June 12, 2024 • 55 mins
Sam Altman has used his power and influence to become a multi-billionaire with stakes in hundreds of startups, but behind the curtain, he's never run a successful company, fired from both Y Combinator and, briefly, OpenAI. In this episode, Ed Zitron digs into the history of Silicon Valley's most popular confidence man, and talks to the Wall Street Journal's Tom Dotan about Altman's many, many investments. EPSIODE LINKS: https://tinyurl.com/betterofflinelinks
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Speaker 1 (00:02):
Zone Media.
Speaker 2 (00:04):
Hello, and welcome to Better Offline. I'm your host ed Zetron.
The tech industry has craved a messiah since the death
of Steve Jobson twenty eleven, but in Open Ay's CEO
(00:26):
Sam Mortmon, I think they've discovered more of a false profit,
a seedy little grifter that uses his remarkable ability to
impress and manipulate people, specifically in Silicon Valley, to mask
a total lack of technical and business acumen. I realized
this sounds a little dramatic and definitely a little inflammatory,
but the air around Sam Mortman has for years been
(00:47):
that he's somehow a magical, special creature, a man who
and I quote is wise beyond his years and was
so at the tender age of nineteen and who to
quote startup incubator why Combinators Paul Gray could be parachuted
into an island full of cannibals and come back in
five years and be king. In the next two episodes,
(01:08):
I'm going to dig into Sam Moultman's really specious success story,
and it's one that was built on the back of
being in the right place at the right time, definitely
dodging accountability and responsibility and basically every job he's ever had,
including by the way, the two that he was fired
from and the feiled startup he had. And I believe
he's used his political powers leverage to scare away anyone
(01:30):
who's going to ask any nasty questions or of course,
dare to stand against him. In a stunning in depth
piece by Ellen Hewett of Bloomberg, Sam Altman is repeatedly
framed by his contemporaries as some sort of genius, without
anyone ever asking why or explaining why, Rather than there's
this vague sense of intellectual and philosophical superiority with why
(01:55):
Combinator founder John Cougan claiming that Altman had and I
quote an uncanny ability to listen intently and diagnose problems,
and that he was and this is a real quote.
I'm not kidding the Michael Jordan of listening. Sit with
that for a moment, Just sit with that. These laughable
(02:15):
and completely stupid accolades aside, there doesn't actually appear to
be a single story that I can find of some
genius moment of clarity ushered in by Sam Altman. There
are none of these fantastical situations where his remarkable mind
brilliantly delivers the exact solution to a problem or some
sort of concrete accomplishment that required these descriptive, pre natural
(02:38):
levels of vision and clarity. No, I just found this
torrent of platitudes about this man who always gets what
he wants, which is, by the way, another quote from
Ellen Hewitt's story. And he just appears to be this
unstoppably pushy young man that excelled not necessarily at building things,
because he really has not built any great companies, nor
(02:58):
have they done any great things. It's mostly about and
I quote Allan Hugh again, sam Orman, bending the world
to his will. If this all sounds familiar, by the way,
it's because I've really said this before. Many CEOs, especially
in take, had this amazing ability to make these bold proclamations,
and that had people pretty much accept them at face value,
(03:21):
even by the media that's meant to hold them to account.
With the earliest days of Facebook's metaverse pivot, probably the
best example I can give you, I really encourage you
to go back to the rock Com bubble and the
Facebook episodes to look into it. But even by Mark
Zuckerbian standards, Zuckerberbian now we'll get to that later. Sam
Altman exists in his own pantheon of bullshit. There are many, many,
(03:44):
many examples of him saying open AI, or I should
be more specific, AI broadly will do something it cannot
and likely will not do, such as think for itself
or be that super smart companion I keep quoting, and
the fourth estate just kind of accepts it without any pushback.
And this is really Sam Mortman's history being in the
(04:06):
right place, saying the right thing, and even when the
thing in question is kind of hollow, people saying, wow, oh,
this boy is so smart, and there's just no limit.
It seems to this phenomenon. When Sam Mortman says something
or does something genuinely truly insane, like how he wants
to raise seven trillion dollars for futuristic chips, which is
(04:29):
by the way, they combined GDP of Germany and France,
or that he needs one hundred billion dollars from Microsoft
to build a supercomputer for the future of AI, people
just say, yeah, sounds about right, Yes, classic Sam Mortman's
stuff is just the smart bloke going. The response is
never to dismiss it and say this is absolutely bloody
(04:49):
stupid but to actually discuss it with a level of
seriousness that just is not warranted for anyone, let alone
Sam Ortman. And that might be Aortmand's real skill collopsia,
the appearance of things being more beautiful than they really are,
hiding the weakness of his arguments, and indeed generative AI
writ large and beguiling those around him with this nasty
(05:11):
instinctial ability to tell them exactly what they want to hear,
giving them the words to tell other people in his name,
to get in exactly the room he needs to be
in exactly the right time to connect with exactly the
right people, or without ever having to actually do anything
or create anything. Despite the fact that his location based
social network looped failed to get any traction or build
(05:34):
any meaningful product, it appears it allowed him to get
in the Dora famed Silicon Valley Incubator, y Combinator, and Dazzle.
Poor Graham It's creator who, for reasons I cannot understand,
I've read so much of poor Graham's stuff now, Paul
Graham became convinced that Sam Worton was the future, and
in turn helped Sam Morton get in on these huge
(05:55):
VC deals in companies like Stripe and Airbnb, making him
hundreds of millions of dollars. This is, by the way,
a very Silicon valley problem and a problem with the
vallee writ large, and a precursor to the growth that
all costs rot economy that I talk about seemingly every minute.
When you strip away Sam Morton's ability to convince people
that he's smart, he doesn't appear to have done anything.
(06:18):
He's done very, very little. He was a college dropout
with a failing then failed startup, one where employees tried
to get him fired twice because he kept diverting resources
to other places and focusing on his own personal products
and projects. And the reason they sound so flushed that
is this is Sam Altman's entire existence. In a podcast
(06:40):
discovered by Ellen Hewett Bloomberg, Twitch co founder Emmitt Sheer
appeared from Mortman's y combinator cohort the first one and
briefly his replacement at CEO of OpenAI, described his surprise
that Sam Morton was able to close deals with boost
Mobile without any actual product yet because Altmand fit a template.
He resembled a kind of guy that got things done.
(07:02):
Powerful people in Silicon Valley have fallen over themselves to
give him the opportunities that made him look like a
king maker. And at some point, the funny thing is
in the Valley is when you get to the prominence
where people just feel like you should be in on
these things, you are. That's why all these guys all
kind of look and act the same and all get
(07:22):
in on the same things. And honestly, I think the
truth might be a little grimmar. Almond was, from a
relatively early age chosen by Silicon Valley to be their
next messiah, which allowed him to wield this incredible power
over the startup ecosystem without really ever meaningfully contributing to it.
(07:43):
His ascent to the apex of the Valley and the
budding flowers of a sam Ortman colt, which we see
today everywhere, feels random and arbitrary, without any real force
behind it. Aw there's one thing, though, Sam Boulman, he's
a master manipulator. He's incredibly adept at saying things that
(08:04):
sound profound, like your rate of learning should always be high,
and yes that's a quote, as are the rest of these,
and that each unit of work you do should generate
more and more results while also knowing that the self
reinforcing prophecies of the tech industry are what makes someone
rich and powerful, rather than achievements or founder great companies
or doing things for people. In essence, his whole vacuous
(08:27):
platitude buffet, the kind that can be cut into ten
second clips for TikTok and YouTube and Twitter. They're really
good ways to feel intelligent when people already want you
to be, and they're just really useful for tricking extremely
disconnected and credulous morons. People that don't really participate in
(08:51):
the grandest scheme of building software and hardware, people like
Read Hoffman of LinkedIn, of Brian Cheski of Airbnb. People
that aren't coders or builders or anything. They're just people
that vaguely fell into success. Perhaps they built useful companies,
but they didn't really make the companies, and they didn't
really do the work. Sam Altman is really good at
(09:12):
saying the things that reinforce their biases, and in the
process kind of helps them disguise their nepotism and his
real superpower, which is, by the way, another form of nepotism.
Sam Moorman didn't find the startups that made him so
rich and wealthy and influential. He was being shown them
by other powerful people that wanted him in on these
(09:35):
deals so that he could give them a vice based
on the career of specious management bullshit. And because the
valley liked how he looked and how he acted, how
he talked, the things he resembled, the things they were
reminded of when they heard Sam Mormon speak. And it's
funny because a lot of these people, the Paul Graham's
of the world especially, they're big time meritocratic people. They
(09:56):
love the meritocracy. Yet when you look deeper, the people
seeding and not actually building the things. Ilia Suitzkaeva over
Open Ai. He is the actual technolog Jesus, He's the
actual guy that and by the way, no longer Open
Ai the kind of deserves this. But Sam Alton's the
one that got invited in early to stripe and Airbnb
(10:16):
and all these things. And as I'll get into, kind
of rat fucked his way around a bit. And nowhere
is this more obvious than in Hydrozene Capital, Aortman's venture
capital fund that he created with the five million dollars
he got from selling looped his failed startup by the
way and backing of course from Peter Teel, Hydrozene invested
seventy five percent of its funding in y Combinator companies
(10:39):
including Reddit and instacar, even after Sam Mortman became the
president of y Combinator, which is weird because the other
partners at y Combinate, like Gary Tann, they were forbidden
from managing their own investment funds at the time, according
to reporting from the Wall Street Journal. But I guess
Sam Moltman just felt right. It's cool that he gets
(10:59):
rid right, not to say Gary Tann hasn't, but the
other people just didn't seem to get these opportunities for
some reason, could be anything. And he became head of
why Combinated, by the way, despite being one of the
he was looped was one of the first companies in
y Combinator, and they to explain how this works. Why
(11:20):
Combinate would invest a little in a few early stage
startups and much larger number these days, and the first
cohort was one that included Sam Altman's Looped and he
was made president of y Combinator. Despite the fact that
luped was terrible. It didn't have a good product, They
couldn't sell it. He retasked engineers at one point to
work on a dating app somewhere else. Sam Alton was
(11:41):
a terrible CEO, But you know what, he's capable of
saying stupid shit like and I quote, competitors are one
of the last monsters that haunt your dreams to New
York Magazine shortly before predicting that there was absolutely no
reason to believe that we would not have a computer
by twenty twenty nine that could replicate his brain. You
(12:04):
know what, though, putting that aside, I do think Sam
Mormon's right on that one, though, in the sense that
chat GPT kind of seems capable of producing this kind
of nonsense too. But again, because Sam Mortman's the affable, friendly,
amicable white guy who's known by the right people. He
keeps going, he keeps on trucking, And I think that
(12:27):
Sam Moltman is on some level, he's a monument to
the roight at the core of the valley, and he's
a product of this growing distance between the tech industry
and actually creating things of value. While why Combinator founder
Paul Graham may be a decorated and successful computer scientist,
by the time he made Sam Mortman, president of y
Combinator in twenty fourteen, he was already more than a
(12:48):
decade removed from selling his software startup via web to Yahoo.
As he drifted further away from actually building things on
the computer, so too did Paul Graham's essays drift away
from the piosophical measures of software development towards a far
darker management philosophy, one where he admitted in a blog
from two thousand and three that intelligence itself is not
(13:11):
a factor in popularity because smart kids don't want to
be popular, and that popularity is much more about alliances
and doing things that bring you closer to other popular people. Humm,
maybe he did like Sam Wultman for real reasons then. Anyway,
two years before he made Samultman president, Paul Graham would
(13:31):
publish a piece called Startup Equal Growth, claiming that growth
drives everything in this world, and that growth makes the
successful companies so valuable that the expected value is high
even though the risk is two. A statement that could
only make sense if you believed that there will always
be hyper growth companies, and indeed that the opportunities for
those high growth companies would keep emerging, say for the
(13:55):
next forever and these people ever thought about it. It's so
strange to read this stuff, to go back even five years,
but especially ten and reading these things and reading these
people talking about how dogged Sam Morton is and how
great he is at this, and then reading their other philosophies,
and it's all stuff like, well, you see, uh, intelligence
(14:18):
comes from the mind and building businesses. It's all about
growth and business. And you read them and you're like, huh,
these people smart or stupid. I can't tell. They're using
smart people language, but they seem kind of stupid. Maybe
that's also the problem. Maybe the problem's just a little simpler.
