The Trial Begins: Elon vs Sam Altman

Josh: Two people sat across from each other at a federal courtroom in Oakland yesterday. Josh: One is the most valuable person in the world. Josh: The other runs the most valuable startup in history. They built it together Josh: decades ago. Now one is trying to take it from the other. Josh: Those people involved Elon Musk and Sam Altman. And the numbers attached are pretty hard to believe.

Josh: It's an $850 billion company, $134 billion in damages, and a potential $1 trillion Josh: IPO that might not go through in the case this trial goes in an unfavorable way for OpenAI. Josh: Whatever the verdict is, the rules of how AI gets built in America is about to change. Josh: And this is probably the trial of the decade. Ejaaz: Yeah, this is the culmination of a decade-long grudge between Sam Altman and Elon Musk.

Ejaaz: And in order to talk about what happened yesterday and what's happening today Ejaaz: with the trial, I think it's important to set some context. Ejaaz: So we created this timeline of the experience, right? Thank you, Claude. Ejaaz: So we used a neutral party, by the way. No chat GPT, no XAI. Ejaaz: It's just Claude. Okay, so exactly 11 years ago.

Ejaaz: Elon Musk and Sam Warmer got together and had this idea to create an AI startup Ejaaz: called OpenAI, specifically a non-profit foundation that would create AI, Ejaaz: superintelligence, and then use it for the benefit of humanity. Ejaaz: So the key point here is that they wouldn't request to turn a profit, Ejaaz: but it was only just over two years later in 2017 that there was a power struggle. Ejaaz: And the struggle was specifically over wanting to turn OpenAI into a for-profit.

Ejaaz: Now, if you looked at the trial today, you would assume that was Sam Altman Ejaaz: calling for it, but it was actually Elon Musk himself. Ejaaz: He said he wanted to convert OpenAI into a for-profit and merge it into Tesla. Ejaaz: He thought he had the chops and power to be able to do that. Ejaaz: And the reason why he thought that was he had agreed to fund the entire endeavor Ejaaz: up to the tune of a billion dollars.

Ejaaz: Sam Altman and Greg Brockman, who were key co-founders of OpenAI at the time, Ejaaz: rejected that proposal, but wanted to figure out another way to work with him. Ejaaz: But Musk couldn't get agreeance on both sides. And in 2018, he decided to leave. Ejaaz: But it was only a year later that Sam Altman and Greg Brockman thought, you know what? Ejaaz: We will turn this into a for-profit and we will own major stakes in this ourselves.

Ejaaz: So obviously, Elon Musk was a bit salty about this, Ejaaz: but he didn't believe they had the chops to create a Ejaaz: winning ai startup but of course as we know the story goes three years later Ejaaz: chat gpt launches it goes completely viral and open ai becomes one of the most Ejaaz: valuable privately held startups in the entire world and of course at this point Ejaaz: they are shifting more towards a for-profit so elon musk looks at the success and he's like,

Ejaaz: ha, I'm owed reparations from this. I co-founded OpenAI. He changes his tune. Ejaaz: Now he wants a piece of the pie. And what he's seeking in today's culmination Ejaaz: of a trial is exactly $134 billion. So he's not really asking for much.

Ejaaz: And for the polite removal of Sam Altman and Greg Brockman from the board of Ejaaz: OpenAI. So that is the context that brought us here today. Josh: It's funny because now they're actually on the stand. So as of this week, Josh: people are on the stand there beginning testifying. Josh: Elon just went up yesterday for the opening remarks. Now, these are the softball Josh: questions that his own lawyer asked him.

Josh: But on the stand, I mean, he had a pretty compelling case. He said he came up with the idea. Josh: He came up with the name. He recruited the key people. He taught them everything that he knew. Josh: And then he provided all of the initial funding. So he essentially did everything Josh: in the early stages of OpenAI, including the recruitment of the single most Josh: important person to OpenAI, a lot will argue, which is Ilya Sitzkever.

