm going to talk to Sundeep everybody has friends I mean it's not a good deal yeah I got it the really the note should be um who are the most followed of the group it should list the most followed people first i think what it does is it lists the verified and then it lists everybody else i would list it verified most followed then unverified most followed that would be easier to figure out who's got the most followers as just one but one proxy for maybe they'll have until i would also like people to be able to type in their question when they request to speak so that would be a very interesting you request to speak and say what topic do you want to talk about put your question here do an emoji you should be able to like have a thing that's uh you know like a little like a little text box thing that shows this person's type their question yeah yeah yeah then i could either read the question or i could have you come up and ask it but that would be like a good pre-screen like a pre-screening thing on the radio all right yeah this has been an amazing emergency episode of this week in startups you can and search your podcast player for this week in startups and subscribe.

58:52I do it four days a week. Every Monday, Sandeep and I do AI demo day. Monday equals AI demo day. Sandeep looks all week at all of the different AI things that have been released. He then presents them to me. We then give them a letter grade and we, and we try to learn every Monday, the latest and greatest. Sometimes you even invest. Sometimes you even invest. And sometimes I find a company and I just, you know, I get a little tasty poo. I get a slice. Sandeep's company is Definitive Intelligence. If you're doing large-scale AI stuff, you can reach out to him. He's at Sandeep, first name club on X, formerly known as Twitter.