While Sam Morton's a spacious opportunist and very much a manipulator,
(14:43):
the time he entered Silicon Valley was this period where
pretty much all you needed to do was sound smart
and be in the right rooms. Companies were being created
that could enter these giant markets and just dominate because
all they really needed was money and enough handshakes. Oltman
is adept at using connections to make new connections, in
(15:04):
finding new ways to make others owe him favors, in
saying the right thing at the right time when he
knew that nobody would think about it too hard, something
he continues to this day. Ortmand was early on Stripe
and read it in Airbnb, all seemingly brilliant moments of
investment in the life of a man who has had
many things handed to him, who knew how to look
(15:25):
and sound to get put in the room and to
get the capital to make his next move. It's easy
to conflay investment returns with intellectual capital, even though the
truth is that people just liked Sam Wultman enough to
give him the opportunity to be rich, and he took it.
And he had the ability to hand them money too.
In two thousand and nine, when he put fifteen thousand
dollars into Stripe, which I'll get to it a bit,
(15:47):
he had fifteen grand he could pull out in the
middle of founding a start up. He was working on
Loop for years at this point. Where did he get
the fifteen grand? I didn't have fifteen grands sitting around then,
Jesus Christ, he didn't like. This is the thing. No
one digs deeper into these things. No one asks where
the privilege truly comes from, and when that happens, guys
like this get popular. Now, look, those who might defend
(16:12):
Sam Altman might suggest that he may not have been
a creator, but he gave his time and his energy
to those he backed. Maybe he was a value creator.
Right wrong. According to the Washington Post, sam Aulman's time
at y Combinat ere it ended because he developed a
reputation for favoring personal priorities over official duties and for
(16:33):
an absenteeism that rankled his peers and some of the
startups he was supposed to nurture, much as he had,
as I've mentioned, once diverted engineers at lut to work
on a dating app instead of working on the company
he was running. To give Sam Altman credit, he really
is able to talk for hours without saying anything. Just
(16:55):
ask LinkedIn, co founder of Reied Hoffman, an investor in
open Ai and early of Sam Mortman, and a man
who was critical to getting Sam Mortman returned to the
helm of open Ai when he was fired, who also
let Sam Mortan ramble for over an hour on his
podcast Masters of Scale with all one, at one point
saying that he was and I quote, he was in
(17:16):
a developing world country shortly after the iPhone came out,
and despite their poverty, everyone had smartphones. Now, I just
want to be clear. This is so obviously, completely and
utterly stupidly false. It made me genuinely angry. Why because
what so the iPhone comes out? So the rollout of
smartphones in other countries has been incredibly useful, it's been great.
(17:39):
It didn't happen in a goddamn year. Sam, you lying
sack of shit. I'm sorry. I just really hate this stuff.
I really hate that these people who can go around
getting money seemingly at will just go on each other's
podcasts and jack off and wank about this nonsense, who
say these patently obviously fake things. He probably saying his
(18:02):
defense by the way, Oh it's four years later, which
might have made sense. It's always vague with this goddamn guy.
It's always vague with these goddamn guys. And it's just
so offensive because regular people do not get these opportunities.
Regular people don't get put in these rooms. People that
are undoubtedly smarter and more accomplished and harder working than
(18:24):
Sam Aortman. But because Sam Altman fits the template, he's
allowed to go and he's allowed to be rich one
hundred times over. And it really shouldn't come as a
surprise that Reid Hoffman of LinkedIn, investor in open ai
and so much has such affection for Aortman. After all,
he's the founder of LinkedIn, which is basically the one
(18:45):
place that you know you can go to read six
hundred words that mean nothing, these massive, cringe worthy paragraphs
broken into a Staccato's style that hurts the brain and
the mind, but makes people who don't really know why
they're doing their job care about what they're doing very
happy because it makes it all feel far more important
than it really is. Moving on through Aortmand's power structures.
(19:09):
Another of his close friends is Airbnb CEO Brian Chesky,
who helped, by the way, also get Sam Altman put
back in open AI, and he's helped Altmand pedal these
vague rubbish promises about artificial intelligence, at one point, with
Cheske calling it bigger than the Internet, mobile and cloud
combined and saying that AI will, by the way, non
(19:31):
specifically change Airbnb, which is a company that has and
this is what kills me as well, only got worse
over time. I think Airbnb really crested about four or
five years ago, and then it just became the same.
But worse over time, put my gravances to the side,
and as you can kind of tell what I'm getting
(19:51):
at here, Aortmand's used his political maneuver and to become
super rich. And he's grown, according to the Wall Street Journal,
a portfolio of more them four hundred companies worth nearly
three billion dollars. Now what's really worrying is that he's
partially funded it with hundreds of millions of dollars of
debt of loans from JP Morgan Chase. Now almost anyone
(20:15):
can see why this is insane borrowing money from a
bank and putting it into an industry where the majority
of companies fail. It's just completely bonkers. I don't understand
what's going on. Well, I mean I do, which is
the rich reinforce the rich, and they put money with
people who don't necessarily qualify for it and aren't necessarily
(20:38):
smart or good at stuff or have done things. But
because they're in the right company, it works for them.
Like a regular person. They can barely get a mortgage,
let alone. What's likely I'm guessing by the way a
low interest rate loan to sink hundreds of millions of
dollars into companies like Helion, which is a nuclear fusion
company that Sam Moultman put three hundred and seventy five
(21:00):
million dollars into in twenty twenty one. He serves as
both the chairman of Helion's board and potentially one of
its largest customers because open ai is now and just
announced a deal with Helion, and I quote Matthew Konnittzer
from the Register here to get access to Helion's not
yet possible nuclear fusion driven electricity generators. Just it's so
(21:25):
cool that that, and tons of people reported that without
Matt's necessary bile there. I love the Register because they're
willing to say stuff like this nuclear fusion has not
happened yet. That's that's a sci fi thing that he
has put all that money into. Nevertheless, plenty of people
credulously accepted this, and like Sam odd Man, aw they're
doing a deal open ai, open ai and nuclear Fusion.
(21:47):
Just to be clear, there's no deal there the nuclear fusion.
Oh my god. The Wall Street Journal also reported the
open Ai is happily cutting multiple deals with other things
that Sam Altman's invested in, including Reddit, which Ortmann owns
hundreds of millions of dollars were stuck in thanks to
an investment from hydro Seen Capital when he worked a
y combat are, along with AI device companies Limitless and Humane,
(22:09):
the latter of which Ortmand owns a fifteen percent stake in.
According to the Journal, it's just obvious, naked self dealing,
the kind of stuff that should be something that disqualifies you,
that gets critiqued further than of course the journal, and
I'm not seeing it. I'm not seeing enough of it
at least, But I wanted to dig further into this
(22:31):
investment portfolio, so I sat down with Ton Datan of
the Wall Street Journal to kind of go through it.
So in your story, you were talking about how Sam
Ortman had this massive credit line I think from JP Morgan.
(22:53):
Is this standard for investment? Have you seen this before?
Speaker 1 (22:57):
No, It's incredibly not standard. And in the course of
reporting out this story with my colleagues, we talk to
a lot of venture capitalists and investors, other kinds of
investors and founders in the tech industry, and they either
had never heard of something like this before or found
it to be so incredibly risky, not just investing in
startups off of credit, but using as collateral your holdings
(23:21):
in privately held tech companies. Both of those things together
are like not you do not see that very often
in the tech industry.
Speaker 2 (23:28):
And why don't you? Just to be clear, why is
this usually a bad idea?
Speaker 1 (23:33):
Because it's incredibly risky. I mean, if you think about
an investment in a startup, what percentage of startups not
only don't get acquired or go public, but straight up
fail will go to zero? The numbers I don't want
to quote a specific one, but it's like the majority.
And that's kind of the way the venture capital system
works is that you invest in a bunch of unprofitable
(23:54):
or zero profit, zero revenue companies, hoping that a few
home runs or Grand Slams or whatever is enough to
justify your entire fund. But if you were to use
those holdings in those kinds of companies in which a
huge majority of them go under, and then a huge
majority of them do go under, and suddenly you are
having to use as collateral holdings in a company that
(24:16):
is worth zero, you're in big trouble. So yes, it
is not done very commonly.
Speaker 2 (24:21):
Very strange, and it seems the strange financial relationships that
kind of Oltman's modus operandi. So tell me about Hydrozine.
Speaker 1 (24:31):
Sure. Hydrozine was a fund that Sam started around the
time that he joined y Combinator, the accelerator incubator in
Silicon Valley, and he got some funding from Peter Teel
for it, and basically it was a way for him
to invest in other y Combinator startups. So it was
largely using outside money, but it was like just an
(24:52):
access line to capital that he could put into these
seed stage investments in startups.
Speaker 2 (24:58):
As I've mentioned previously, since leaving White Company, Altman's investment
portfolio was balloon to hundreds of start ups with billions
of dollars. How many of these companies have you seen
have a direct relationship with open Ai that's he's invested in.
Speaker 1 (25:16):
Well, in the story, we laid out a couple of
clear overlaps between you know, open Ai as a business
and companies that he's invested in. Like the most obvious
one that we that we brought up, I shouldn't say obvious,
but the most like apparent one of this kind of
overlap was Helion, which is this nuclear fusion energy startup
that he's put hundreds of millions of dollars into and
(25:38):
they worked out a deal, as we broken in the story,
for Helion to provide be the energy provider for future
open ai data centers. So these data centers, when they're
built and I guess when nuclear fusion exists, you know,
would be powered by clean nuclear fusion energy. And so
that's something in which Sam obviously as one of the
largest by far the largest investor, and he leon, you know,
(26:01):
there's there's there's an overlap there between that and open
AI's business. And then the other one that also kind
of stoock out to us was Reddit, where he is
one of the largest outside shareholders in the company. And
open ai announced a licensing deal with Reddit a couple
of weeks ago, and you know, Reddit stock popped on
(26:22):
announcement of this deal, and Sam, as a major shareholder,
saw his net worth increase, you know, within the course
of a day. I mean, that's kind of how it
goes when you hold stock. But you know, notably on
announcement of this deal.
Speaker 2 (26:36):
Surely any future deals between open ai and Reddit would
mean that Sam Oapman would be there must be some
kind of insided trading. How is that possibly legal?
Speaker 1 (26:46):
I mean, I don't know, I don't want to get
into what what's legal or isn't legal. I thought questionable. Yeah,
I guess what was interesting to me and to the
other reporters about the way that Reddit and open ai
announced this license deal was they didn't say that Sam
recused himself from the conversations between Reddit and open Ai.
They said something to the effect of this deal was
(27:09):
spearheaded or the person who was in charge of this
deal was open Ai COO. And I don't know what
to make of that. I feel like the language of
Sam recused himself would have been easy enough to do,
but they didn't do it. They chose not to do it.
Speaker 2 (27:23):
So if it was like saying Brad Lightcap took the deal,
that doesn't feel like a disconnection from Sam Oltman.
Speaker 1 (27:29):
Yeah, and it isn't regardless even if he wasn't involved.
And you know, you could make a fair argument that
like open ai probably should be licensing data from all
of these you know, providers, because that's what they're using
to train their models. But the fact is they didn't.