Josh: Now, Ilya is the reason why Larry Page will no longer talk to Elon, Josh: because Larry Page deemed him as his best employee. Josh: Elon was able to convince him to come to OpenAI and to start something powerful with Greg and Sam. Josh: Now, he's also responsible for recruiting Microsoft Cloud and NVIDIA Compute.

Josh: I mean, I remember listening to a conversation with Jensen where one of the Josh: first people to ever believe in these chips was Elon, who was buying them and Josh: recruiting NVIDIA's help on behalf of OpenAI, not Tesla, not SpaceX, for OpenAI. Josh: So it's clear that he did a lot and he wanted it to be known as he got started Josh: with the court briefing yesterday. Ejaaz: So let's now dive into what exactly happened yesterday.

Ejaaz: This is a closed trial in the sense that it isn't public. Ejaaz: There's 15 reporters, probably totally 30 people in the room, Ejaaz: but the stars of the show are in the courtroom themselves. Ejaaz: Sam Altman, Greg Brockman, and Elon Musk. Ejaaz: And for the first day, Elon Musk decides to put his first witness up to the stand. Ejaaz: And that's himself, of course, Elon Musk, who is testifying for himself on behalf of his case.

Ejaaz: And the side that Elon Musk and his lawyer is basically making is, Ejaaz: and this is a direct quote, ladies and gentlemen, we are here today because Ejaaz: the defendants in this case, OpenAI, stole a charity. Ejaaz: And they go on to make the point that Elon Musk is an immigrant into the US. Ejaaz: He worked hard. He busked tables.

Ejaaz: And he put in his own hard-earned money up to the tune of $44 million, Ejaaz: so not that $1 billion that I mentioned earlier into OpenAI to make it its success that it is today. Ejaaz: And therefore, he is owed some form of payment. Ejaaz: Now, he's asking for a large chunk, $134 billion, but that money doesn't actually go to Elon Musk. Ejaaz: He's going to send that to a non-profit as was originally attended in OpenAI.

Ejaaz: But the main point here is it's a philosophical and brand-related dunk on his Ejaaz: biggest competitor versus XAI, for example. Ejaaz: Now, OpenAI's lawyer himself says, we are here because Mr. Musk didn't get his way at OpenAI. Ejaaz: That's what happened. He quit saying that they would fail for sure. Ejaaz: But my clients had the nerve to go on and succeed without him. Ejaaz: So the point that OpenAI is making is basically Elon Musk had his opportunity.

Ejaaz: He actually wanted to take it for profit as well. Ejaaz: But just because we did it ourselves and became successful after he left. Ejaaz: He's now coming back for undue payments, which is also a very valuable argument on their side. Ejaaz: So that's currently two settings of the argument. Ejaaz: The tension was pretty palpable.

Ejaaz: Sam Altman, apparently, according to reports, sat there the entire time with his arms crossed. Ejaaz: He didn't stay for Elon Musk's specific testament. Ejaaz: Instead, leaving behind a recorded video of him making excuses saying, Ejaaz: I've got to go work and do A, B, and C. Ejaaz: But the president of OpenAI, Greg Brockman, did stay for the entire thing and hear Elon Musk out.

Ejaaz: The spiciest news is probably going to come later today when Elon Musk himself Ejaaz: is going to get grilled by OpenAI's lawyer. Josh: Yeah, it's a shame that this isn't being televised or that's not recorded. Josh: You have to read these accounts of people who are actually there in order to Josh: kind of get a peek into what's going on.

Josh: But before we get into that peek of what happened, maybe we talk about the smoking Josh: gun, which is the piece of evidence that actually turned this lawsuit into a trial. Josh: And that's Greg Brockman's diary entry, which I thought was really funny. Josh: So Greg Bachman, president and co-founder of OpenAI.

Josh: And in November of 2017, when he was publicly and privately telling Elon that Josh: the team remained enthusiastic about the nonprofit structure, Josh: he was writing in his personal journal something totally different. Josh: And we actually have the personal journal diary entries. Josh: In November 6th, 2017, it says, cannot say that we are committed to the nonprofit. Josh: Don't want to say that we're committed. If three months later,

Josh: we're doing B Corp, then it was a lie. So he's kind of confessing to the idea Josh: that he's aware that it is a lie. Josh: And then a few days later, under the heading called Our Plan, Josh: Greg Brockman wrote, it would be nice to be making billions of dollars, Josh: but we can't see us turning into a for-profit without a very nasty fight. And then there's more. Josh: This is the only chance we have to get out from Elon. What will it take me to do this? $1 billion?

