We've made a lot of predictions. We get some wrong. This was a layup.
It was.
Hi everyone. This is Pivot from New York Magazine and the Vox Media Podcast Network. I'm Kara Swisher.
Well, let's get straight to the breaking news of the day. Hey, Elon Musk just lost his high-stakes lawsuit against Sam Altman and OpenAI, which alleged OpenAI had violated a promise to remain a nonprofit after deliberating less than two hours, which means they didn't get the free lunch. A federal jury ruled unanimously 9 to 0 that Altman and OpenAI did not betray their nonprofit founding missions. There was a statute of limitations technicality, but I think they're basically saying, Elon, you giant adult toddler, too bad. Scott, we've been saying this all along that this would happen. Check it out. I think this jury can't possibly side with him. I mean, ultimately, I don't think they proved anything. And it's a sort of he-said, he-said kind of thing. And Elon's the most lo of the pair, right? By far, by the country mile. So, I think Elon's made a spectacle of himself. If he wins, it would be something else. Like, I'll tell you that. But I can't imagine the jury thinks this guy got the short end of the stick or that he's stupid and didn't know what was happening to him. The judge backed the verdict and dismissed all claims, including one against Microsoft. Both men are racing towards massive IPOs with OpenAI valued at over $850 billion, and SpaceX expected to go public very soon after merging with Musk's xAI, which has been pretty much of a failure in the AI department, possibly one of the reasons for this lawsuit. Thoughts?
Look, as predicted, I thought this was an easy one. And I thought this was a messiah complex and seller's regret cosplaying a legal argument. The only thing that came out of this entire case was that Musk was a board member and that she nor he disclosed it after he had left.
Well, if they did it that way, let's be—we don't know how that happened. There was something.
Alleged. You're saying she—she would—it was immaculate conception.
In there was—let's not get into it, but they're romantically involved now.
This was lawfare. And this was again—I am turning so I think we now need alternative minimum taxes of 60 or 70% on anything over a billion dollars for an individual because these individuals are under the impression that they are not subject to the standards of Western society, decency, or the law. The fact that they would even—he would even bring this case—
Is okay, you don't have a legal argument, but I'm Elon Musk and nonprofits are allowed to convert to for-profits. They do it all the time. He tried to convince them to become a for-profit that he would control, and when they said no, he left and started his own for-profit AI company. And then six years later decided to give up all ownership and governance of that now that it was worth $850 billion. He wanted some of that, or he wanted to at least slow it down for his failing—
Uh, LLM. This was—we've made a lot of predictions. We get some wrong. This was a layup.
It was. I have to say, one of the things that people look—look, first of all, it's a waste of our legal time. It's a waste of those nine jurors' time. It was ridiculous. How—let me tell you, all of them came off badly, right? Sam Altman doesn't look—Siobhan Zillis, the alleged person, girlfriend thing. Um, no, she is a girlfriend, I guess. I don't know. I don't care. Um, but Greg Brockman—the only person who came off like an adult is Satya Nadella, who's the CEO of Microsoft, right? He looks like he did the right thing. He handled it well. All his texts are fine. The rest of them look like babies and unhappy and just—why are they in charge of our fate? Why are they so unhappy and so rich? Um, all kinds of like weird dramas between them, personal dramas, and it's a waste of our legal system's time. It's just—the judge seemed perplexed as to what it was doing there. Um, and again, it does come down to Elon Musk and sour grapes. He has the sourest grapes on the planet, even though he's about to become the richest person on the planet, right? In the history of the planet. The other thing is that both of them are sucking wind while Gemini and Anthropic are lapping them, right? So all this waste of time and energy over companies that have problematic real problems, right? In their own thing, and it's just—the whole thing is just—I just—and I think the fault lies, of course, with Elon Musk who just can't like lose. He's a sore winner is what he is. I don't know what else. And he's a bad loser essentially. And you know, do you think it'll affect their IPOs or positions in the overall AI race? Because I don't see anyone coming off well except for Gemini and Anthropic in this deal essentially.