Sam didn't recuse himself, And you know, whether it's his
fault or not, or this was intentional or not, the
(27:50):
fact of the matter is he owns a sizeable like
disclosed percentage of Reddit through various holdings, and like those
you know, those shares went up on announcement of the deal.
Speaker 2 (28:00):
So with Helion, back to the nuclear energy startup, have
they actually built anything yet?
Speaker 1 (28:05):
No?
Speaker 2 (28:06):
No, I mean it's so strange.
Speaker 1 (28:08):
I don't want to discount anything that Helion does because
you know, who wouldn't want nuclear energy to exist? Right? Like,
that's that's obviously a great boon for humanity to have
nuclear fusion. You mean yeah, sorry, so nuclear fusion, yes,
like that would be a major technological breakthrough. That would
be a you know, a sea change in how you
know we derive energy from the grid and whatever. But
(28:30):
you know, aside from a couple of announcements in terms
of partnerships or future purchase agreements between Helion and Microsoft
and and you know the thing that we reported Helion
and open AI, this is not like they have not
achieved it yet. These guys are not out there selling
you know, nuclear fusion energy to the mass public.
Speaker 2 (28:51):
Well, I think what gets me that Sam Won puts
three hundred and seventy five million dollars into this company.
He got them into y combine or if I remember
from you reporting he being embedded with them. Now there
is this deal between Helia and a company that is
yet to build something and open Ai that they will
theoretically do something in the future. It just feels like,
(29:13):
I know we're not talking in legalities here, but it
feels like there is just so much self dealing here.
It feels like he has been self Oltman has been
self dealing for years.
Speaker 1 (29:24):
Yeah, I mean, I guess to make the argument that
Sam or open AI or other people in that circle
would make is like Sam is a prolific investor. He's
been doing this for as long as he's been in tech.
They say he's kind of slowed down quite a bit.
You know, maybe numbers would show a different story, but regardless,
he you know, this is a thing that he does.
(29:45):
And like, if you are going to be running, you know,
the most consequential tech company at the moment or startup
at the moment and open AI, there's just bound to
be overlap between a vast investment empire and an open AI.
So that's like the argument to the contrary, you know,
self dealing. I guess that's in the interpretation of the reader.
Speaker 2 (30:06):
Yeah, I think what it is is that it doesn't
feel like this would be tolerated in any other industry,
like if you put politicians own stock, for example. I
realized it's not an industry, and they are heavily criticized
for it. But it almost feels like perhaps you can
speak to this. It feels like Sam Wilton gets reported
(30:28):
on differently than many entrepreneurs and many investors. And I
really do put the journal to the side here. I
think the journal in the Washington Post done a very
good job scrutinizing it, but it feels writ large like
he's given a much rosier and easier ride than most.
Speaker 1 (30:43):
It's hard to know with Sam, right, I mean, he's
such a figure at this point, which is kind of
funny to me because like I've been reporting on tech
for let's say ten years or so, and Sam's always
kind of been around. He's just this person that we
all kind of knew as reporters because of you know,
his role at y Combinator and showing up at Sun
(31:05):
Valley almost every year, and you know, now open Ay
being this big deal that it is. He's this figure
that everyone kind of has dealt with at certain points
as a tech reporter, and there's just so many opinions
on him. I mean, you know, I think there are people,
maybe like you, who see him as this nefarious character,
self dealing, someone who isn't really above board. But you know,
(31:27):
you report a story like this and you talk to
founders and some venture capitalists and they love him. They
think he's, you know, a great investor, a brilliant business person,
has incredible insights, and you know, is this also kind
of futuristic thinker, who's who's kind of in that Elon
musk vein thinking ten twenty years down the road and
(31:49):
at a scale at the trillions of dollars level that
they find very you know, alluring and exciting. And so,
you know, I it's always hard to know when you
do these sort of story is like what you're going
to get in the course of reporting, because you can
talk to a certain group of people who think he's
borderline criminal and to be clear, I'm not saying that,
but there are.
Speaker 2 (32:08):
People yeah yeah, just citing someone yeah yeah, and and.
Speaker 1 (32:11):
People who think he's the you know, nikolay Tesla of
our time. What are you gonna do?
Speaker 2 (32:17):
So here's my thing with that, is he that successful
a businessman though, Like he's a very clearly a successful investor.
But as a businessman, the company he's been attempted, fired from, looped,
fired from Y Combinator, fired from open Ai. He seems
like a very effective politician and a very good deal maker.
(32:41):
But I wonder how much of this, because you say
he's slown down. I wonder how much of his success
can be attributed to the fact that he just was
inside of Y Combinator and had the money to play
at the time. Because yeah, you've been around long, so
go ahead.
Speaker 1 (32:59):
Yeah, I know, looks it's a fair point, and I think, like, look,
the numbers probably speak for themselves in terms of his
net worth, right, you know, you can stack the deck
however you want in Silicon Valley to say someone is
or isn't a good investor.
Speaker 2 (33:12):
Like when you have deal flow, when you have really
is a school board situation.
Speaker 1 (33:16):
Yeah, well no, but I'm saying, like, you can have
access to early stage startups better than other people, and
you're just gonna be getting first looks at Uber and Stripe. No,
he's not an Uber. I'm just giving an example, yea,
like you you know Stripe, Yeah, yeah, or Stripe or Airbnb,
which he is in. Like if you're in that inner
circle of people who see these companies on the way up,
and like, you know, I don't think it takes a
(33:38):
brain genius to look at something like Uber and be like, oh, well,
I bet that's probably going to be a pretty big
deal one day, so I'd like to invest in that.
But you know, I think to his credit, maybe his
investment in Stripe was an incredibly risky one for him personally.
I think it was like fifteen thousand dollars or something,
and you know, he probably didn't have a ton in
(33:59):
his bank account at the time, so that was a
pretty When when was that early early days, I mean
they were they were in It was in two thousand
and nine, actually, Paul Grant so before he sold Looped. Yeah, yeah,
I think it was around the same time.
Speaker 2 (34:14):
Because that's what I'm saying, there's not really much of
a risk if he hadn't, But I feel like he
sold Loop later because that. But nevertheless, it.
Speaker 1 (34:21):
Is fair enough. I don't know Sam would have been
out on the streets, you know if if this, if
this investment hadn't turned out. But you know, in a
world of investment where people get congratulated for you know,
going all in on something or you know, being willing
to bet it all on an unprofitable, you know, unproven startup.
You know, people give Sam a lot of credit. But yeah,
(34:43):
I don't know. I think you bring up a good question,
which is like if you have access to an Airbnb
in the earliest days, or or a Reddit or even
a company that like Rippling, which I don't know if
your you know, listeners know about. But it's this very
successful now hrs art up that Sam has has invested
in and also.
Speaker 2 (35:03):
An offshoot of Gusto when it's complicated.
Speaker 1 (35:08):
Yeah, yeah, basically I don't know how interesting this is,
but whatever, you know. There was a kind of a
big scandal a bunch of years back with this company
called Zenefitz, which was accused of shirking regulatory requirements for
training its workers on anyway, it was a big scandal
a couple of years ago, and the CEO of that
(35:29):
was was pushed out very publicly, later replaced by David
Sachs for what it's worth, and he went on to
start this other company that was basically a direct competitor
to that, and it's called rippling, and it's done really
well in terms of building up its valuation. And Sam
is one of their earliest investors. And I think you
know part of his Conrad Parker. Conrad is the guy's name. Yeah,
(35:49):
And anyway, Sam has made a bunch of money from that,
or at least you know his his investment is valuable
from that. And my point is basically like when you
when you're in this inner circle, you have access to
these companies and you can make these investments. Whether you
know he is like standard Deviation is a better business
person than anyone else in tech, I don't know. It's
(36:10):
not for me to say, but you know he is
on paper, you know his his holdings are worth billions.
So I guess you got to give him something for that.
Speaker 2 (36:18):
So you mentioned in the story that Hydrozene, Sam Altman's
firm bought a portion of startup shares owned by Paul
Graham versus y Combinator. Would those have been Paul Graham
basically doing the same like he might have been investing
in these companies too, or is this just early days
why Combinator shares?
Speaker 1 (36:36):
These were shares that were owned by Paul Graham, As
we reported, and so it was probably a transaction for
him to kind of take some money off of the
table and offload them to Hydrazine so he could be
I guess a little bit more liquid. But yeah, these
were these were Paul Graham shares that you know ended
up being bought up by the Hydrozene Fund.
Speaker 2 (36:54):
It's interesting because there's so it feels like Altman at
times doesn't have a focus though, because he's done all
of these investments, and you within the reporting, within the
Washington Posts reporting as well, there's this idea of him
being absent, absent from y Combinator, absent from looped at
one point, retasking engineers to work on a dating app separately.
(37:17):
It almost feels it almost feels hard to tell whether
Autman is focused on anything other than just the number
going up. But here here is the real problem. I
see what happens if and we mentioned this earlier, these
startups go to zero and he has this these massive
credit lines.
Speaker 1 (37:38):
Yeah, I mean it feels like a house of cards. Yeah.
I think, you know, these people tend to be okay
in the end, I find so, you know, I don't
know how many people are really all that worried about
you know, Sam's credit line and stuff, and you know,
obviously when interest rates go up, these things tend to
be a lot riskier than they were going into it.
(37:58):
You know, I can't go into all of the details there,
but yeah, there's a reason why using you know, privately
held shares or private you know, you know shares and
privately held companies as collateral is not commonly done. I
mean I talked to someone in the course of this
story who was like shocked that someone would do that
kind of thing. But you know, again, to this Silicon
Valley mindset in which risk, you know, quote unquote risk
(38:21):
is really promoted and celebrated around here, that kind of
thing is seen as like an example of how aggressive
and cool Sam is that he's willing to kind of
take a risk on something like that in order to
put more money into well, I guess you could. Some
people would say, put more money into the ecosystem. Other
people would be like, give himself more examples to get rich.
Speaker 2 (38:41):
Yeah, and it's it doesn't. Actually, this is a question.
Did you see a lot of it was the general
pattern of what you've seen a lot of smaller investments
across a lot of companies or big fat ones generally
like the three hundred and seventy five million in Helium.
Speaker 1 (38:57):
That one is a standout, the three seventy five million
and Helion. But you know, again without going too specific
into the numbers because we didn't put them in the story,
but you know some of them are in the you know,
millions and tens of millions. You know, whether that's all
his personal money or money that's raised through you know,
various LP funds that are you know, in which there's
(39:17):
capital put in by LPs. Can get a bit complicated,
but no, this isn't you know, one of those angel
investors who's putting ten thousand dollars in a bunch of
different companies. I mean when he really believes in a
startup or he really thinks they're going to go somewhere.
The number is in the millions and tens of millions.
Speaker 2 (39:36):
So slightly different tack here. Yeah, everyone is saying the
open AI is the future, that chat GPT will be
in everything. You've been reporting on the enterprise for a
long time. Do you think that's actually the case. Do
you think that this company is really I know they're
making billions of revenue, but do you think they're ever
gonna go into the green? Do you think this is
(39:57):
for real?
Speaker 1 (39:59):
I I don't know. I mean, I guess i'd actually
maybe even push that back to you, because you know,
you're someone who's you know, been around tech and you
know reporters and and I mean, like it's it's incredibly
hypey right now. Like of my time, you know, covering
this industry, I've never really seen the level of how
you know you you you know. Crypto obviously was an
(40:21):
interesting moment in terms of there are people who believe
that the entire financial system was about to be transformed
because of these you know, the blockchain, and you know,
there was the on demand era, you know cloud. I
didn't really cover tech at the time, and you know
that sort of proved out to really be in a
very specific way transformative. I don't know with this one.
(40:43):
I mean, I think the technology as it stands right
now is very problematic in terms of its shortcomings. I
think hallucinations are a major issue, Uh, if it's going
to be as valuable as search, which is like the
most successful product you know, tech has probably ever put out.
