SPEAKER_01: Yeah, 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
SPEAKER_02: 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 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 changed the world. So then the question becomes why? What happened and why this week in startups is
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SPEAKER_02: Hey, everybody. Hey, everybody. Welcome to an emergency podcast This is an emergency breaking news podcast here on this week in startups. 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 will 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 we were both Sequoia Scouts together, both Sequoia founders together. And we've got, you know, literally hundreds of contacts together. And yeah, I think he's, obviously, I've watched him from his first startup, Sunny 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 demo day, Sam was on stage. This has become a $90 billion company. This is, I think, one of the biggest news stories of the year. Would you agree sending?
SPEAKER_01: Oh, definitely. I mean, the biggest story and tech this year, for sure. And, you know, hugely impactful, because we have a giant ecosystem of, you know, maybe 5000 plus companies that are being built in and around AI, and many of which who are working on opening eyes platforms. And so this has pretty huge impact to a number of companies, depending on, you know, and we'll maybe talk about it here. But what happens with opening 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 the co founders, Greg Brockman just quit. Okay, yeah, yeah, he
SPEAKER_02: was removed from the board. Yes. 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, Reid 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 nonprofit, which became a for profit company, and then some industry experts. And as part of this action by the board, Greg Brockman was stepping down, or they said will be stepping down as chairman of the board and will remain 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?
SPEAKER_01: 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 functionality that's built around open AI, you know, upwards of 10 different co pilots and, you know, GPT for offerings for their enterprise customers. This has to be, you know, incredibly kind of, I guess, worrying, right, you have the founders, the CEO. You know, he was I think Greg was a president, not the CTO. I think that was the just took over the woman who just took over for that. So yeah, I'm just processing it as quickly as you are as it's coming. Yes. And so
SPEAKER_02: this should 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 10s of billions of dollars invested in 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
SPEAKER_02: happened and why? Well, the board did this news dump on a Friday, which is always a classic PR move 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. And so 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 does create this amount of chaos. We are live on Twitter spaces, we're live on YouTube, we will take your questions as a programming note. But here's what opening eyes board said. They fired Sam Altman for not being quote, consistently candid in his communication. Now, on a housekeeping basis, we're going
SPEAKER_02: to do some speculation here. One thing we're not going to speculate about is any of the, you know, gnarly allegations floating around about personal conduct. Yeah, yeah, I we're not in the business of that. And, you know, we'll just leave it at that. On a business basis, consistently candid in his communications. What does that say to you, Sonny? Knowing what
SPEAKER_02: you know about startups and boards? Yeah. consistently candid in his communications. So this is more than one, right? Yeah, well, instance, there's a pass. This company is very
SPEAKER_01: 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's 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. You know, the company has taken billions of dollars in funding in non-traditional ways. 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, 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 reach 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. And then there's the, you know, we've talked about this in a regular pod, there's the data that the company has used, 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 had already been out there with respect to what this company has been, you know, has had to deal with. And which is to say, if I may summarize, when you make a
SPEAKER_02: startup, and you're moving fast, you may break things. And sometimes you got to break some eggs to make an omelet. And so the broken eggs that could have been causing communications issues with the board, as they put it, is maybe the training data. That's a vector. That's number one. Number two, withholding information about a security breach, 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 of biggest, it's the biggest surface area. So it gets the most attacks in fairness to them. So that's the second thing. And then the third bucket would be who owns the company who owns shares in the company in the corporate structure. I will add a fourth thing to that, which is deal making. So what do we mean by deal making? Sam is a consummate deal maker. He has been an incredible deal maker at Y Combinator. I think he had an LP and 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 you on to put $50 million, reportedly into open AI as a nonprofit and other people like Reid Hoffman to join the board. So an incredible networker, incredible deal maker. 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. So, you know, I might be an LP, I'm an LP, as one example, in 24 venture funds, 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 I'm an LPN. People go from one company to the other, you get the idea. 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 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. 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 in crypto, and then maybe was reactor company, you know, sure.