Well, Gemini and Anthropic win by just virtue of the fact that this is a big distraction for a non-competitor, xAI, and a real competitor, OpenAI. The only nuance I would add to your comments is one: there's a small fraction of people, us included, very small, that we're tracking the nuance and the details of the case. Generally speaking, the majority of people will read this today and it distills down to a very basic thing: Musk lost and Altman won. So I actually think Altman comes out of this as a winner.
That's fair. That's fair.
Because the majority of us didn't listen to the testimony and just how petty and childish and weird these people are. So it's like they'll remember one thing about this: Oh, Musk lost and Altman won.
And I don't—I think the prediction markets—I don't know what they were at one point, it had Musk at 50%, which was a great bet.
But the thing I looked at was the secondary market, and I didn't see shares in OpenAI decline in value. So I think this gives new—not new wind, but existing wind in the sails of the OpenAI IPO. And also, I don't think it—to be fair, I don't think it hurts Musk's IPO because I think people are so intoxicated, for real, for many good reasons, by the IPO of SpaceX. This was—and the most interesting thing I saw in the CNN article that we just pulled up was the judge almost appears to be wallpapering over why they didn't dismiss it in the first place. Why did they even let this get to trial? Because the judge was saying that she, you know, one of the reasons I was thinking of dismissing—you're going to have legal scholars look at this and go, 'How the fuck did this ever go to trial?' because of a technicality, because of a statute of limitations. Correct.
Was that it? Yeah. Well, statute of limitations and also there is a certain benchmark for what actually proceeds to a jury trial.
Yeah. A nuisance lawsuit. Yeah.
Yeah. So I look—I think this will go down as—I don't want to call it a nothingburger, but something that was distracting for them. That people, the TMZ of the tech community, loves reading the testimony and all that. But at the end of the day, this is a speed bump—not even a speed bump, a bump for both firms. But the distillation is the following: our court system still works. Musk lost, Altman won. But bigger picture, neither of their IPOs is threatened by this.
Yeah. Who the fuck cares is what I thought. The whole thing was such a—like, I do think—I agree with you about the nuance. I think you're absolutely right. No one will remember that. But boy, did I get an insight to what a bunch of babies these people are. Really, truly out of—I thought that, and now I'm like unconfirmed and confirmed. Like a lot of the stuff, like that I had heard about Zillis not telling the board about the pregnancy, the twins and stuff. I heard that and I was like, that can't be. And then it was like—like a lot of—and Greg Brockman's journal, and I know that's sort of like—we're interested in it, or I am at least, but it does like really does—I was like, I thought they were babies, and indeed in court they were babies.
Can I tell you about my pregnancy story conflict?
Do you want to bring this back?
You want to bring—you know, stranger things have happened.
Okay. So, you got to tell me you want the story first. So—
I want the story. Go ahead. Really briefly, though. Okay.
That's—Scott briefly is an oxymoron. So I'm a professor. I'm just getting traction at Stern. It's like 200—when was it? I should know this. 2007. Finally, I'm finally getting traction as a professor. And my dean calls me and says, 'I need you to come up right away.' And when the dean calls me and says, 'Come up right away,' right away, it's either very good or very bad news. So I roll up there and he goes, he goes, 'Okay, so there's a rumor,' and he goes, 'There's a second year who looks like she's about to give birth.' And I mean, she's clearly very, very pregnant, a second year student. Oh, no.
And there's a rumor that you're the father.
He goes, 'There's a rumor that you're the father.' And I go, 'Well, I've got good news and bad news.' And he literally put his head in his hands and went, 'Oh, fuck. No.' And I said, 'The bad news is I am the father.' And I said, 'The good news is we've been having sex for several years.' We disclosed in her application that we were living together and in a relationship together.
But we didn't pivot.
We didn't tell anyone, especially students, and I didn't tell any of my colleagues. I just disclosed it when she was applying to the school. But yeah, that was—I had knocked up a student who was walking around.
Oh no. Oh god. Okay. All right. On that note, I had a lovely pregnancy and it was all in a—
And then I went on to do the IPO of Red Envelope and a market cap of 108 million.
Oh god, that ended badly. Okay, it did end.
