They're like declaring a code red.
We're we're not winning on the product and now we're going to
make the Welcome back to the Newcomer
Podcast, Tom here, Eric and Madeline.
We're going to talk now about Open AI and the state of affairs
in the AI race because it's been a very chaotic seeming couple of
days. Alert danger It's.
Yeah, yeah, there are flashing lights happening over in the
Mission St. Yeah, yeah, they're just running
through the corridor screaming and throwing papers in the air
at Opening the Eye. Because door, yeah, door locks
are coming down. You know, there's smoke going
through the opening eye offices, it looks like.
Alien when they're locking down for the creature.
And the, yeah, I know there are people that's like, you're in or
out right now, Like, the water is filling into the rooms and
people's hands pressed up against the glass.
Yeah. So Sam Ultiman recently declared
a code Red did. You order the code red.
I did the job. Did you order the code red?
God damn right I did. Inside I don't know why it's so
funny to me he he sent out a memo to to employees saying that
they they needed a code red alert on on Chachi PT that
there's a lot of competitive threats in the app is not
working as well as they wanted to right now.
And this came a couple weeks after he also kind of warned
employees that there was about to be a very bad news cycle
around open AI, as Gemini and Google in particular, you know,
was breathing down their necks. And they released a new model
that was really good. And everyone now is down on open
AI. Tom's literal first story in
Newcomer said yeah, Gemini, Google, they're in a better
place than you might think. Just yeah.
Yeah, yeah. Read the newsletter.
You could have made a bunch of money.
I'd love to take more credit for it, but I was just talking to,
you know, sources at Google who were like, yeah, we have a
really good model here. I don't know why everyone
decided that we were fucked. Like, you know, Google literally
invented key parts of the transformer technology.
Well, on the David Sachs, all the all in guys are like Google.
The culture is gonna ruin the whole thing.
It didn't make any sense. And all the hedge run guys have
been super like standoffish about Google.
I I don't understand it. Yeah, Yeah.
Keep going. Yeah.
So what was the threat? Obviously, Obviously.
And they make money either way. That's the beauty beautiful
thing with Google. They have Google Cloud, you
know, and they have a search so they can drive the cost like
they do with, you know, their workspaces stuff.
You know they can screw over everybody else by offering
things that some people want to build money, right?
They're a monopoly, is what you're trying to say.
Yeah, you're. Saying they own title.
No. Is that improving the core line?
I can't say say anything about that, but.
Yeah, it's like they have the full stack.
And I think what's been like clear in the last couple of
weeks is that like they're competitive at every part of it.
Like Google Cloud is a major player in cloud, which we all
knew. The Tpus, which people kind of
all forgot about, are like the only legitimate competitor to
Nvidia's chips. And now they have one of.
Capture how much Tpus we're going to be a credible
competitor, I don't think. Yeah, well, they've been working
on it for a long time. Like you compare that to like
open AI, which is very Johnny come lately with all of these
things. They're basically like building
a airplane in the sky or whatever that metaphor is.
Whereas like Google is literally the airplane and like, you know,
they they certainly were slow when it came to embracing it and
like had a lot of concerns ethically, which is interesting
even though of. Course, I hope people listening
this podcast already know this fact, but attention is all you
need. The Seminole AI paper was
written by Google employees, like, so they were, they were
there, they knew it. They gave it away for free.
They created this whole problem themselves.
And so, yeah, it was frustrating that they weren't like, leading
from the whole time, like you invented this category.
But you know, yeah, not surprising that they would
figure it out and and catch up. Right.
And So what I guess is more interesting to me now is like
the state of affairs going forward because the idea that
open AI is fucked, it's it's literally just AAI mean open AI
and Sam Altman assisted, but it's a creation of media.
Nothing has fundamentally changed about the business like
their model maybe isn't ranking as highly.
On. Traffic.
Also I think there are some traffic numbers.
Right. Traffic is a little down, yeah,
to HPT. But I will say also, Sam Altman
is such a savvy media player. He knows that if he sends an
e-mail to the entire company that says Code Red in a memo,
that that's going to get leaked to a reporter like.
And it's very possible Open AI leaked it itself.
Like a lot of these company memos, they know they're going
to come out and some of them the companies leak.
You know, I I don't have proof either way on this one, but just
as a reporter, these company memos, especially in the
Facebook era, were coming out so often, but I think companies
were definitely handing them out to reporters because it's like
we're blasting them to all our employees.
This is the message we want out there.
And it gives it gives the statements some sincerity that
you wouldn't get if you put it, if you put out a press release
saying, oh, we're we're in trouble.
Like people be like, what? But if you're like, it's to
employees, it's like, well, that's what they're saying
authentically inside. Then we metabolize it in the
culture. They wrote this for public
consumption, whether they leaked it or not, right?
Yeah, it was for the public. I my, my belief is that they
didn't leak it on purpose. And I think the reason you can I
can say that confidently is that there actually weren't that many
outlets that reported it with their own reporting.
It's actually only been a small handful of them.
So if everybody says we have a source, then the company is
like, all right, yeah, yeah, that was true.
Here's the here's the memo. Yeah.
Yeah, but that said, like, Sam is a smart guy who knows how the
media works, and when you do send something out, you know
it's going to happen. So the level of intentionality
is sort of irrelevant at that point.
But I think like Google also had a code red exactly 3 years ago
to this time where they were worried about the state of
Google search and, and, and ChatGPT was, was taking off like
a rocket. And here's where we are now.