And the other issue is the cost of training and
(41:04):
deploying these models is tremendous. I mean, like you said,
like I cover the enterprise, so part of my bead
is writing about the cloud and data centers. I mean,
to me, one of the biggest things that's going on
right now is this multi billion dollar build out of
data centers that's happening at an unprecedented level across not
even the country, but the world in order for there
to be enough you know, AI warehouses, data centers you know,
(41:28):
outfitted with Nvidia chips to train and inference, you know,
deploy all of these models. That's crazy, I mean, because
that is all done in advance that they're being enough
demand to justify these investments, right. I mean, like this
is all because you know, for a huge portion of
last year, there was more demand than supply when it
(41:48):
came to compute, and so all of these tech companies
started saying, well, we need to build out in advance
of you know, this demand being unending and increasing. And
it's like, well, well, okay, that's fine for now, but
if in the future it doesn't, If you know, this
turns out to have been a fad, or the years
that it takes for this to be a widely a
(42:09):
widely use technology is way longer than it is. You know,
it could be one of the bigger boondoggles I think
we've seen in tech, you know, like all these data
centers that were built out that lay unused because there's
not enough people wanting to use chat ept or any
of the kind of similar similar products.
Speaker 2 (42:27):
Is that happening now or is that something you fear
for the future.
Speaker 1 (42:31):
More for the future, you know, I think the demand
is still fairly high right now. And if you talk
to startups like a I startups, they'll say it's still
hard for us to get access to GPU clusters, for
us to train models or you know, things like, you know,
the technology we want to deploy is still much slower
than we want because there isn't enough compute. But yeah,
(42:51):
Jerry is still out. Sorry, I know that's a really
lame phrase, but like.
Speaker 2 (42:55):
For real, that's good though, because what happens if the
demand never arrives? Though? Does this stuff get repurposed? Does
it get sold off? Well?
Speaker 1 (43:06):
I think you actually saw a kind of interesting thing
happening with crypto, which I actually wrote a story about
that with with berber Jen, my colleague on this story.
Who you know, who was who was you know, the
lead on this Sam Altman piece about you know, with
crypto mining, there were a lot of companies at the
height of and specifically ethereum mining that were building up
these rigs, these these mining rigs that were had GPUs
(43:30):
at the heart of them that were necessary when people
thought that was going to be profitable basically.
Speaker 2 (43:35):
Like it wasn't. Coal Weave, which is as a listener,
is a huge student typo, multi billion dollar GP provider.
They previously crypto.
Speaker 1 (43:43):
Yeah, one hundred percent. They're a fascinating company. I love
core Weave because, yes, this was a company that is
started up by people in finance basically like traders, like
energy traders. I shouldn't actually don't know if it was energy,
but but people with like a very financial background who
realized like this amazing arbitrage that was happening in crypto
and ethereum mining, which was that like the like the
(44:04):
value of mining when theoreum prices were high, is greater
than the electricity it takes to consume to do the mining.
And so when that was at its peak, they were,
you know, they were doing pretty well, and then they
read the writing on the wall that you know, ethereum
mining was probably gonna decrease in value, and they made
an early switch to like retrofit all of their mining
(44:26):
rigs into AI compute. And that was before chat GPT
and you know, open ai became a household name. But anyway,
I bring up that whole story because what a lot
of ethereum miners started to realize when there was this
kind of shift in the nature of ethereum mining that
basically meant they didn't need GPUs, like these very powerful
(44:48):
GPU rigs to do the mining is they were stuck
with these kind of useless machines. And so a lot
of them have tried to like jump over into AI
compute and providing you know, training and inferencing. And so
it was an interesting example of like one trend jumping
into another. And so I don't know what that could
(45:08):
mean because the theory of mining is just not even
close to the scale that we're talking at here with AI,
but you know, tech seems to find a way. I
don't know, I don't have a good answer for it,
but it would be a crazy outcome, honestly, if you know,
we're talking thirty billion dollars a year of investment in
(45:28):
infrastructure from a single company alone in building up data centers,
So if that ended up not being necessary, yeah, I
don't I don't know what to do with those things.
Speaker 2 (45:37):
Yeah, it feels like what I would worry about is
the physical GPU equivalent of twenty twenty two, where you
had all these companies in twenty twenty one who hired
everyone everywhere and then they went, oh crap, better fire them.
But it almost feels like it could cause I think
(45:58):
Nvidia feels like they would be or a MD to
an extent Micron, I guess, but would be most at
risk from this because if there's just thousands, tens of thousands,
hundreds of thousands of black Wells or what have you
sitting around unused, it feels like it could be catastrophic.
Speaker 1 (46:15):
Yeah, I mean, at least in videas selling stuff, like
at least they're pushing product, you know, like, at least
they're manufacturing or designing things that are manufactured and selling
to the people who are paying cash for them. So
that's that's better than some crypto or sorry, that's better
than some AI companies that it's really just on like
on hype and a hope and a prayer, but yeah,
I mean, like, as we're recording this in video is
(46:37):
in and around a three trillion dollar company. It's more
valuable than Apple. I mean that's just crazy. Yeah, there's
a lot going on in terms of the expectation of
this sort of not stopping anytime soon.
Speaker 2 (46:49):
Do you think the AI boom is a bubble?
Speaker 1 (46:52):
Oh yeah, one hundred percent. Like I don't even think
that's a controversial statement, Like I think Sam go ahead. Yeah, no,
I think Sam would even agree. And like most people
that I talk to in a I think it's a
bubble because look, the nature of that doesn't mean that
everything's going to go to zero and that you know,
like the huge run up and value that we've seen
(47:12):
with Microsoft and in Nvidia is gonna all, you know,
disintegrate if it takes a lot longer or it doesn't
even catch on with AI. But yeah, I mean you're
seeing money. And my colleague Berber wrote actually a good
story about this a couple of weeks ago. I mean,
you're seeing startups that have no you know, no revenue
(47:32):
really or not even a product raising at valuations in
the billions. I mean that's the very definition of a bubble.
So yeah, I don't. I don't even feel like I'm
going out on a limb saying that.
Speaker 2 (47:43):
So I will push back on that, not to say
you're not going like I believe you are, because if
you look around and this is rap on this one.
I think it feels like AI is humored on a
level in the media right now. The I have literally
only seen since on the metaverse, where it was just
this concept, not saying AI is useless generally if AI
(48:05):
has uses, But it feels like everybody is giving Sunda Pshai,
for example, the benefit of the doubt about Google Search,
or at least they were until it told you to
eat rocks, but especially with chat GPT, they're just kind
of assuming these things will happen.
Speaker 1 (48:19):
And I don't know what it is.
Speaker 2 (48:20):
It feels almost like the why do you think people
are giving it so much space and believing that it
will grow exponentially?
Speaker 1 (48:29):
Why? Actually I have to have two answers to that.
I mean, one is like you are surrounded as a
reporter by your sources. The people that you talk to
day in day out, who you know try to let
you know what's going on in the space. Are people
that a lot of the times are big believers in
any new trend in technology, and so it's kind of
easy as a reporter to hear about this stuff and
(48:50):
want to at least explain it to readers. Not necessarily
be part of the hype. I mean, that's not our job,
but at least say, like, well, this is why Anthropic
is getting billions of dollars of investments, or obviously open
Ai or anything like that. I think if I had
to just personally guess on a lot of this stuff,
you know, it's been a bit slow in terms of
(49:11):
transformational technologies in a while. I mean, honestly, you could
maybe look back to probably the iPhone as the last
thing that like fundamentally upended the way we live our lives,
you know, in the enterprise. I guess you could look
to the cloud, although most people don't care about that,
but you know, with AI and you know these kind
(49:32):
of seemingly magical interactions that you've had with chat, GPT
or it can you know, write poems and you know,
create images and and you know Sora and the video
stuff and you know whatever you want to call that.
You know, her like demonstration from open Ai, like it
it demos very well. It sounds like the kind of
(49:53):
promise of AI of creating something that approximates human intelligence.
Speaker 2 (49:58):
Right, so you can fill in the gaps.
Speaker 1 (50:00):
Yeah, it's just like it feels like the future. You know,
I'm not at all saying that it is, but like
in terms of like other technological trends that we've seen
in the last decade or so, like this one comes
closer to science fiction than anything I've seen. I'm not
saying it is, but like it looks like it on paper,
And so it's a lot easier, I think, to get
caught up in the hype than you may have been
(50:21):
in like I don't know, Uber for X or like
instant delivery or something.
Speaker 2 (50:38):
The Wall Street Journal also reports the Open AI has
established and I quote, a strengthened conflicts policy and a
new independent audit committee that reviews potential conflicts, which the
journal also note says yet to disclose any details about
what those policies might be. It's also important to remember
that when Samultman returned to Open AI, he appointed a
(50:59):
new board of direct is made up of this avengers
of capitalism. I've called them before, people like Fidjisimos, CEO
of Instacart, which is a company that Sam Mormon invested in,
to a board that also already included Dan Adam DeAngelo
of Cora, which is another company that Sam Mortman invested in.
Oh oh, sorry, sorry, I forgot. There's one other guy
(51:21):
that Sam Ortman added back to the board when he
became CEO. He's a guy you might know. He's called
Sam Altman. It's so good watching all this happen. It's
so fun. It's so great watching all of this naked
self dealing, corrupt nonsense happen, and everyone's just like, this
guy is the future. Sam Mortman's the man. And I
(51:44):
think the frustrating part of watching the Sam Mortman story
unfold is that at no point anybody appears to interrogated
who this person was and whether they might be fit
to task. There are credible allegations of abuse from his
sister Annie Altman. There are real things happening here, business things,
social things, horrible things, and no one's god dwn doing anything.
(52:05):
And maybe that's it. Maybe Ortmand's skill isn't so much
creating things or any real legacy, but it's just a
result of the momentum one gets when you've made enough
money for people and enough money yourself that people no
longer bother to check and would rather just find convenient
platitudes and stories about the clever things you've said, rather
(52:27):
than think about it for too long, because maybe the
truth's just a little disgusting. And the problem with someone
like Sam Orman is that they'll eventually get to the
point where they can do real damage. I don't know,
like today, like becoming the figurehead for the entirety of
Silicon Valley and the entire artificial intelligence boom and the
(52:48):
CEO of its largest player. Aortman is a marketer at best,
kind of a management consultant, but let's be honest, history
shows he doesn't really manage it anything.
Speaker 1 (53:01):
Now.
Speaker 2 (53:01):
I think he's the Michael Jordan of bullshit, the Michael
Jordan of empty promises, except he's never had a situation
before where these promises were actually connected to something he
was responsible for. And what's scary is, like I said,
this guy is the CEO of Open AI, and he
has made all of these promises for everyone in artificial intelligence,
(53:22):
even those not making generative AI. So everyone is putting
the expectations of Sam Altman, who is building and by
which I mean having other people build a technology that
doesn't do the things he's promising on the entirety of
the AI industry, so that the people buying AI who
don't really know what they're talking about go and use
generative AI and then they say, wait, this doesn't do
(53:43):
the thing. Do you not see the problem here? Do
you not see that Sam Altman is leading tech to ruin.
He's promising these things that generative AI cannot do. He
is making these statements that are boosting stocks that are
honest to god impressive here tricking fortune one hundred CEOs
(54:05):
into investing money in take that will not do what
it says. And when the ruination begins, it's going to
be terrible for the valley. Funding will be even harder
to get. And in the next episode, I'm gonna explore
Sam a little bit more and I'm gonna really look
at what happens to an industry when they so doggedly
(54:27):
follow and support and appreciate such an obvious false prophet.
Thank you for listening to Better Offline. The editor and
composer of the Better Offline theme song is Matasowski. You
can check out more of his music and audio projects
(54:47):
at Matasowski dot com, M A T T O S
O W s ki dot com. You can email me
at easy at better offline dot com or visit better
offline dot com to find more podcast links and of
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and go to our slash Better Offline to check out
(55:08):
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Zone Media.