Josh: So there's this lot of contemplation that's happening in his redacted diary Josh: entries that we see here that leads the court to believe that they were aware of what was going on. Josh: They were trying to scheme and plot against Elon.

Josh: And no side is right in this court case. And I think that's why Josh: It's so compelling is because both sides really do have compelling arguments, right? Josh: It's like Elon says, this is a corrupt structure that sets a poor precedent Josh: for what a charitable organization looks like. Josh: And OpenAI is saying, well, we basically couldn't exist unless we pivoted. Josh: We did everything we could. Josh: And now we have this new company that exists. That's kind of been a disaster

Josh: and a mess, but it works. It gets the job done. Josh: It's been a chaotic disaster. So I think Polymarket currently has it at about Josh: 60% chance in Elon's favor, but this is very much an even battle as it stands Josh: right now in who we expect to win. Ejaaz: Yeah, there is no clear winner, as you said. And that's because both sides are Ejaaz: kind of shooting themselves in the foot, right?

Ejaaz: Like there's three main cracks that I see, right? Okay, so crack number one Ejaaz: is what you just mentioned. Ejaaz: So Greg Brockman's diary, there's some implicative evidence that states that Ejaaz: they're trying to go behind Elon's back to not only turn it into a for-profit Ejaaz: against the original vision of the company, but also turn a profit for Sam Olman Ejaaz: and Greg Rockman themselves, Ejaaz: whilst ousting Elon Musk, the guy that funded them.

Ejaaz: That sounds very convincing enough, except there is an email and tweet from Ejaaz: Elon Musk three years later, where he basically admits to him saying. Ejaaz: Yeah, I wanted to turn it into a for-profit first. Ejaaz: And the idea was to put it under Tesla's ownership, therefore defeating the Ejaaz: whole intentional purpose that he was aligned with this non-profit vision.

Ejaaz: So that's crack number one. Crack number two is the Statue of Limitations tweet, Ejaaz: where he basically goes, OpenAI is essentially captured by Microsoft, right? Ejaaz: So the legal significance of this is this was tweeted in 2020.

Ejaaz: And it wasn't until four years later that Elon filed this lawsuit against Sam Altman and OpenAI, Ejaaz: which suggests that there was a time delta where he had a reason to sue them Ejaaz: early on because they were going very much for a for profit, Ejaaz: hence Microsoft investing $13 billion in them.

Ejaaz: But decided to wait until three years later when OpenAI was much, Ejaaz: much, much more successful, profitable, and the number one leading AI startup Ejaaz: to then be like, hmm, I'm going to seek reparations now. Ejaaz: It kind of defeats his whole argument. And crack number three is the 2017 Tesla Ejaaz: merger email that I mentioned earlier that he tweeted about in 2021, Ejaaz: but also the email came out in evidence through this court proceedings in 2017.

Ejaaz: Proving that he wanted to merge it within Tesla, indicating the same kind of Ejaaz: for-profit nature That's Sam Altman and Greg Rockman they're going after. Ejaaz: So Elon Musk is kind of fighting himself here, especially as he takes the stand Ejaaz: and starts providing all these different bits of evidence, which can just be Ejaaz: refuted by emails and posts that he made himself.

Josh: Well, it was funny. I mean, the judge threatened a gag order yesterday because Josh: he had to sit both of them down and say, you guys cannot be insulting each other Josh: publicly while this court is going on. Josh: And it's really funny because they can't help themselves. Josh: Like the arena in which they play in is where they troll each other.

Josh: And the judge made it very clear that unless you guys stop bullying each other, Josh: Elon calling Sam Scam Altman and things of that nature, I'm going to forcibly make you stop tweeting. Ejaaz: So please stop. It's such a good name though. Oh, that's so good. Josh: Scam Altman is pretty good. But we have some updates from inside the court. Josh: I mean, unfortunately, again, there's no cameras, but there are a few reporters that were in there.