So, and I think Facebook in the past is, you know, Mark has
declared various code Reds over, over different things.
And I think actually over Google Plus, when that first came out,
there was a lot of concern over there.
So it's stupid to take from this like the beginning of the end.
And and I saw some people tweeting that out.
It's like when you've declared a code red, it's already over.
You've already lost, you know, your men are already dead.
And and it's like, we're so early in this.
And I hate using metaphor, but it literally is true.
Like if you can go from like an also ran like Google was a
couple of months ago, like when I wrote that piece, like
everyone thought Google was done and here we are months later and
they have the best model everything.
So it's like a lot is going to change.
The thing that does sort of start to worry me about open AI
is like I do think they have too many plates spinning right now.
I think they are literally trying to become Google at a
time that Google already exists. And I don't know like where
their focus is going to end up being.
Like you've got the Chachi PT stuff, you've got the Stargate
stuff, you've got the Johnny I've stuff, you've got the
browser stuff. Like I'm probably missing 5 or 6
other things. They're trying to get an
advertising right now. The meme is they're trying to
get an ads. They're like declaring a code
red. We're we're not winning on the
product and now we're going to make the product worse with
advertising. Right, right.
Which man? The whole advertising thing too.
You know, we had Alex Heath on while you were out, Eric.
And you know, I, I like Alex a lot.
He's an amazing, amazingly well sourced.
Supporter. You can go read his newsletter.
Yeah, go read sources and his podcast is called Access.
But he was, you know, very, I, I thought a little bit too, I
think a little, a little too credulous on the fact that ads
is going to be a big business for, for open.
AII think actually ads is going to be very difficult for them
because ads rely on proof of concept and proof of success and
also linking out and clicking out.
And it's sort of proved that this stuff does not link out
very well. So why would you want?
I'm shopping for all my Christmas gifts in Shia GBT.
I don't agree. Well, anyway, this is a
different discussion. I just think it's going to be
complicated for them. I don't think it's a done deal
and I, I worry for them if I were an investor, which is
increasingly everyone basically, you know, VCs on upwards that
like they are going to lose focus and what they're trying to
win on is like increasingly competitive.
And, and that to me is more like the red alert than like Chachi
BT is losing customers or something like that.
It's just like what matters and what doesn't matter and should
be doing should we be doing everything?
And I would be, I know we'll get to predictions in a later
episode, but I wouldn't be surprised if in the next year or
two you start seeing open AI dropping some of these ambitions
that something like the browser just sort of goes away.
It's not that necessary or I don't know.
I really don't have a lot of bullishness on the Johnny Eye of
hardware project. I think that is going to be
expensive and and difficult, but that's that's where I would be
worried about them. If you're selling Tam, you need
to be able to do everything. I mean, there's some valued
opening eye and just being ready if a category appears promising
that they can lean in. It's like, oh, coding is big,
we'll lean into that. So you have projects sort of
spinning. Yeah, I don't know.
The piece that stuck out to me with all of this too, is that
each iteration of the startup boom, whether we should be
looking at applications or foundation models and how do we
build out products and how do the large labs also build out
products? Every time a new model comes
out, like this junior Gemini model, the race is totally
reset. So all of the people that I
think have talked about, you know, will foundation models
ever be the Moat? The answer seems to be no again,
as it just keeps climbing and chasing back and forth.
And every few months we get a new model that tops the
leaderboard and then opening eyes back at the top and then
Google's back at the top. So it's not that I don't think I
would count them out at all. Obviously I think it's still too
early, but it just becomes a lot trickier to see, you know, can
you be the everything company when the everything company
already exists? Like you need to figure out
applications beyond ChatGPT that work because you will not get
the Moat with foundation models like this.
Race seems like it's nowhere near done.
Which is why I think ads feels like heart before the horse in
that, yeah, opening eye, ChatGPT needs more more clear designed
applications before just, I don't know, going into
monetization. I want to say 1.
I guess my last word on this is I do think it's it speaks to the
power of truth that open AI is saying code red.
I do think there's value in shaping your company's narrative
and just saying, yeah, we're we're in a hard place because it
undercuts the media and the commentary.
And just like Twitter and regular people would all be
like, oh, open AI is in trouble because of Gemini.
But when you say, oh, it's a code red, we're in big trouble,
then you lower the bar for yourself.
So maybe it hurts your reputation, but instead of
having to fend off like, oh, Google, are they better than
you, you say, yeah, we're we're really needing to work hard.
And so then everything you do to sort of be slightly better than
a Code Red is now a positive again.
And so I think there's a lot of value in just, you know,
communication strategy and lowering expectations for
yourself so that you can much more easily slip over them.
If you think entirely through narratives, then you're setting
yourself up for your comeback. You're setting yourself up for
like, we, we, we girded down and now everything is great.
And we, we, we the same way Google sort of did when they had
their code red and and now everyone's, you know,
celebrating them. So genius move by Sam Altman,
where we we applaud you tip of the cap for your great decision
to call yourself a cap. I don't.
Think Google's as savvy about the PRI.
Think they're just just building and trying.
I think Sam is very aware of, you know, how the narrative is,
is consumed. Yeah, cool.
Yeah. Well, fun to talk about this
more next week or whatever when we do our prediction.
Yeah. We're gonna do predictions.
We're gonna have superlatives. I think it's gonna be a fun end
of the year for the newcomer podcast where it's trying to
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