SPEAKER_01:
SPEAKER_02: 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 or possibly doing something johnny.ive to do an another thing that sounded like it would compete with humane, possibly as an AI hardware device. Listen, selling software is hard enough right now, man, it's hand to hand combat out there and b2b land, the last thing you need to do is slow your sales team down because you don't have your sock to dialed in. So if you're SAS or services company, and you store consumer data in the cloud, you know what you need to do, you need to check out Vanta, they're going to get your sock to compliant easier and faster. And Vanta makes it so easy to get in renew your sock to on average, Vanta customers are sock to comply in just two to four weeks, compare that to three to five months without Vanta, they're going to save you hundreds of hours of work and up to 85% on compliance costs. And Vanta does more than just sock to 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. Vanta is going to give you 1000 off because they love this weekend startups, they love startups, vanta.com slash twist, that's vanta.com slash twist to get $1,000 off your sock to I'm going to go with that last bucket first. What are
SPEAKER_02: your thoughts handicapping this, that this had to do with his you 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? sack speculated it on all in we had a discussion about that. And humane launch just happened. And you know, I think that might have been a little screwed up by this Johnny Ive news. So here we are no conflict of interest, Sonny go. Well, look, when you've created the technology that's been the
SPEAKER_01: 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. And 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, you know, what we would call a typical board member, but it's typical board members that are, you know, venture investors, or board members of public companies. It's a little, you know, there's Adam is there, and he obviously runs Quora, but like the other folks are related, either work for the company or and some external folks. And so I do think the ability for conflict to arise is really, really high with this with with open AI, but it may not be malicious, it just may be at the pace of everything that's happening, you got to put yourself in GM shoes and think about how many inbounds you get on every single day, you know, there's 5000 AI companies, right? And they all want to, you know, get access to open AI or do a partnership or get funding from open AI, you know, open AI is funded companies as well. So I, you know, there's, there's so much that could be happening here, that it's, you know, not on purpose, but just maybe even just hard to keep up with the disclosures.
SPEAKER_02: Could be, and it could be the board had, you know, based on their phrasing here, you know, a frustrating time with the second third or fourth time this happened. Yeah. 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 Calicadas 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. 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
SPEAKER_02: 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.
SPEAKER_01: 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 just I've done well in other places. And, you know, like you mentioned, he's been involved in some of these record breaking funds that have had, you know, hundreds of x return. And so it is, you know, potentially feasible that, like, that, you know, that he does not have it in any kind of related entity or entity that's pushed off, but just, you know, he decided to give it all away as a donation to, you know, Stanford or I'm staying Stanford because he went there, right. But like, you know, some someplace that he's very passionate about. Now, 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 or the general counsel, the company or the outside counsel, to understand every single entity on the cap table. And, and then to come back and maybe ask, like, you know, if 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, a be careful. Yeah, be careful. Yeah.
SPEAKER_02: Well, that this is, again, super speculation here. 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 communication, and maybe there are other issues like that. And so then we go to the security one. So maybe you could unpack the speculation about security, because the GPT has got launched. And then I remember seeing this headline that Microsoft took everybody at Microsoft while their developers off of open AI. Yeah. Well,
SPEAKER_01: let's maybe rewind back. So they had an incident, I would say, you know, maybe March this year, where people's information was getting leaked. And and so you know, that's, 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, you know, build them like, you know, we did one as well. And so I think, given how fast it was moving, how many GPTs are being created, it was probably a proactive move by Microsoft to say, Hey, let's, let's not allow our employees to rush into that ecosystem, fill it up with perhaps confidential documents and confidential, you know, text and other, you know, pictures, whatever it happens to be that you want to use to create a GPT and not put it in there. Because I think the experience as we did, you know, 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, you know, being still being kind of finalized and or harden. Like, we took the, 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, you know, placement documents or something like that. Yeah.