By the way, the legal stuff isn't over. Moving on to more OpenAI legal news. The company is reportedly weighing possible legal action against Apple over how ChatGPT has been integrated into devices and apps. They were just waiting for this trial to end, and here we are. This deal that OpenAI thought would bring billions of dollars in subscriptions has not turned out that way. OpenAI believes Apple failed to give ChatGPT prominent placement in Siri and iOS and didn't significantly promote the integration. Apple has its own concerns about OpenAI, as they should—questions around privacy and the company's push into hardware and devices. They did hire Jony Ive's company. Another sign of the fraying relationship, Apple is planning to let users choose between multiple AI models the way they do with search, even though they favor Google, including Gemini from Google and Claude from Anthropic across its software later this year. Maybe they'll sell the pole position to one of them, but supposedly it was supposed to be OpenAI. What do you think about OpenAI taking on Apple? I don't know what the contract is, but it kind of goes to the notion that even one of the most powerful companies in AI—it's all about placement and distribution.
Absolutely.
Even going as far back as when I was running a strategy firm and we were working for Levi's, they initially decided they needed to go vertical because JCPenney would put their own Arizona brand at the front. I mean, distribution just has so much power, right? And even something as powerful as OpenAI, if you put them at the bottom, they're not going to get as much. But I've said for a long time, I thought Apple was going to continue to be the arbiter and basically say, unless you pay us a lot of money, we're not putting you at the top, especially a company like OpenAI. But I don't know what the contract is. I don't know if it's an actual formal breach of contract.
Like the Disney-Soros one that you had called out as possibly being a nothingburger. I just—I wonder, do you really want to piss off the premier means of distribution with the kind of access to cheap capital that OpenAI has? And Sam Altman's a smart man regardless of what you think of him. I don't see—I would be trying to figure out a way to cut a deal similar to what Google did, where we're going to pay a fuck ton of money and we're going to be your default AI. So I don't—going after them legally, I don't—I don't—
Maybe Apple doesn't want them to be default AI. Maybe Apple does have concerns. I don't know anything about this. Do you know anything about the legal veracity of the case? I just—
I don't know. I mean, they obviously—the deal doesn't like these—they struck all these very high-profile deals, whether it was Disney, which became a nothingburger. It was an experiment and didn't really go anywhere. They, you know, they did a lot of like ta kind of things, and this is the biggest one of them. And then they turned around and did the Jony Ive thing, right, which has got to chap Tim Cook's ass like on some level, right? Even though he's going to be stepping down. And at the same time, they would have questions about what they want to do. Now, of course, Apple is a pay-to-play kind of company too by giving Google—probably Google Maps are very good. Theirs were very good. There were other players. They didn't give search to—they gave search to Google because they paid them much. So they will take your money, and Google certainly has issues around all manner of issues. So they didn't—they sort of overlook those. So I don't know. I just—I feel like they'll be—I think letting people choose between the multiple models is the best way to go. I don't love this pay-to-play kind of stuff because it doesn't—it may give you a good version, but it doesn't give you necessarily the one you want. So it seems to me that people should be able to choose their AI model since Apple's not going to be deploying that themselves. You know, if you want to use Claude, you should be able to use Claude and whoever, and may the best man win kind of thing. But that's hard to do because people don't really choose, do they? They just default use Google Maps or Google Search.
Well, you can make being your default if you want. I think they—I think they—I don't think they—
They play on the inertia of consumers, and that is—that's right. They essentially—basically my understanding is with Google search being the default on iOS, they make it easier for you to use Google search than use Bing.
Oh, it comes with it. You have to go deep into the thing to change it, like to any of them. Just—it's like six—it's like a lot of steps. I mean, this is the same across all of big tech. Amazon—if you want to be in the golden buy box, you know, if you want to be top of search results, you have to pay. And the way they extract payment is that you have to use Amazon Media Group, you have to use their fulfillment, and then the algorithm slowly but surely puts you towards the top or deprioritizes you. And it's like—it's like having a store on Mars just because you're on Amazon unless you figure out a way to do pay-for-play. I've said for a long time, I think eventually it'll move from these companies getting paid by Apple to Apple extracting a lot of payments from them.