Josh: They were kind of live posting as we were going throughout the course of the Josh: day. A few highlights from Elon being on the stand. Josh: He did say, and I quote, AI could kill us. Josh: Looting a charity will destroy charitable giving along with some other pretty strong wording. Josh: No one should be allowed to steal a charity. And it's, it makes sense. Josh: I think we're really in for fireworks because we got the witness list also.

Josh: And the witness list is pretty good. So we have Elon and Sam, Josh: of course. We have Greg Brockman. And then we have Satya Nadella. Josh: Because for those that don't know, Satya Nadella is CEO of Microsoft. Josh: And Microsoft is involved in this. Josh: Microsoft CTO sent an email to Satya saying something to the likes that they Josh: are aware of OpenAI and Elon's private holdings not being happy about the changes that were happening.

Josh: And that singular email got him dragged into this court case.

Josh: So we're going to be seeing Satya Nadella. we are going to be seeing ilia setzkever Josh: ilia as everyone knows he is the founder of Josh: safe super intelligence now he is also one of the co-founders of open Josh: ai and the person who elon most fought Josh: over to join mira marati is listed here she is the co-founder of thinking machines Josh: and she is another co-founder from open ai and then we have siobhan zilis who

Josh: is a funny one siobhan i think has four children with elon currently works at Josh: neural link but she was on I believe some sort of board of directors for open AI. Josh: And I assume there's some conflict of interest there. So it is a all-star cast. Josh: We will be hearing all of these as we go. Josh: It's going to be really exciting as we go along this court case to see how these things unfold. Ejaaz: I think the precedent that Elon is fighting for is interesting.

Ejaaz: We were talking about this before we started recording, which is, Ejaaz: is this trial as major as it's being made out to be? Ejaaz: And the point is, this doesn't or won't have any recurring effect on AI as an Ejaaz: industry, but it will affect the philanthropic nature of America as a whole, Ejaaz: which is the argument that Elon is making.

Ejaaz: He's saying, basically, if you allow companies to go from a non-profit into Ejaaz: a for-profit and then become the most valuable private startup in the entire Ejaaz: world, valued currently, the secondaries of OpenAI shares are trading for over a trillion dollars, Ejaaz: then you're kind of cheating the system because there are various tax benefits.

Ejaaz: Sam Altman technically doesn't own any of OpenAI, but he is getting access via Ejaaz: side venture funds, which he set up earlier on, which he completely owns, Ejaaz: but doesn't really admit or speak to. Ejaaz: So there's a lot of evasion going on here. Ejaaz: Elon's making the point that if you allow this to happen, then it's the end Ejaaz: of philanthropy in America. Ejaaz: But to me, it also sounds like it's an ego-driven thing, right?

Ejaaz: He doesn't like the fact that he started the company that is now way ahead of Ejaaz: XAI and is arguably the number one AI lab in the entire world. Ejaaz: And he wants some kind of benefit from that for his ego.

Ejaaz: So I don't really know whether Elon and Sam should be fighting over this. Ejaaz: I think once this is done, it should just be settled. open air was always meant to be a full profit. Ejaaz: And I think if there wasn't such a rivalry between these two key figures, Ejaaz: this wouldn't even be a new story in itself. Josh: Yeah, that's probably right. I think because of the rivalry, Josh: this becomes a new story.

Josh: And the smoking gun that Elon is using is these diary entries and the fact that it's a poor precedent. Josh: I don't think people will be rushing to emulate this precedent of how to set Josh: up a company just because of how much pain and suffering it's caused OpenAI. Josh: I mean, if you remember, Sam Allman got ousted temporarily. There was a lot Josh: of contention around his pay packages and how he gets actual equity. Josh: He famously claimed that he has a 0% equity stake in OpenAI.