Speaker 2 (00:04):
Hello, and welcome to Better Offline. I'm your host ed Zetron.
The tech industry has craved a messiah since the death
of Steve Jobson twenty eleven, but in Open Ay's CEO
(00:26):
Sam Mortmon, I think they've discovered more of a false profit,
a seedy little grifter that uses his remarkable ability to
impress and manipulate people, specifically in Silicon Valley, to mask
a total lack of technical and business acumen. I realized
this sounds a little dramatic and definitely a little inflammatory,
but the air around Sam Mortman has for years been
(00:47):
that he's somehow a magical, special creature, a man who
and I quote is wise beyond his years and was
so at the tender age of nineteen and who to
quote startup incubator why Combinators Paul Gray could be parachuted
into an island full of cannibals and come back in
five years and be king. In the next two episodes,
(01:08):
I'm going to dig into Sam Moultman's really specious success story,
and it's one that was built on the back of
being in the right place at the right time, definitely
dodging accountability and responsibility and basically every job he's ever had,
including by the way, the two that he was fired
from and the feiled startup he had. And I believe
he's used his political powers leverage to scare away anyone
(01:30):
who's going to ask any nasty questions or of course,
dare to stand against him. In a stunning in depth
piece by Ellen Hewett of Bloomberg, Sam Altman is repeatedly
framed by his contemporaries as some sort of genius, without
anyone ever asking why or explaining why, Rather than there's
this vague sense of intellectual and philosophical superiority with why
(01:55):
Combinator founder John Cougan claiming that Altman had and I
quote an uncanny ability to listen intently and diagnose problems,
and that he was and this is a real quote.
I'm not kidding the Michael Jordan of listening. Sit with
that for a moment, Just sit with that. These laughable
(02:15):
and completely stupid accolades aside, there doesn't actually appear to
be a single story that I can find of some
genius moment of clarity ushered in by Sam Altman. There
are none of these fantastical situations where his remarkable mind
brilliantly delivers the exact solution to a problem or some
sort of concrete accomplishment that required these descriptive, pre natural
(02:38):
levels of vision and clarity. No, I just found this
torrent of platitudes about this man who always gets what
he wants, which is, by the way, another quote from
Ellen Hewitt's story. And he just appears to be this
unstoppably pushy young man that excelled not necessarily at building things,
because he really has not built any great companies, nor
(02:58):
have they done any great things. It's mostly about and
I quote Allan Hugh again, sam Orman, bending the world
to his will. If this all sounds familiar, by the way,
it's because I've really said this before. Many CEOs, especially
in take, had this amazing ability to make these bold proclamations,
and that had people pretty much accept them at face value,
(03:21):
even by the media that's meant to hold them to account.
With the earliest days of Facebook's metaverse pivot, probably the
best example I can give you, I really encourage you
to go back to the rock Com bubble and the
Facebook episodes to look into it. But even by Mark
Zuckerbian standards, Zuckerberbian now we'll get to that later. Sam
Altman exists in his own pantheon of bullshit. There are many, many,
(03:44):
many examples of him saying open AI, or I should
be more specific, AI broadly will do something it cannot
and likely will not do, such as think for itself
or be that super smart companion I keep quoting, and
the fourth estate just kind of accepts it without any pushback.
And this is really Sam Mortman's history being in the
(04:06):
right place, saying the right thing, and even when the
thing in question is kind of hollow, people saying, wow, oh,
this boy is so smart, and there's just no limit.
It seems to this phenomenon. When Sam Mortman says something
or does something genuinely truly insane, like how he wants
to raise seven trillion dollars for futuristic chips, which is
(04:29):
by the way, they combined GDP of Germany and France,
or that he needs one hundred billion dollars from Microsoft
to build a supercomputer for the future of AI, people
just say, yeah, sounds about right, Yes, classic Sam Mortman's
stuff is just the smart bloke going. The response is
never to dismiss it and say this is absolutely bloody
(04:49):
stupid but to actually discuss it with a level of
seriousness that just is not warranted for anyone, let alone
Sam Ortman. And that might be Aortmand's real skill collopsia,
the appearance of things being more beautiful than they really are,
hiding the weakness of his arguments, and indeed generative AI
writ large and beguiling those around him with this nasty
(05:11):
instinctial ability to tell them exactly what they want to hear,
giving them the words to tell other people in his name,
to get in exactly the room he needs to be
in exactly the right time to connect with exactly the
right people, or without ever having to actually do anything
or create anything. Despite the fact that his location based
social network looped failed to get any traction or build
(05:34):
any meaningful product, it appears it allowed him to get
in the Dora famed Silicon Valley Incubator, y Combinator, and Dazzle.
Poor Graham It's creator who, for reasons I cannot understand,
I've read so much of poor Graham's stuff now, Paul
Graham became convinced that Sam Worton was the future, and
in turn helped Sam Morton get in on these huge
(05:55):
VC deals in companies like Stripe and Airbnb, making him
hundreds of millions of dollars. This is, by the way,
a very Silicon valley problem and a problem with the
vallee writ large, and a precursor to the growth that
all costs rot economy that I talk about seemingly every minute.
When you strip away Sam Morton's ability to convince people
that he's smart, he doesn't appear to have done anything.
(06:18):
He's done very, very little. He was a college dropout
with a failing then failed startup, one where employees tried
to get him fired twice because he kept diverting resources
to other places and focusing on his own personal products
and projects. And the reason they sound so flushed that
is this is Sam Altman's entire existence. In a podcast
(06:40):
discovered by Ellen Hewett Bloomberg, Twitch co founder Emmitt Sheer
appeared from Mortman's y combinator cohort the first one and
briefly his replacement at CEO of OpenAI, described his surprise
that Sam Morton was able to close deals with boost
Mobile without any actual product yet because Altmand fit a template.
He resembled a kind of guy that got things done.
(07:02):
Powerful people in Silicon Valley have fallen over themselves to
give him the opportunities that made him look like a
king maker. And at some point, the funny thing is
in the Valley is when you get to the prominence
where people just feel like you should be in on
these things, you are. That's why all these guys all
kind of look and act the same and all get
(07:22):
in on the same things. And honestly, I think the
truth might be a little grimmar. Almond was, from a
relatively early age chosen by Silicon Valley to be their
next messiah, which allowed him to wield this incredible power
over the startup ecosystem without really ever meaningfully contributing to it.
(07:43):
His ascent to the apex of the Valley and the
budding flowers of a sam Ortman colt, which we see
today everywhere, feels random and arbitrary, without any real force
behind it. Aw there's one thing, though, Sam Boulman, he's
a master manipulator. He's incredibly adept at saying things that
(08:04):
sound profound, like your rate of learning should always be high,
and yes that's a quote, as are the rest of these,
and that each unit of work you do should generate
more and more results while also knowing that the self
reinforcing prophecies of the tech industry are what makes someone
rich and powerful, rather than achievements or founder great companies
or doing things for people. In essence, his whole vacuous
(08:27):
platitude buffet, the kind that can be cut into ten
second clips for TikTok and YouTube and Twitter. They're really
good ways to feel intelligent when people already want you
to be, and they're just really useful for tricking extremely
disconnected and credulous morons. People that don't really participate in
(08:51):
the grandest scheme of building software and hardware, people like
Read Hoffman of LinkedIn, of Brian Cheski of Airbnb. People
that aren't coders or builders or anything. They're just people
that vaguely fell into success. Perhaps they built useful companies,
but they didn't really make the companies, and they didn't
really do the work. Sam Altman is really good at
(09:12):
saying the things that reinforce their biases, and in the
process kind of helps them disguise their nepotism and his
real superpower, which is, by the way, another form of nepotism.
Sam Moorman didn't find the startups that made him so
rich and wealthy and influential. He was being shown them
by other powerful people that wanted him in on these
(09:35):
deals so that he could give them a vice based
on the career of specious management bullshit. And because the
valley liked how he looked and how he acted, how
he talked, the things he resembled, the things they were
reminded of when they heard Sam Mormon speak. And it's
funny because a lot of these people, the Paul Graham's
of the world especially, they're big time meritocratic people. They
(09:56):
love the meritocracy. Yet when you look deeper, the people
seeding and not actually building the things. Ilia Suitzkaeva over
Open Ai. He is the actual technolog Jesus, He's the
actual guy that and by the way, no longer Open
Ai the kind of deserves this. But Sam Alton's the
one that got invited in early to stripe and Airbnb
(10:16):
and all these things. And as I'll get into, kind
of rat fucked his way around a bit. And nowhere
is this more obvious than in Hydrozene Capital, Aortman's venture
capital fund that he created with the five million dollars
he got from selling looped his failed startup by the
way and backing of course from Peter Teel, Hydrozene invested
seventy five percent of its funding in y Combinator companies
(10:39):
including Reddit and instacar, even after Sam Mortman became the
president of y Combinator, which is weird because the other
partners at y Combinate, like Gary Tann, they were forbidden
from managing their own investment funds at the time, according
to reporting from the Wall Street Journal. But I guess
Sam Moltman just felt right. It's cool that he gets
(10:59):
rid right, not to say Gary Tann hasn't, but the
other people just didn't seem to get these opportunities for
some reason, could be anything. And he became head of
why Combinated, by the way, despite being one of the
he was looped was one of the first companies in
y Combinator, and they to explain how this works. Why
(11:20):
Combinate would invest a little in a few early stage
startups and much larger number these days, and the first
cohort was one that included Sam Altman's Looped and he
was made president of y Combinator. Despite the fact that
luped was terrible. It didn't have a good product, They
couldn't sell it. He retasked engineers at one point to
work on a dating app somewhere else. Sam Alton was
(11:41):
a terrible CEO, But you know what, he's capable of
saying stupid shit like and I quote, competitors are one
of the last monsters that haunt your dreams to New
York Magazine shortly before predicting that there was absolutely no
reason to believe that we would not have a computer
by twenty twenty nine that could replicate his brain. You
(12:04):
know what, though, putting that aside, I do think Sam
Mormon's right on that one, though, in the sense that
chat GPT kind of seems capable of producing this kind
of nonsense too. But again, because Sam Mortman's the affable, friendly,
amicable white guy who's known by the right people. He
keeps going, he keeps on trucking, And I think that
(12:27):
Sam Moltman is on some level, he's a monument to
the roight at the core of the valley, and he's
a product of this growing distance between the tech industry
and actually creating things of value. While why Combinator founder
Paul Graham may be a decorated and successful computer scientist,
by the time he made Sam Mortman, president of y
Combinator in twenty fourteen, he was already more than a
(12:48):
decade removed from selling his software startup via web to Yahoo.
As he drifted further away from actually building things on
the computer, so too did Paul Graham's essays drift away
from the piosophical measures of software development towards a far
darker management philosophy, one where he admitted in a blog
from two thousand and three that intelligence itself is not
(13:11):
a factor in popularity because smart kids don't want to
be popular, and that popularity is much more about alliances
and doing things that bring you closer to other popular people. Humm,
maybe he did like Sam Wultman for real reasons then. Anyway,
two years before he made Samultman president, Paul Graham would
(13:31):
publish a piece called Startup Equal Growth, claiming that growth
drives everything in this world, and that growth makes the
successful companies so valuable that the expected value is high
even though the risk is two. A statement that could
only make sense if you believed that there will always
be hyper growth companies, and indeed that the opportunities for
those high growth companies would keep emerging, say for the
(13:55):
next forever and these people ever thought about it. It's so
strange to read this stuff, to go back even five years,
but especially ten and reading these things and reading these
people talking about how dogged Sam Morton is and how
great he is at this, and then reading their other philosophies,
and it's all stuff like, well, you see, uh, intelligence
(14:18):
comes from the mind and building businesses. It's all about
growth and business. And you read them and you're like, huh,
these people smart or stupid. I can't tell. They're using
smart people language, but they seem kind of stupid. Maybe
that's also the problem. Maybe the problem's just a little simpler.