Right. Right.
What I think with OpenAI though, they're now—
Well, Google pays Apple for those things, right? They do get paid.
I thought Apple paid Google a billion dollars to be the engine behind.
It's the opposite. It's the opposite.
Oh.
Okay. So they already—
cases. Yes. Yes. They're used to that model of let's—we'll pick the winners and then get paid for it.
I thought Apple paid Google a billion dollars a year for access to a custom Gemini model.
Sounds like they—I'm talking about search and maps. They get paid. So Google pays Apple to be the default search, but yes, Apple is paying Google around a billion dollars for Gemini. They did this deal with OpenAI, right? To make them the favored nation. At the time they did it, we thought that was pretty smart of OpenAI to move in there on Gemini. And at the time, Claude was not that big a player, right? So it was sort of a move on Gemini. And so—and here it didn't work out. And I bet Apple has all kinds of problems with their privacy issues and the sort of image around Sam, everything else. You know what I mean? Like that's what it feels like to me. It's like it's a regretful link or something. And maybe they aren't doing what it takes, but a lawsuit is not great for OpenAI, I assume, correct or not. Doesn't matter for Apple.
Well, the fear amongst OpenAI is this hands Google's Gemini the keys of the Apple universe, and that's the same keys they've possessed with search for two decades, right? And Apple routes Siri queries through its Private Cloud Compute framework, claiming user data is never stored or used to train Google's models. And Apple evaluated—or claims they evaluated—OpenAI and Anthropic before choosing Google. I got to think there's 20 billion reasons why Apple wants to maintain a good relationship with Alphabet.
Also, that could be a court case in a future Democratic administration too, right? Like they're not—they've already been in trouble for those deals. That's always been part of the thing.
Well, that $20 billion accounts for about 20% of Apple's annual services revenue. So it's real. I mean, that is real. That strikes me as the perfect relationship that fucks consumers.
Yes. Exactly. They will get paid. Apple will be the payee here. They're not going to pay Google.
Oh, no. No. They control the distribution. They control the interface. They control custody of the consumer. And it's the age-old argument of who's more important, the distribution or the manufacturer's brand. And there's always an argument. And then the companies that get really, really have extraordinary shareholder value always either reverse engineer into creating their own brands and controlling and taking advantage. Everyone goes vertical at some point, or they forward integrate and start opening, you know, original Levi stores. They start opening their own stores. But in the case of Apple, they've done a great job of deciding what they're going to go vertical on and what they should just extract a lump of flesh for. And I would, again, I've said this before, I think Apple's smart move, and as far as I can tell, their strategy is to decide that around AI, they're going to be the toll booth and let whoever the highest bidder is be the default AI.
Yeah, it'll be questionable if they, as we talked about last week, about whether they do this with Siri, right? Because Siri just sucks. Are they going to make Siri better or use someone else's? Siri has never been intuitive. I spend more time arguing with Siri than anything else. What I say—
I think Oculus and Siri are arguably two of the worst brands in tech over the last 10 years. I think they become total cliches for shit that doesn't work or that doesn't live up to its potential.
Because a lot of the AI interface is going to be talking, right? Like, hey, like you're on the—like you're in Iron Man.
Scarlett Johansson, it'll be her, right?
Yeah. Right. But who does—who is that company? Are they going to—is Apple going to default that or is that going to be their thing? Because they—I wish someone would do like a really deep dive into what happened with Siri, why it's so bad, and why it is under-resourced. Or I don't really—I don't even know. But it seems to me like that's going to be the real interface is the voice. But maybe not. I don't know.