SPEAKER_02: All right. So Microsoft put $10 billion into this company, they don't own a board seat that is absolutely bonkers, but they do own 49% of the company. So that's insane. So this is also kind of a governance problem here. Who is on the board? We had Greg, you had Sam, they're both off the board. And then I think everybody else was independent. Yeah, also Ilia is the chief scientist and co founder. So that's Yeah, and then you had a couple of independent directors, chorus CEO Adam D'Angelo, 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
SPEAKER_02: 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. So I and Greg would, I guess vote in favor of Sam, because he just quit. And you would think that Ilia would as well. 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. And of course, CEO Adam went to IC I would think he would be very loyal to Sam, I don't know the relationship with these other two 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. And he was just on demo day. So that's the thing I'm having this hard. This is even closer to that
SPEAKER_01: yesterday. He was at the APAC conference, right? He was at APAC representing opening. I didn't realize that. Yeah, yeah, events. Huh? Yeah, yeah. This is probably all happening in real
SPEAKER_02: time. Yeah. Wow. So while so I wonder if this goes back to the open AI day, because that was the Okay, so let's talk about Microsoft. Satya Nadella showed up right? For years. 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
SPEAKER_01: what what Sam did call out was, hey, people are any, you know, how to tweet about it, people are speculating about the, you know, the relationship between Microsoft and and open AI. And he used that moment to solidify that the relationship is stronger than ever. Fast forward to this week, Microsoft has ignite, and they launch upwards of 10 new products, kind of built on open AI. So I feel like they had just squashed all the rumors that were out there about the potential tension between the two companies.
SPEAKER_02: There was also a tweet where Sam said we're not like sandbagging any of their software products with chat CPT. 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. Yeah. chat CPT 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 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. weekly, I think they said at 100 million weekly users, I
SPEAKER_01: wonder how many are paid, I'm going to go with 3%. So maybe
SPEAKER_02: one, two, I'd say one or 2 million people are paying one or 2 million people are paying 20 bucks, 2 million people 20 bucks a month, 400, it's a half billion dollars, and then maybe a half billion dollars in API calls. So then the next speculation is, is this financial? Is this financial?
SPEAKER_02: But before we get to that, there's a collision course, isn't there? Microsoft wants consumers and business users to do this. And chat CPT 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 what is Microsoft own 49% of this? It's like, it's like Mac, it would be as if Microsoft owned 49% of the
SPEAKER_02: Mac OS or something or the iPhone, it doesn't. It's so conflicted, right?
SPEAKER_01: Let me give you a possible way. And I'd love your take on it. I think, if you look at open AI in two distinct ways, let's look at open AI as an API, and an API for product led growth. So you know, 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 open AI. And you know, we've demoed a bunch of these type of things, right? Things that are standalone things that are features. And then I think, and that's like the product led growth of it. That's, you know, what 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 enterprisee. 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 open AI path with open AI API's. So I feel like it was, you know, even though it's, it's, you can kind of see a conflict there. But they have two different competencies, right, where 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
SPEAKER_02: 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 actually use Windows, or and also Xbox, you know, and other products they have. Yeah. And leaving the zoom and the surface. Yeah, yeah, but that's one. And that's one where you can see
SPEAKER_01: 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 substantial conflict between the businesses, you know, going directly after the consumers.
SPEAKER_02: All right, Microsoft, according to reports, found out about this one minute before opening, I 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?
SPEAKER_01: Yeah, well, 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, some issues. There were some issues. Yes. Some issues.
SPEAKER_01: It was a multi month process that in close to close to a year. Yeah, yeah. That involved external firms that involved, you know, external counsel. And even they brought in some 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 the only way you can think about it moving so quickly. I don't think this could be criminal. Because they said it
SPEAKER_02: was an issue with communicating with the board. Yeah. And so that is, that's somewhere between, like, an ethics or an honesty problem. Okay. 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. If you've ever had to hire
SPEAKER_02: developers, you know, it is a giant headache. Are they built from the startup grind? How do you know if you hire the wrong developer, man, maybe they drag your whole team down, maybe they take you down some rabbit hole, and you don't know what's going on. And then not only are you back to square one, you might be behind the eight ball, right. But if you hire the right developer, that could be a game changer. Let me introduce you to lemon hire. It's a platform that helps you find qualified senior developers who want to join your team. Lemon hire pre selects vets and matches tech candidates with high growth startups. So founders can focus on building their vision. Here's why you can trust lemon hire. They got 80,000 pre vetted engineers, and you can interview any of them within 48 hours notice you pay nothing until you started onboarding lemon hire is going to replace any of your hires for free in the first 30 days. So just go to lemon.io slash hire H I R E to get a special offer just for Chris listeners $2,000 off your first hire. That's right to grand off at lemon.io slash hire le mo n.io slash hire hire with confidence at lemon.io slash hire just to hold people over we're walking through what could have happened here. And listen, Microsoft didn't know it. What 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 costs, they're burning through tons of money. He said recently, they're going to need to raise 10s 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, that's that wasn't real. I didn't I didn't okay email. So