While Sam Morton's a spacious opportunist and very much a manipulator,
(14:43):
the time he entered Silicon Valley was this period where
pretty much all you needed to do was sound smart
and be in the right rooms. Companies were being created
that could enter these giant markets and just dominate because
all they really needed was money and enough handshakes. Oltman
is adept at using connections to make new connections, in
(15:04):
finding new ways to make others owe him favors, in
saying the right thing at the right time when he
knew that nobody would think about it too hard, something
he continues to this day. Ortmand was early on Stripe
and read it in Airbnb, all seemingly brilliant moments of
investment in the life of a man who has had
many things handed to him, who knew how to look
(15:25):
and sound to get put in the room and to
get the capital to make his next move. It's easy
to conflay investment returns with intellectual capital, even though the
truth is that people just liked Sam Wultman enough to
give him the opportunity to be rich, and he took it.
And he had the ability to hand them money too.
In two thousand and nine, when he put fifteen thousand
dollars into Stripe, which I'll get to it a bit,
(15:47):
he had fifteen grand he could pull out in the
middle of founding a start up. He was working on
Loop for years at this point. Where did he get
the fifteen grand? I didn't have fifteen grands sitting around then,
Jesus Christ, he didn't like. This is the thing. No
one digs deeper into these things. No one asks where
the privilege truly comes from, and when that happens, guys
like this get popular. Now, look, those who might defend
(16:12):
Sam Altman might suggest that he may not have been
a creator, but he gave his time and his energy
to those he backed. Maybe he was a value creator.
Right wrong. According to the Washington Post, sam Aulman's time
at y Combinat ere it ended because he developed a
reputation for favoring personal priorities over official duties and for
(16:33):
an absenteeism that rankled his peers and some of the
startups he was supposed to nurture, much as he had,
as I've mentioned, once diverted engineers at lut to work
on a dating app instead of working on the company
he was running. To give Sam Altman credit, he really
is able to talk for hours without saying anything. Just
(16:55):
ask LinkedIn, co founder of Reied Hoffman, an investor in
open Ai and early of Sam Mortman, and a man
who was critical to getting Sam Mortman returned to the
helm of open Ai when he was fired, who also
let Sam Mortan ramble for over an hour on his
podcast Masters of Scale with all one, at one point
saying that he was and I quote, he was in
(17:16):
a developing world country shortly after the iPhone came out,
and despite their poverty, everyone had smartphones. Now, I just
want to be clear. This is so obviously, completely and
utterly stupidly false. It made me genuinely angry. Why because
what so the iPhone comes out? So the rollout of
smartphones in other countries has been incredibly useful, it's been great.
(17:39):
It didn't happen in a goddamn year. Sam, you lying
sack of shit. I'm sorry. I just really hate this stuff.
I really hate that these people who can go around
getting money seemingly at will just go on each other's
podcasts and jack off and wank about this nonsense, who
say these patently obviously fake things. He probably saying his
(18:02):
defense by the way, Oh it's four years later, which
might have made sense. It's always vague with this goddamn guy.
It's always vague with these goddamn guys. And it's just
so offensive because regular people do not get these opportunities.
Regular people don't get put in these rooms. People that
are undoubtedly smarter and more accomplished and harder working than
(18:24):
Sam Aortman. But because Sam Altman fits the template, he's
allowed to go and he's allowed to be rich one
hundred times over. And it really shouldn't come as a
surprise that Reid Hoffman of LinkedIn, investor in open ai
and so much has such affection for Aortman. After all,
he's the founder of LinkedIn, which is basically the one
(18:45):
place that you know you can go to read six
hundred words that mean nothing, these massive, cringe worthy paragraphs
broken into a Staccato's style that hurts the brain and
the mind, but makes people who don't really know why
they're doing their job care about what they're doing very
happy because it makes it all feel far more important
than it really is. Moving on through Aortmand's power structures.
(19:09):
Another of his close friends is Airbnb CEO Brian Chesky,
who helped, by the way, also get Sam Altman put
back in open AI, and he's helped Altmand pedal these
vague rubbish promises about artificial intelligence, at one point, with
Cheske calling it bigger than the Internet, mobile and cloud
combined and saying that AI will, by the way, non
(19:31):
specifically change Airbnb, which is a company that has and
this is what kills me as well, only got worse
over time. I think Airbnb really crested about four or
five years ago, and then it just became the same.
But worse over time, put my gravances to the side,
and as you can kind of tell what I'm getting
(19:51):
at here, Aortmand's used his political maneuver and to become
super rich. And he's grown, according to the Wall Street Journal,
a portfolio of more them four hundred companies worth nearly
three billion dollars. Now what's really worrying is that he's
partially funded it with hundreds of millions of dollars of
debt of loans from JP Morgan Chase. Now almost anyone
(20:15):
can see why this is insane borrowing money from a
bank and putting it into an industry where the majority
of companies fail. It's just completely bonkers. I don't understand
what's going on. Well, I mean I do, which is
the rich reinforce the rich, and they put money with
people who don't necessarily qualify for it and aren't necessarily
(20:38):
smart or good at stuff or have done things. But
because they're in the right company, it works for them.
Like a regular person. They can barely get a mortgage,
let alone. What's likely I'm guessing by the way a
low interest rate loan to sink hundreds of millions of
dollars into companies like Helion, which is a nuclear fusion
company that Sam Moultman put three hundred and seventy five
(21:00):
million dollars into in twenty twenty one. He serves as
both the chairman of Helion's board and potentially one of
its largest customers because open ai is now and just
announced a deal with Helion, and I quote Matthew Konnittzer
from the Register here to get access to Helion's not
yet possible nuclear fusion driven electricity generators. Just it's so
(21:25):
cool that that, and tons of people reported that without
Matt's necessary bile there. I love the Register because they're
willing to say stuff like this nuclear fusion has not
happened yet. That's that's a sci fi thing that he
has put all that money into. Nevertheless, plenty of people
credulously accepted this, and like Sam odd Man, aw they're
doing a deal open ai, open ai and nuclear Fusion.
(21:47):
Just to be clear, there's no deal there the nuclear fusion.
Oh my god. The Wall Street Journal also reported the
open Ai is happily cutting multiple deals with other things
that Sam Altman's invested in, including Reddit, which Ortmann owns
hundreds of millions of dollars were stuck in thanks to
an investment from hydro Seen Capital when he worked a
y combat are, along with AI device companies Limitless and Humane,
(22:09):
the latter of which Ortmand owns a fifteen percent stake in.
According to the Journal, it's just obvious, naked self dealing,
the kind of stuff that should be something that disqualifies you,
that gets critiqued further than of course the journal, and
I'm not seeing it. I'm not seeing enough of it
at least, But I wanted to dig further into this
(22:31):
investment portfolio, so I sat down with Ton Datan of
the Wall Street Journal to kind of go through it.
So in your story, you were talking about how Sam
Ortman had this massive credit line I think from JP Morgan.
(22:53):
Is this standard for investment? Have you seen this before?
Speaker 1 (22:57):
No, It's incredibly not standard. And in the course of
reporting out this story with my colleagues, we talk to
a lot of venture capitalists and investors, other kinds of
investors and founders in the tech industry, and they either
had never heard of something like this before or found
it to be so incredibly risky, not just investing in
startups off of credit, but using as collateral your holdings
(23:21):
in privately held tech companies. Both of those things together
are like not you do not see that very often
in the tech industry.
Speaker 2 (23:28):
And why don't you? Just to be clear, why is
this usually a bad idea?
Speaker 1 (23:33):
Because it's incredibly risky. I mean, if you think about
an investment in a startup, what percentage of startups not
only don't get acquired or go public, but straight up
fail will go to zero? The numbers I don't want
to quote a specific one, but it's like the majority.
And that's kind of the way the venture capital system
works is that you invest in a bunch of unprofitable
(23:54):
or zero profit, zero revenue companies, hoping that a few
home runs or Grand Slams or whatever is enough to
justify your entire fund. But if you were to use
those holdings in those kinds of companies in which a
huge majority of them go under, and then a huge
majority of them do go under, and suddenly you are
having to use as collateral holdings in a company that
(24:16):
is worth zero, you're in big trouble. So yes, it
is not done very commonly.
Speaker 2 (24:21):
Very strange, and it seems the strange financial relationships that
kind of Oltman's modus operandi. So tell me about Hydrozine.
Speaker 1 (24:31):
Sure. Hydrozine was a fund that Sam started around the
time that he joined y Combinator, the accelerator incubator in
Silicon Valley, and he got some funding from Peter Teel
for it, and basically it was a way for him
to invest in other y Combinator startups. So it was
largely using outside money, but it was like just an
(24:52):
access line to capital that he could put into these
seed stage investments in startups.
Speaker 2 (24:58):
As I've mentioned previously, since leaving White Company, Altman's investment
portfolio was balloon to hundreds of start ups with billions
of dollars. How many of these companies have you seen
have a direct relationship with open Ai that's he's invested in.
Speaker 1 (25:16):
Well, in the story, we laid out a couple of
clear overlaps between you know, open Ai as a business
and companies that he's invested in. Like the most obvious
one that we that we brought up, I shouldn't say obvious,
but the most like apparent one of this kind of
overlap was Helion, which is this nuclear fusion energy startup
that he's put hundreds of millions of dollars into and
(25:38):
they worked out a deal, as we broken in the story,
for Helion to provide be the energy provider for future
open ai data centers. So these data centers, when they're
built and I guess when nuclear fusion exists, you know,
would be powered by clean nuclear fusion energy. And so
that's something in which Sam obviously as one of the
largest by far the largest investor, and he leon, you know,
(26:01):
there's there's there's an overlap there between that and open
AI's business. And then the other one that also kind
of stoock out to us was Reddit, where he is
one of the largest outside shareholders in the company. And
open ai announced a licensing deal with Reddit a couple
of weeks ago, and you know, Reddit stock popped on
(26:22):
announcement of this deal, and Sam, as a major shareholder,
saw his net worth increase, you know, within the course
of a day. I mean, that's kind of how it
goes when you hold stock. But you know, notably on
announcement of this deal.
Speaker 2 (26:36):
Surely any future deals between open ai and Reddit would
mean that Sam Oapman would be there must be some
kind of insided trading. How is that possibly legal?
Speaker 1 (26:46):
I mean, I don't know, I don't want to get
into what what's legal or isn't legal. I thought questionable. Yeah,
I guess what was interesting to me and to the
other reporters about the way that Reddit and open ai
announced this license deal was they didn't say that Sam
recused himself from the conversations between Reddit and open Ai.
They said something to the effect of this deal was
(27:09):
spearheaded or the person who was in charge of this
deal was open Ai COO. And I don't know what
to make of that. I feel like the language of
Sam recused himself would have been easy enough to do,
but they didn't do it. They chose not to do it.
Speaker 2 (27:23):
So if it was like saying Brad Lightcap took the deal,
that doesn't feel like a disconnection from Sam Oltman.
Speaker 1 (27:29):
Yeah, and it isn't regardless even if he wasn't involved.
And you know, you could make a fair argument that
like open ai probably should be licensing data from all
of these you know, providers, because that's what they're using
to train their models. But the fact is they didn't.
Sam didn't recuse himself, And you know, whether it's his
fault or not, or this was intentional or not, the
(27:50):
fact of the matter is he owns a sizeable like
disclosed percentage of Reddit through various holdings, and like those
you know, those shares went up on announcement of the deal.
Speaker 2 (28:00):
So with Helion, back to the nuclear energy startup, have
they actually built anything yet?
Speaker 1 (28:05):
No?
Speaker 2 (28:06):
No, I mean it's so strange.