Josh: It seems like it's only caused them headaches and nightmares. Josh: And had they choose to do it again, or if any other company were to try to do Josh: this, they certainly would not take this route. Josh: But maybe we could talk about what Elon actually stands to win if he does get Josh: the win or what happens if he wins versus what happens if Sam wins. Josh: So in the worst case scenario, it's kind of, I guess in the worst case scenario Josh: for OpenAI, it's pretty bleak.

Josh: Elon is looking for $134 billion, which is quite a bit. Josh: He would also want the conversion to be unwound. So OpenAI would turn into a nonprofit again. Josh: Sam Altman and Greg Brockman both would be out. The IPO that is rumored to happen Josh: later this year, early next year, that's off the table. Josh: That's not coming until at least 2028 or later. If it does, Microsoft's $13 Josh: billion in equity is in play.

Josh: That can mess up Microsoft and it could cause a lot of really messed up downstream Josh: effects that might actually stand to benefit xai spacex that whole spacex xai Josh: meta conglomerate thing because now one of their largest competitors is kind Josh: of out of the game it would be Josh: really detrimental to the state of ai as it relates to open ai so that's kind Josh: of a the bleak outlook the reality is we're not going to get that worst case

Josh: scenario it's going to be something Josh: much better if he does win um but there is a lot at stake here on Ejaaz: On the minute chance of that happens, it's not just the end of AI, Ejaaz: it's the end of the entire economy of stock market that is propped up by the leading AI lab, OpenAI. Ejaaz: And that kind of like blew, if you want to call it a bubble, Ejaaz: this bubble up in the first place.

Ejaaz: When I look at this, right, the biggest smoking gun, Ejaaz: for Elon, at least, is that there is no smoking gun. Ejaaz: His argument is kind of like, okay, you have a few good points, Ejaaz: but there isn't like a zinger that shuts Sam Altman down. Ejaaz: And therefore, the probability of all of this being unwound is minute. Ejaaz: Elon Musk might at best get the minimum amount of money that he put into open Ejaaz: air at the start, which was $44 million.

Ejaaz: He promised up to a billion dollars, but only ended up investing $44 million. Ejaaz: But he was lauding that as a reason why OpenAI should pay him $134 billion. Ejaaz: And obviously there's a major equity stake differential between that.

Ejaaz: So I think Elon Musk probably won't come out winning from this, Ejaaz: but we'll see from the trials proceeding today and over the next couple of weeks. Ejaaz: And we will keep you up to date on that. Ejaaz: You had a fun example that you wanted to share, Josh, which was this clip from Ejaaz: Peter Thiel commenting on the entire thing, where he basically makes the point Ejaaz: that whichever person I talked to last, I find the most convincing. Ejaaz: Can you unpack this for us?

Josh: Yeah, he said it so well where, I mean, he's personally friends with Elon and Josh: Sam Alman, or at least in communications with them. Josh: And he was describing what it's like to talk to them about this court case. Josh: And when he speaks to Elon, it becomes very clear, Elon's case, Josh: and it makes a lot of sense where if a company is able to start as a nonprofit Josh: and then roll all of that into a for-profit entity, it breaks what a charitable model looks like.

Josh: And it kind of destroys and crumbles the charitable infrastructure that we have in America.

Josh: And then he was describing leaving that Josh: and feeling like okay yeah this is a pretty sound argument this makes sense and then Josh: going over to sam altman having a conversation with him and Josh: sam saying well there's actually no way we ever could have made this work Josh: if we stayed a non-profit we had no choice but Josh: to switch over to a for-profit and we did everything in our power to make it

Josh: as i guess egalitarian as possible both of those are pretty compelling arguments Josh: and i think that's why everyone's kind of split on where this is going to end Josh: up and why you're kind of left supporting whoever you last spoke to because Josh: both arguments are incredibly strong and both of these things really do matter Josh: right like we want open act to exist Josh: And had they never pivoted, they wouldn't have existed. And that's probably

Josh: a worse off future. But we also don't want them to be able to take advantage Josh: and create a precedence for a loophole that now a lot of other AI companies Josh: could possibly come in and do. Josh: So I just found to be a really interesting take from someone whose ideas I kind Josh: of trust and respect in Peter Thiel. Josh: And just to the point that no one really knows. And I think the judge has a Josh: really tough case cut out for him.