SPEAKER_01: we said it was going out to select people. So I'm wondering
SPEAKER_02: if it was going out to people who are spending $5,000 a day on the API or you know, $100,000 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, maybe cash flow problems. I can't imagine they would have cash flow problems. It's only a couple 100 people right at the company. So and 10 billion raised. Yeah. And even if you had that you don't
SPEAKER_01: 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. Sure. A lot less, right. And so, 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 let's speculate a new then. Yeah. Under what circumstances a
SPEAKER_02: 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. Um, yeah, I guess, you
SPEAKER_01: know, like, that's not so crazy. I mean, to put that out today is a bit crazy. But, you know, a lot of a lot more weird stuff is happening right now. So that's kind of really interesting to think about. Right. There was also a unverified anonymous Reddit
SPEAKER_02: comment, again, unverified could be fanfiction, but it's interesting. Claiming somebody claiming to be from open AI is saying, I feel compelled as someone close to the situation to share additional context about Sam and the company engineers raise 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. It's cotton bond brand, not the wouldn't listen to but charging head. He does believe in speed. He's said that very publicly when he was running YC, and he's right. startups go fast. His focus increasingly seemed to be fame and fortune not upholding our principles as a responsible nonprofit. Hmm. I've heard that I think that's a lot of jealousy to Yeah. 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 step down. That doesn't make much sense. That Yeah, I think this is a kid say I think this is cap. I'm gonna go with this. This is cap. You say that but yeah. Yeah. I mean, facts are
SPEAKER_02: cap. All right. So I'll bring up something like so impact to the
SPEAKER_01: company. I want your take on this founder led to not 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
SPEAKER_02: that losing the founders is obviously disastrous. The lead that chat GPT has is not de minimus. 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, so just on one thing, Jake, he was posting about a bug
SPEAKER_01: fix like two days ago. Yes. Okay. So this is where this is where you have to like, pause for a second and think it
SPEAKER_02: through. So if I was on the board of 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 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 stock options, etc. So yeah, this to me, sounds like Greg, there is the 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 mid term. 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
SPEAKER_01: that they have? Well, I mean, I think we're gonna 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 you'll ever like, Oh, my God, they took, you can tell it's a great deal. Because
SPEAKER_02: 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 ask my producers to tell me what Microsoft stock price went up. You know, since they announced the $10 billion investment, I'm guessing it's gone up 100 billion. 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. Sometimes you need a hybrid solution. Like let's say you're working with sensitive data that you just can't put in some random cloud, right? Or maybe you need to connect multiple cloud providers at once. Or maybe you just want a more cost efficient solution, right? Because sometimes these cloud bills can get crazy. If that's the case, you need to check out Equinix. Equinix metal will give you direct access to physical servers, but you still get the benefits of the cloud. So there's no need to rack your own servers. Equinix provides on demand infrastructure in over 25 major cities. And here's the best part. They have an amazing startup program. The Equinix startup program offers personalized consultations, guidance from the Equinix team and wait for it $100,000 in credits. That's not a typo. So here's what I want you to do. Go to Equinix startups.com to apply. And when you apply, James from Equinix will reach out to you directly. That's how serious they take the startup community. That's EQ ui n i x startups.com EQ ui n i x startups.com equinix startups.com get a call from James. All right, we have a question from YouTube. I think it's AGI Jason and Microsoft wants to announce wants that. And he disagrees whoever announced AGI first rules the world and you share price goes to the roof.
SPEAKER_01: I said it 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
SPEAKER_02: $10 billion investment. I forgot about that. Remember that condition? Yeah, 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 he's losing him. So yeah, losing him. Just to wrap on that thought, I don't think this is AGI. But that's another interesting point. Could they have discovered something and hit it from the board? That's like some crazy science fiction movie. They 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 it. It's just AGI. So I don't think this is. I don't think we've achieved general intelligence. Yeah. And again,
SPEAKER_01: if you if that had happened, let's just let's just double click into it for completeness. You wouldn't fire the people right away. Right? You'd want them around. Yeah, like the
SPEAKER_01: opposite. Yeah, you'd kind of lock them down a little bit. You wouldn't be like, Oh, you're fired. You know? Yeah. You know,
SPEAKER_02: I'm gonna stick with my original thought that there are some conflicts 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 that costs this. When you go through all this for you, what's the most likely scenario security, conflict of interest, personal issues,
SPEAKER_01: conflict of interest, personal issues, I conflict of interest, I think, okay, yeah, if we take personal issues off the table,
SPEAKER_02: yeah. For obvious reasons, we would never want to speculate about anything like that. Yeah, that makes the most sense to
SPEAKER_01: me. And like, you know, you already touched on it, open the eyes investing in companies, these guys are investing in companies, they're trying to start the free for all these.