Speaker 1 (28:08):
I don't want to discount anything that Helion does because
you know, who wouldn't want nuclear energy to exist? Right? Like,
that's that's obviously a great boon for humanity to have
nuclear fusion. You mean yeah, sorry, so nuclear fusion, yes,
like that would be a major technological breakthrough. That would
be a you know, a sea change in how you
know we derive energy from the grid and whatever. But
(28:30):
you know, aside from a couple of announcements in terms
of partnerships or future purchase agreements between Helion and Microsoft
and and you know the thing that we reported Helion
and open AI, this is not like they have not
achieved it yet. These guys are not out there selling
you know, nuclear fusion energy to the mass public.
Speaker 2 (28:51):
Well, I think what gets me that Sam Won puts
three hundred and seventy five million dollars into this company.
He got them into y combine or if I remember
from you reporting he being embedded with them. Now there
is this deal between Helia and a company that is
yet to build something and open Ai that they will
theoretically do something in the future. It just feels like,
(29:13):
I know we're not talking in legalities here, but it
feels like there is just so much self dealing here.
It feels like he has been self Oltman has been
self dealing for years.
Speaker 1 (29:24):
Yeah, I mean, I guess to make the argument that
Sam or open AI or other people in that circle
would make is like Sam is a prolific investor. He's
been doing this for as long as he's been in tech.
They say he's kind of slowed down quite a bit.
You know, maybe numbers would show a different story, but regardless,
he you know, this is a thing that he does.
(29:45):
And like, if you are going to be running, you know,
the most consequential tech company at the moment or startup
at the moment and open AI, there's just bound to
be overlap between a vast investment empire and an open AI.
So that's like the argument to the contrary, you know,
self dealing. I guess that's in the interpretation of the reader.
Speaker 2 (30:06):
Yeah, I think what it is is that it doesn't
feel like this would be tolerated in any other industry,
like if you put politicians own stock, for example. I
realized it's not an industry, and they are heavily criticized
for it. But it almost feels like perhaps you can
speak to this. It feels like Sam Wilton gets reported
(30:28):
on differently than many entrepreneurs and many investors. And I
really do put the journal to the side here. I
think the journal in the Washington Post done a very
good job scrutinizing it, but it feels writ large like
he's given a much rosier and easier ride than most.
Speaker 1 (30:43):
It's hard to know with Sam, right, I mean, he's
such a figure at this point, which is kind of
funny to me because like I've been reporting on tech
for let's say ten years or so, and Sam's always
kind of been around. He's just this person that we
all kind of knew as reporters because of you know,
his role at y Combinator and showing up at Sun
(31:05):
Valley almost every year, and you know, now open Ay
being this big deal that it is. He's this figure
that everyone kind of has dealt with at certain points
as a tech reporter, and there's just so many opinions
on him. I mean, you know, I think there are people,
maybe like you, who see him as this nefarious character,
self dealing, someone who isn't really above board. But you know,
(31:27):
you report a story like this and you talk to
founders and some venture capitalists and they love him. They
think he's, you know, a great investor, a brilliant business person,
has incredible insights, and you know, is this also kind
of futuristic thinker, who's who's kind of in that Elon
musk vein thinking ten twenty years down the road and
(31:49):
at a scale at the trillions of dollars level that
they find very you know, alluring and exciting. And so,
you know, I it's always hard to know when you
do these sort of story is like what you're going
to get in the course of reporting, because you can
talk to a certain group of people who think he's
borderline criminal and to be clear, I'm not saying that,
but there are.
Speaker 2 (32:08):
People yeah yeah, just citing someone yeah yeah, and and.
Speaker 1 (32:11):
People who think he's the you know, nikolay Tesla of
our time. What are you gonna do?
Speaker 2 (32:17):
So here's my thing with that, is he that successful
a businessman though, Like he's a very clearly a successful investor.
But as a businessman, the company he's been attempted, fired from, looped,
fired from Y Combinator, fired from open Ai. He seems
like a very effective politician and a very good deal maker.
(32:41):
But I wonder how much of this, because you say
he's slown down. I wonder how much of his success
can be attributed to the fact that he just was
inside of Y Combinator and had the money to play
at the time. Because yeah, you've been around long, so
go ahead.
Speaker 1 (32:59):
Yeah, I know, looks it's a fair point, and I think, like, look,
the numbers probably speak for themselves in terms of his
net worth, right, you know, you can stack the deck
however you want in Silicon Valley to say someone is
or isn't a good investor.
Speaker 2 (33:12):
Like when you have deal flow, when you have really
is a school board situation.
Speaker 1 (33:16):
Yeah, well no, but I'm saying, like, you can have
access to early stage startups better than other people, and
you're just gonna be getting first looks at Uber and Stripe. No,
he's not an Uber. I'm just giving an example, yea,
like you you know Stripe, Yeah, yeah, or Stripe or Airbnb,
which he is in. Like if you're in that inner
circle of people who see these companies on the way up,
and like, you know, I don't think it takes a
(33:38):
brain genius to look at something like Uber and be like, oh, well,
I bet that's probably going to be a pretty big
deal one day, so I'd like to invest in that.
But you know, I think to his credit, maybe his
investment in Stripe was an incredibly risky one for him personally.
I think it was like fifteen thousand dollars or something,
and you know, he probably didn't have a ton in
(33:59):
his bank account at the time, so that was a
pretty When when was that early early days, I mean
they were they were in It was in two thousand
and nine, actually, Paul Grant so before he sold Looped. Yeah, yeah,
I think it was around the same time.
Speaker 2 (34:14):
Because that's what I'm saying, there's not really much of
a risk if he hadn't, But I feel like he
sold Loop later because that. But nevertheless, it.
Speaker 1 (34:21):
Is fair enough. I don't know Sam would have been
out on the streets, you know if if this, if
this investment hadn't turned out. But you know, in a
world of investment where people get congratulated for you know,
going all in on something or you know, being willing
to bet it all on an unprofitable, you know, unproven startup.
You know, people give Sam a lot of credit. But yeah,
(34:43):
I don't know. I think you bring up a good question,
which is like if you have access to an Airbnb
in the earliest days, or or a Reddit or even
a company that like Rippling, which I don't know if
your you know, listeners know about. But it's this very
successful now hrs art up that Sam has has invested
in and also.
Speaker 2 (35:03):
An offshoot of Gusto when it's complicated.
Speaker 1 (35:08):
Yeah, yeah, basically I don't know how interesting this is,
but whatever, you know. There was a kind of a
big scandal a bunch of years back with this company
called Zenefitz, which was accused of shirking regulatory requirements for
training its workers on anyway, it was a big scandal
a couple of years ago, and the CEO of that
(35:29):
was was pushed out very publicly, later replaced by David
Sachs for what it's worth, and he went on to
start this other company that was basically a direct competitor
to that, and it's called rippling, and it's done really
well in terms of building up its valuation. And Sam
is one of their earliest investors. And I think you
know part of his Conrad Parker. Conrad is the guy's name. Yeah,
(35:49):
And anyway, Sam has made a bunch of money from that,
or at least you know his his investment is valuable
from that. And my point is basically like when you
when you're in this inner circle, you have access to
these companies and you can make these investments. Whether you
know he is like standard Deviation is a better business
person than anyone else in tech, I don't know. It's
(36:10):
not for me to say, but you know he is
on paper, you know his his holdings are worth billions.
So I guess you got to give him something for that.
Speaker 2 (36:18):
So you mentioned in the story that Hydrozene, Sam Altman's
firm bought a portion of startup shares owned by Paul
Graham versus y Combinator. Would those have been Paul Graham
basically doing the same like he might have been investing
in these companies too, or is this just early days
why Combinator shares?
Speaker 1 (36:36):
These were shares that were owned by Paul Graham, As
we reported, and so it was probably a transaction for
him to kind of take some money off of the
table and offload them to Hydrazine so he could be
I guess a little bit more liquid. But yeah, these
were these were Paul Graham shares that you know ended
up being bought up by the Hydrozene Fund.
Speaker 2 (36:54):
It's interesting because there's so it feels like Altman at
times doesn't have a focus though, because he's done all
of these investments, and you within the reporting, within the
Washington Posts reporting as well, there's this idea of him
being absent, absent from y Combinator, absent from looped at
one point, retasking engineers to work on a dating app separately.
(37:17):
It almost feels it almost feels hard to tell whether
Autman is focused on anything other than just the number
going up. But here here is the real problem. I
see what happens if and we mentioned this earlier, these
startups go to zero and he has this these massive
credit lines.
Speaker 1 (37:38):
Yeah, I mean it feels like a house of cards. Yeah.
I think, you know, these people tend to be okay
in the end, I find so, you know, I don't
know how many people are really all that worried about
you know, Sam's credit line and stuff, and you know,
obviously when interest rates go up, these things tend to
be a lot riskier than they were going into it.
(37:58):
You know, I can't go into all of the details there,
but yeah, there's a reason why using you know, privately
held shares or private you know, you know shares and
privately held companies as collateral is not commonly done. I
mean I talked to someone in the course of this
story who was like shocked that someone would do that
kind of thing. But you know, again, to this Silicon
Valley mindset in which risk, you know, quote unquote risk
(38:21):
is really promoted and celebrated around here, that kind of
thing is seen as like an example of how aggressive
and cool Sam is that he's willing to kind of
take a risk on something like that in order to
put more money into well, I guess you could. Some
people would say, put more money into the ecosystem. Other
people would be like, give himself more examples to get rich.
Speaker 2 (38:41):
Yeah, and it's it doesn't. Actually, this is a question.
Did you see a lot of it was the general
pattern of what you've seen a lot of smaller investments
across a lot of companies or big fat ones generally
like the three hundred and seventy five million in Helium.
Speaker 1 (38:57):
That one is a standout, the three seventy five million
and Helion. But you know, again without going too specific
into the numbers because we didn't put them in the story,
but you know some of them are in the you know,
millions and tens of millions. You know, whether that's all
his personal money or money that's raised through you know,
various LP funds that are you know, in which there's
(39:17):
capital put in by LPs. Can get a bit complicated,
but no, this isn't you know, one of those angel
investors who's putting ten thousand dollars in a bunch of
different companies. I mean when he really believes in a
startup or he really thinks they're going to go somewhere.
The number is in the millions and tens of millions.
Speaker 2 (39:36):
So slightly different tack here. Yeah, everyone is saying the
open AI is the future, that chat GPT will be
in everything. You've been reporting on the enterprise for a
long time. Do you think that's actually the case. Do
you think that this company is really I know they're
making billions of revenue, but do you think they're ever
gonna go into the green? Do you think this is
(39:57):
for real?
Speaker 1 (39:59):
I I don't know. I mean, I guess i'd actually
maybe even push that back to you, because you know,
you're someone who's you know, been around tech and you
know reporters and and I mean, like it's it's incredibly
hypey right now. Like of my time, you know, covering
this industry, I've never really seen the level of how
you know you you you know. Crypto obviously was an
(40:21):
interesting moment in terms of there are people who believe
that the entire financial system was about to be transformed
because of these you know, the blockchain, and you know,
there was the on demand era, you know cloud. I
didn't really cover tech at the time, and you know
that sort of proved out to really be in a
very specific way transformative. I don't know with this one.
(40:43):
I mean, I think the technology as it stands right
now is very problematic in terms of its shortcomings. I
think hallucinations are a major issue, Uh, if it's going
to be as valuable as search, which is like the
most successful product you know, tech has probably ever put out.