Ejaaz: This is kind of an amazing PR campaign for Sam Ullman and OpenAI, right? Ejaaz: Like, I think Sam himself has been branded as this kind of like evil villainous Ejaaz: character for a long, long time now. Ejaaz: And that has been boosted by Elon Musk in large part. Ejaaz: And to have a court proceeding come out and basically say, hey, Ejaaz: Elon basically asked for the same thing back in 2017, kind of like portray Sam Ejaaz: as like a better faith actor. So it's really good PR for him.

Ejaaz: The other thing I was thinking about is the strongest argument that OpenAI has, Ejaaz: for becoming or having become a for-profit was made by Elon Musk himself, Ejaaz: the guy that is fighting against it. Ejaaz: So like he would have to effectively, I don't know, sue himself if he wants Ejaaz: to make the exact argument. This is why I think this entire thing is ridiculous.

Ejaaz: So I just think this is a hot mess. I think the brothers need to stop fighting Ejaaz: and band together and just get on with this. Ejaaz: This is a positive sum game. You see kind of like a similar rivalry between Ejaaz: OpenAI and Anthropic in the fact that they're each putting out models that are Ejaaz: leapfrogging each other every couple of weeks now at this point.

Ejaaz: I think Elon Musk just needs to put this down, put the money and his focus on Ejaaz: XAI and put out a better Grok model because I want Grok to get back into the race at this point. Josh: Yeah, me too. I hope it's not too distracting, but I do love the fact that we Josh: will have entertainment guaranteed.

Josh: And I guess we could also entertain what happens if Sam Altman wins in the best Josh: case scenario for OpenAI, which is, I mean, that IPO is a certainty and that Josh: IPO is going to be at over a trillion dollars, right? Josh: You were just telling me before recording that OpenAI has kind of postponed Josh: their current fundraising round to increase the valuation prior to raising more money. Josh: So the company is growing incredibly quickly. There will be nothing that slows them down.

Josh: Microsoft is going to be locked in with no legal overhead or ramifications. Josh: Altman is going to maintain his role as CEO of OpenAI and XAI is going to just Josh: kind of continue to compete and like try to catch up. Josh: But it seems like there's a lot more downside for Sam than there is upside. Josh: And there is a lot more upside for Elon than there is downside. Josh: So it's a little unbalanced when it comes to the outcomes here.

Ejaaz: Yeah, totally. But that is everything that is happening over this multi-week Ejaaz: culmination of this trial. Ejaaz: Remember, this is like pretty much at this point a decade's worth in the making of this rivalry. Ejaaz: So it'll be good to finally tie a bow on this. We'll be covering all the exciting Ejaaz: news that comes out of this. Ejaaz: Again, there is a current Elon taking the witness as we speak, as you listen to this.

Ejaaz: Actually, it probably would have already happened where OpenAI's lawyer is basically Ejaaz: grilling him on his entire argument. Ejaaz: And there's going to be some spicy tastes that come out from that. Ejaaz: But rest assured, we will be the first podcast to cover it in great detail and give our own insight. Josh: EJ has an important question. Yes. Ejaaz: Who you got? Josh: Who's winning this? Ejaaz: I am the biggest Elon fan, but Sam's got this.

Ejaaz: Sam's going to win this. Yeah. At minimum, I think Elon's going to get his $44 Ejaaz: million that he originally invested in OpenAI back with zero interest. Ejaaz: But Sam's got this. It's a win for him. Josh: That seems right. I can't imagine anything close to the worst case scenario for open AI happening. Josh: I assume it's probably, the entire thing probably fizzles out into a whole nothing Josh: burger where there's just like not much that changes and Elon just like gets

Josh: his day in the spotlight. But I don't know. We'll be following it closely. Josh: We will keep you posted as this trial goes along. But now you're up to date on all things. Josh: If you are looking for current up-to-date status, you might want to tune in Josh: today because it's going to get a little spicy. Josh: But yeah, thank you guys so much for watching as always and we will see you Josh: guys in the next episode. Ejaaz: See you guys.