SPEAKER_01: It's, 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 at the pace is so quick, like, think about, you know, how much has happened with this thing is just approaching 12 months. So, you know, probably anywhere from 25 to 100 companies that they're involved in and, you know, partnered with 80%, I'm going to go 70%
SPEAKER_02: chance conflict of interest, I'm going to go 20% chance of 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, we bring
SPEAKER_01: someone on up from the audience. Yes, you have a specific person you want to bring up? Just the first person on my list. Jared is the VP of AI at Vercel would love to hear what they're saying. So me, it's coming up. What a great
SPEAKER_02: question. What do you think you're really well aware of the system Sandeep? Well, yeah, look, I think one of the things
SPEAKER_01: just building on what we just said about, you know, Sam and team, they were able to push the boundaries really, really far, right? Because 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 it. And to just repeat the Yeah, so just to repeat the
SPEAKER_02: 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 in the march towards artificial general intelligence? Yeah, I agree with you. I think this gives, you know, whatever their lead is, you give the lead. OpenAI'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 raise from a sovereign wealth fund tomorrow. Like within 48 hours, I think on Monday, because I, 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 nonprofit, 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 weird corporate structures can actually cause real issues. I Sam bankman free now this is not fraud. But you had no board there, or Elizabeth Holmes had a bunch of like, 80 year old former generals that know nothing about blood, 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 gonna happen, folks. It's just a matter of it's 357 or 10 years. I you know, it's going to be one of those numbers. 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 kind of conflict. 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, there's a California company, they put their office in San Francisco, that you there's no non competes in this, you know, New York State and some of the northeast, I think, Massachusetts, Boston, obviously, these can non competes up there. One of the reasons people speculate that the the West has done better than the East Coast on technologies, the non compete issue. So what do you think? Is this going to be a bunch of people leaving open AI?
SPEAKER_01: Well, so in terms of the engineers, let's, let's go to that one first. Recall last week, and I don't know if we touched on it, but like, we definitely had it in the docket. There was a way to sorry, there was an article saying that these folks being offered upwards of $10 million. 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 x AI. And so it is feasible, if I were to bet that if folks aren't happy with whatever direction the company's going in, and, and they haven't been able to properly participate in whatever monetization, like structure exists from the cap table, because of, you know, the wonkiness that's created that, you know, I think one of the things Elon said very clearly about why creating x AI 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. Now was Greg passed up for CEO? Is that why he quit? He didn't
SPEAKER_02: get the CEO son? Hmm. 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. So great comment. So the speaker was saying, Hey, I've never seen this kind of dramatic firing. Dramatic firing equals personal misbehavior misadventures, you know, gnarly, inappropriate stuff. 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. 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? 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 and startups. Okay, next person. All right, we have Travis. Okay. So
SPEAKER_02: the question 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 happens so swiftly. I think it's a pretty Travis asked us that question. What do you think? I mean, it's like we were saying earlier hitting AGI. 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 think that's the case here, obviously. But you know, what do you think? Is that a possibility this foreign espionage? 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
SPEAKER_01: came to just to talk through that, the US government probably is is, you know, happy with Sam, right? He's been the one in in amongst a bunch of other people talking about 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 US government, but maybe some other governments are not happy with what's happening with regulation and sharing of technology. So that's possible. I you know, it's, 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. 2000 people watching
SPEAKER_02: on YouTube 5700 people on our Twitter slash spaces. Yeah, apologies. 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. Microsoft didn't know. That's a lot to happen in a short period of time there. And then who wins? Sonny, who wins? What who does this help most Google in the shortest term Google, I think,
SPEAKER_01:
SPEAKER_01: right? And next Microsoft? Honestly, because what really
SPEAKER_02: why does Microsoft benefit from the leadership change here because they have more control? I think going back to that
SPEAKER_01: point, we were talking about master negotiator, like, you know, if 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 and how you can basically, you know, strike a better deal for yourself, or maybe even by the company. Wow. That's mind