And the other issue is the cost of training and
(41:04):
deploying these models is tremendous. I mean, like you said,
like I cover the enterprise, so part of my bead
is writing about the cloud and data centers. I mean,
to me, one of the biggest things that's going on
right now is this multi billion dollar build out of
data centers that's happening at an unprecedented level across not
even the country, but the world in order for there
to be enough you know, AI warehouses, data centers you know,
(41:28):
outfitted with Nvidia chips to train and inference, you know,
deploy all of these models. That's crazy, I mean, because
that is all done in advance that they're being enough
demand to justify these investments, right. I mean, like this
is all because you know, for a huge portion of
last year, there was more demand than supply when it
(41:48):
came to compute, and so all of these tech companies
started saying, well, we need to build out in advance
of you know, this demand being unending and increasing. And
it's like, well, well, okay, that's fine for now, but
if in the future it doesn't, If you know, this
turns out to have been a fad, or the years
that it takes for this to be a widely a
(42:09):
widely use technology is way longer than it is. You know,
it could be one of the bigger boondoggles I think
we've seen in tech, you know, like all these data
centers that were built out that lay unused because there's
not enough people wanting to use chat ept or any
of the kind of similar similar products.
Speaker 2 (42:27):
Is that happening now or is that something you fear
for the future.
Speaker 1 (42:31):
More for the future, you know, I think the demand
is still fairly high right now. And if you talk
to startups like a I startups, they'll say it's still
hard for us to get access to GPU clusters, for
us to train models or you know, things like, you know,
the technology we want to deploy is still much slower
than we want because there isn't enough compute. But yeah,
(42:51):
Jerry is still out. Sorry, I know that's a really
lame phrase, but like.
Speaker 2 (42:55):
For real, that's good though, because what happens if the
demand never arrives? Though? Does this stuff get repurposed? Does
it get sold off? Well?
Speaker 1 (43:06):
I think you actually saw a kind of interesting thing
happening with crypto, which I actually wrote a story about
that with with berber Jen, my colleague on this story.
Who you know, who was who was you know, the
lead on this Sam Altman piece about you know, with
crypto mining, there were a lot of companies at the
height of and specifically ethereum mining that were building up
these rigs, these these mining rigs that were had GPUs
(43:30):
at the heart of them that were necessary when people
thought that was going to be profitable basically.
Speaker 2 (43:35):
Like it wasn't. Coal Weave, which is as a listener,
is a huge student typo, multi billion dollar GP provider.
They previously crypto.
Speaker 1 (43:43):
Yeah, one hundred percent. They're a fascinating company. I love
core Weave because, yes, this was a company that is
started up by people in finance basically like traders, like
energy traders. I shouldn't actually don't know if it was energy,
but but people with like a very financial background who
realized like this amazing arbitrage that was happening in crypto
and ethereum mining, which was that like the like the
(44:04):
value of mining when theoreum prices were high, is greater
than the electricity it takes to consume to do the mining.
And so when that was at its peak, they were,
you know, they were doing pretty well, and then they
read the writing on the wall that you know, ethereum
mining was probably gonna decrease in value, and they made
an early switch to like retrofit all of their mining
(44:26):
rigs into AI compute. And that was before chat GPT
and you know, open ai became a household name. But anyway,
I bring up that whole story because what a lot
of ethereum miners started to realize when there was this
kind of shift in the nature of ethereum mining that
basically meant they didn't need GPUs, like these very powerful
(44:48):
GPU rigs to do the mining is they were stuck
with these kind of useless machines. And so a lot
of them have tried to like jump over into AI
compute and providing you know, training and inferencing. And so
it was an interesting example of like one trend jumping
into another. And so I don't know what that could
(45:08):
mean because the theory of mining is just not even
close to the scale that we're talking at here with AI,
but you know, tech seems to find a way. I
don't know, I don't have a good answer for it,
but it would be a crazy outcome, honestly, if you know,
we're talking thirty billion dollars a year of investment in
(45:28):
infrastructure from a single company alone in building up data centers,
So if that ended up not being necessary, yeah, I
don't I don't know what to do with those things.
Speaker 2 (45:37):
Yeah, it feels like what I would worry about is
the physical GPU equivalent of twenty twenty two, where you
had all these companies in twenty twenty one who hired
everyone everywhere and then they went, oh crap, better fire them.
But it almost feels like it could cause I think
(45:58):
Nvidia feels like they would be or a MD to
an extent Micron, I guess, but would be most at
risk from this because if there's just thousands, tens of thousands,
hundreds of thousands of black Wells or what have you
sitting around unused, it feels like it could be catastrophic.
Speaker 1 (46:15):
Yeah, I mean, at least in videas selling stuff, like
at least they're pushing product, you know, like, at least
they're manufacturing or designing things that are manufactured and selling
to the people who are paying cash for them. So
that's that's better than some crypto or sorry, that's better
than some AI companies that it's really just on like
on hype and a hope and a prayer, but yeah,
I mean, like, as we're recording this in video is
(46:37):
in and around a three trillion dollar company. It's more
valuable than Apple. I mean that's just crazy. Yeah, there's
a lot going on in terms of the expectation of
this sort of not stopping anytime soon.
Speaker 2 (46:49):
Do you think the AI boom is a bubble?
Speaker 1 (46:52):
Oh yeah, one hundred percent. Like I don't even think
that's a controversial statement, Like I think Sam go ahead. Yeah, no,
I think Sam would even agree. And like most people
that I talk to in a I think it's a
bubble because look, the nature of that doesn't mean that
everything's going to go to zero and that you know,
like the huge run up and value that we've seen
(47:12):
with Microsoft and in Nvidia is gonna all, you know,
disintegrate if it takes a lot longer or it doesn't
even catch on with AI. But yeah, I mean you're
seeing money. And my colleague Berber wrote actually a good
story about this a couple of weeks ago. I mean,
you're seeing startups that have no you know, no revenue
(47:32):
really or not even a product raising at valuations in
the billions. I mean that's the very definition of a bubble.
So yeah, I don't. I don't even feel like I'm
going out on a limb saying that.
Speaker 2 (47:43):
So I will push back on that, not to say
you're not going like I believe you are, because if
you look around and this is rap on this one.
I think it feels like AI is humored on a
level in the media right now. The I have literally
only seen since on the metaverse, where it was just
this concept, not saying AI is useless generally if AI
(48:05):
has uses, But it feels like everybody is giving Sunda Pshai,
for example, the benefit of the doubt about Google Search,
or at least they were until it told you to
eat rocks, but especially with chat GPT, they're just kind
of assuming these things will happen.
Speaker 1 (48:19):
And I don't know what it is.
Speaker 2 (48:20):
It feels almost like the why do you think people
are giving it so much space and believing that it
will grow exponentially?
Speaker 1 (48:29):
Why? Actually I have to have two answers to that.
I mean, one is like you are surrounded as a
reporter by your sources. The people that you talk to
day in day out, who you know try to let
you know what's going on in the space. Are people
that a lot of the times are big believers in
any new trend in technology, and so it's kind of
easy as a reporter to hear about this stuff and
(48:50):
want to at least explain it to readers. Not necessarily
be part of the hype. I mean, that's not our job,
but at least say, like, well, this is why Anthropic
is getting billions of dollars of investments, or obviously open
Ai or anything like that. I think if I had
to just personally guess on a lot of this stuff,
you know, it's been a bit slow in terms of
(49:11):
transformational technologies in a while. I mean, honestly, you could
maybe look back to probably the iPhone as the last
thing that like fundamentally upended the way we live our lives,
you know, in the enterprise. I guess you could look
to the cloud, although most people don't care about that,
but you know, with AI and you know these kind
(49:32):
of seemingly magical interactions that you've had with chat, GPT
or it can you know, write poems and you know,
create images and and you know Sora and the video
stuff and you know whatever you want to call that.
You know, her like demonstration from open Ai, like it
it demos very well. It sounds like the kind of
(49:53):
promise of AI of creating something that approximates human intelligence.
Speaker 2 (49:58):
Right, so you can fill in the gaps.
Speaker 1 (50:00):
Yeah, it's just like it feels like the future. You know,
I'm not at all saying that it is, but like
in terms of like other technological trends that we've seen
in the last decade or so, like this one comes
closer to science fiction than anything I've seen. I'm not
saying it is, but like it looks like it on paper,
And so it's a lot easier, I think, to get
caught up in the hype than you may have been
(50:21):
in like I don't know, Uber for X or like
instant delivery or something.
Speaker 2 (50:38):
The Wall Street Journal also reports the Open AI has
established and I quote, a strengthened conflicts policy and a
new independent audit committee that reviews potential conflicts, which the
journal also note says yet to disclose any details about
what those policies might be. It's also important to remember
that when Samultman returned to Open AI, he appointed a
(50:59):
new board of direct is made up of this avengers
of capitalism. I've called them before, people like Fidjisimos, CEO
of Instacart, which is a company that Sam Mormon invested in,
to a board that also already included Dan Adam DeAngelo
of Cora, which is another company that Sam Mortman invested in.
Oh oh, sorry, sorry, I forgot. There's one other guy
(51:21):
that Sam Ortman added back to the board when he
became CEO. He's a guy you might know. He's called
Sam Altman. It's so good watching all this happen. It's
so fun. It's so great watching all of this naked
self dealing, corrupt nonsense happen, and everyone's just like, this
guy is the future. Sam Mortman's the man. And I
(51:44):
think the frustrating part of watching the Sam Mortman story
unfold is that at no point anybody appears to interrogated
who this person was and whether they might be fit
to task. There are credible allegations of abuse from his
sister Annie Altman. There are real things happening here, business things,
social things, horrible things, and no one's god dwn doing anything.
(52:05):
And maybe that's it. Maybe Ortmand's skill isn't so much
creating things or any real legacy, but it's just a
result of the momentum one gets when you've made enough
money for people and enough money yourself that people no
longer bother to check and would rather just find convenient
platitudes and stories about the clever things you've said, rather
(52:27):
than think about it for too long, because maybe the
truth's just a little disgusting. And the problem with someone
like Sam Orman is that they'll eventually get to the
point where they can do real damage. I don't know,
like today, like becoming the figurehead for the entirety of
Silicon Valley and the entire artificial intelligence boom and the
(52:48):
CEO of its largest player. Aortman is a marketer at best,
kind of a management consultant, but let's be honest, history
shows he doesn't really manage it anything.
Speaker 1 (53:01):
Now.
Speaker 2 (53:01):
I think he's the Michael Jordan of bullshit, the Michael
Jordan of empty promises, except he's never had a situation
before where these promises were actually connected to something he
was responsible for. And what's scary is, like I said,
this guy is the CEO of Open AI, and he
has made all of these promises for everyone in artificial intelligence,
(53:22):
even those not making generative AI. So everyone is putting
the expectations of Sam Altman, who is building and by
which I mean having other people build a technology that
doesn't do the things he's promising on the entirety of
the AI industry, so that the people buying AI who
don't really know what they're talking about go and use
generative AI and then they say, wait, this doesn't do
(53:43):
the thing. Do you not see the problem here? Do
you not see that Sam Altman is leading tech to ruin.
He's promising these things that generative AI cannot do. He
is making these statements that are boosting stocks that are
honest to god impressive here tricking fortune one hundred CEOs
(54:05):
into investing money in take that will not do what
it says. And when the ruination begins, it's going to
be terrible for the valley. Funding will be even harder
to get. And in the next episode, I'm gonna explore
Sam a little bit more and I'm gonna really look
at what happens to an industry when they so doggedly
(54:27):
follow and support and appreciate such an obvious false prophet.
Thank you for listening to Better Offline. The editor and
composer of the Better Offline theme song is Matasowski. You
can check out more of his music and audio projects
(54:47):
at Matasowski dot com, M A T T O S
O W s ki dot com. You can email me
at easy at better offline dot com or visit better
offline dot com to find more podcast links and of
course my newsletter. I also really recommend you go to
chat dot Where's youread dot at to visit the discord,
and go to our slash Better Offline to check out
(55:08):
I'll Reddit. Thank you so much for listening. Better Offline
is a production of cool Zone Media. For more from
cool Zone Media, visit our website cool Zonemedia dot com,
or check us out on the iHeartRadio app, Apple Podcasts,
or wherever you get your podcasts.
Host
Ed Zitron
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