No, I think you're right. I think what I—I think where it's shaping up and one of the big—the underappreciated insights is that from a sensory perception, I think AI is going to be more about your ear canal than your cornea or your eyes. And that is truly seamless. AI will be a function, and again, Apple will control the distribution with their AirPods. What you're saying is what will the branded voice be, or will it be branded? I guess you'll have to say hey something to prompt it. Is it part of who runs it? Who's the back? Anyway, I feel like there's a huge opportunity here for one of these AI companies because that's what you know, as if anyone who's done a chatbot like this, it's really—it's the way to communicate. It's much faster. You don't have to type things in. It's much better. Anyway, speaking of—we may not get there because as these companies fight, Americans are pushing back on data centers powering all of it, especially the AI. According to new Gallup polling, seven in 10 Americans oppose constructing data centers in their local area. That's—well, no, Trump just had new polling. He's down even further. But they don't like Trump. They don't like data centers. The opposition cuts across every major demographic and political group. Although Democrats are significantly more likely than Republicans to strongly oppose these data centers, but Republicans don't like them either. Like, let's be clear, it's pretty interesting that it's something that's quite bipartisan. You know, a lot of people think this is going to be the biggest—I do too—when you hear from people, especially as Elon like runs roughshod over the Tennessee town with his methane engines or whatever. With these Colossus, it just creates this feeling of—I don't know what it is. It's like these rich fucks are fucking with our environment now, right? And not to our benefit essentially. But your thoughts on this? I think it's the same reason that all these commencement speakers got booed when they mentioned AI.
That was—I mean, first off, no one is using AI more than college students. And there's also some evidence that it's not the demand on the electricity or the environmental concerns that—I mean, some people will argue quite frankly that has been exaggerated. I would like to see the scientific evidence on that, but there's just no getting around it. But what this represents is the following: whether you're booing Eric Schmidt or rallying against a data center, Americans see their prices going up and they're not participating in the wealth creation of AI. And it's just a proxy for income inequality that okay, I hear about, you know, Anthropic is worth a trillion dollars. San Francisco real estate prices are booming. Jet sales are booming. There are 28-year-olds who are lucky enough to get a job in coding at OpenAI who are selling 7, 10, $15 million in stock, and I can't afford detergent. I can't—I'm worried about food costs. And so when I hear a data center is going up 40 miles from me in Utah, I show up to the protest. Whether or not I see direct evidence of it hurting me or not, this is a way of saying AI has become indicative of income inequality. And so when anyone shows up at a commencement speech and starts lecturing them on AI or they hear about a data center, I think this is essentially a vessel of people just filling it. And there—I don't want to diminish their concerns. I think there are some real questions that need to be answered around these data centers. But I feel mostly this is a vessel for people's rage around it seems like everyone is doing well except for me, and that America's giant bet on AI is paying off for a small group of people, and I'm not part of that group.
Why not the companies themselves and why these? Because I guess data centers are physical, right? They're here, they're there, they see—
Gives you somewhere to go protest.
It's also dystopian, right? They feel dystopian. They feel like they're probably not going to have a lot of people running them. It's not going to provide the jobs. They're going around local governments to try to like pay off people to put them in the way others. There are worries about the energy costs that'll go up in these areas. There's like some real things. And then there's the pollution aspect. And I think Elon's as usual been like the poster child for abuse of poor people, right? These are usually in poor areas. Also, I think it's just even beyond the worries about things. It's more of a creeping worry about what tech is. Again, the more villainous they—we don't assume the best of these people ever, nor should we. That kind of thing.
Well, the one being planned in Utah that's sort of been the lightning rod or kind of embodies this one—they have the wrong spokesperson. Kevin O'Leary is seen as someone who's not that empathetic.
Oh god. An old white guy who just doesn't—he does not appeal to this cohort. It's going to be two and a half times the envisioned data center is going to be two and a half times the size of Manhattan. They have not figured out a way to communicate the economic benefits. And you're right, this notion that you could turn the lights off on these things during the day because there's so few people working there. The bigger threat in my view—and of course we're not talking about this—but if you look at history, when we have spent more than 3% of GDP on any infrastructure buildout, whether it's the railroads where I think we got up to 10%, we did two big buildouts, whether it's the electrification and the highways, remember the telco infrastructure buildout of the late '90s—
Sure.
Whenever we do that and go above 3% in three years, there's a crash. Because—and what might make this crash especially severe is that railroads need upgrading every 50 years, telco every 20 years, a data center is basically obsolete in four or five years.