SPEAKER_02: 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 them 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 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 nonprofit 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. You Microsoft couldn't buy a video 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 based, get the weights, get the talent, and then you don't have to buy the company. You just suck up 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. But 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 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 the server. So, man, this is one of the most dynamic situations I've ever seen in my career. We'll do another emergency pod, a quick breaking news, breaking
SPEAKER_01: news. Yeah. Yeah. So, Kara Swisher. Let's let's Kara Swisher. She hates me. I see friends in there. Now she hates me. I don't know. I know, but we got to bring it up because it's a scoop, a lot more departures of top folks at open AI tonight. And 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. Hmm. Yeah. And sources
SPEAKER_01: tell me the profit direction of the company and the speed of development, which could be too risky. So this kind of lined up with that hacker Reddit, and the Reddit, both of them were kind of in that zone. So yeah, moving fast and breaking things, I
SPEAKER_02: guess, is going to be the speculation for a lot of folks. 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
SPEAKER_01: board members, nonprofit board members say, Hey, what's going on here? This doesn't seem very nonprofit. Right? Well, and
SPEAKER_02: 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 year, 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 the somebody else the other 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 going to, 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 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. You really don't want to play games with giving the government their fair share. And if everybody's selling in secondary, you know that the secondary thing comes to mind here. Okay, we're going fast and loose. Maybe we interpreted the law member, 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, make a bunch of money, and then not pay taxes, like, maybe we should all be moving towards this. And, you know, I kind of looked at that, too. I didn't ask lawyers, but I was asking folks, like who want to be B corporations and all this nonsense, Salinas, 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 nonprofits 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 10s of millions in legal bills over the last decade, to just navigate the fact that Firefox was a nonprofit that was throwing off hundreds of millions of dollars in search revenue from their search deal with Google. So there is some
SPEAKER_02: history here. And yeah, that would be 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
SPEAKER_01: of, I think it was our top one is just like something in this area of structure and conflict. And yeah, it's like seemingly like, and you said it 72 hours, we're gonna know everything that's happened. Like, look, we might even get it before then.
SPEAKER_02: All right, we got to redo we got to redo our percentages, security breach, conflict of interest with Sam's deal making the nonprofit, the profit structure. Other take a moment,
SPEAKER_02: I'm going to give 10% to security breach 10% to other
SPEAKER_02: I'll go 5050 on the rest. So 4040 I got 40% the original sin of the nonprofit for profit, franken structure, the Frank, I'm going to go, I'm going to, I'm going to go 50% franken structure 30% conflicts in deal making 10% other 10% security breach. What do you got? Sunny, I'm gonna I'm gonna take a page out of Elon's book was
SPEAKER_01: he always pull up Occam's razor? Right? Sure. The most obvious answers. And so I'm going to go 90% you know, corporate structure, profit nonprofit, franken structure, franken structure, and 5% conflict of interest and put everything else in 5%. Okay, there you go. Yeah.
SPEAKER_02: Well, time is gonna tell. 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, yeah. But I think
SPEAKER_01: this is this is fun. A lot of people to choose from the UI
SPEAKER_01: needs to do something that helps you filter it somehow there's what I would like to do is, you know, when it has requests, if I
SPEAKER_02: go to the request tab, I'm going to talk to you on about that. Talk to you on about this on the request tabs when you get too many requests. I know that sounds obnoxious. I know. I mean, it's, I'm going to talk to Sunday, but everybody has friends. I mean, that's not the really the note should be who
SPEAKER_02: are the most followed of the group, it should list the most follow 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 than unverified most followed, that would be easier to figure out who's got the most followers as just one but one proxy for me with 11. 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 it put your question here, do an emoji, you should be able to like have a
SPEAKER_01: thing that's, you know, like a little like a little text box thing that shows this person's type their question. Yeah, yeah,
SPEAKER_02: because 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 search your podcast player for this week in startups and subscribe. I 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. Invest, sometimes you 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, I am at Jason and we'll see you all next time on this week in startups live.
