Who will end up winning this case probably dictates who ends up being the biggest AI company in the years to come. What does it say about the future of open AI? Because if Elon Musk wins this case, then that could fundamentally change how open AI works. And because of that, it could mean that they end up really losing their dominant position that they've had ever since setting up this category of generative AI. Elon Musk believes Sam Altman thinks that he's made of steel, that he's infallible, that you can't bring him down. And that really worries Elon Musk. And I think that's ultimately at the heart of this case. Today on The Tech Report, I'm joined by the tech journalist, Chris Stoker-Walker. Thanks for coming on. Thanks for always having me. The Elon Musk-Sam Altman lawsuit kicked off this week with the jury selected yesterday and opening statements coming today. Lots of news coming out around there, including your piece in The Independent, which says that the trial could determine the future of AI. What is at stake here? Well, I think it's at stake is two things, really. So you have, number one, the ongoing dispute between Sam Altman and Elon Musk that has been going on now for close to a decade. ever since they had this big bust up starting around about 2018 over the future direction of travel of OpenAI and whether or not it would be a for-profit company or it would be one developed almost as a non-profit to try and benefit humanity. So on one side of things, we have that argument of which is going to win out of these two big titanic egos in the tech sector, which I think is interesting for us all. And I think that's probably why this is quite so prominent in the news agenda, particularly within the tech sector, is because it has these two magnetic personalities who are driving the future of technology, both in terms of social media and in terms of AI, respectively. But actually, there is that bigger consequential issue, which is who will end up winning this case probably dictates who ends up being the biggest AI company in the years to come. And that's not saying that XAI or SpaceX as it now is after this mega merger is suddenly going to come around the corner and overtake literally every other AI company that exists to become the dominant one, but rather what does it say about the future of open AI? Because if Elon Musk wins this case, and we can look, for instance, to prediction markets for some indication of where people are thinking this might go. Currently, he has about a 33% chance of winning, they estimate. So not really that significant, but not zero. Then that could fundamentally change how OpenAI works. And because of that, it could mean that they end up really losing their dominant position that they've had ever since setting up this category of generative AI back in November 2022. too among elon musk's sort of victory demands as it were is altman stepping down from ceo along with somebody else and reforming open ai back into its its non-for-profit uh shell body corporate structure is the right word but given all of these sort of serious potential consequences how much of this are we just expecting to be just mud throwing between two people that haven't liked each other for the better part of a decade yeah these are two messy people and so they are making it as messy as possible elon musk has been propelling the new yorker story on sam altman into the timelines of many users on x in the last 24 hours we saw sam altman and open ai releasing some basically a new kind of thesis of how they believe their company ought to operate in an attempt to try and shape the court of public opinion. It was also notable, and I'm not denying for one minute, the actual belief of Sam Olt being behind this, but he announced that he or OpenAI, it's not necessarily 100% clear which are donating money to a charity for health issues, which is interesting timing, given that it comes on the day that he appeared in court for the first time as juries were being selected. There is a lot of stuff here going on where each side of this equation is trying to basically say that the other side is an awful person. And then they also are trying to say that they are brilliant. They know everything. They are cleaner than clean when it comes to what is being alleged of them. But, yeah, I think what really this is doing is it's showing the kind of dirty, egotistical side of this. And it doesn't reflect either of them in a very good light at all. And that matters, I think, because actually we expect these people to be responsible adults. They are overseeing the future of a hugely consequential technology. And so every brick bat that's thrown, every very messy allegation that is made on social media, every catty comment that we see in the courtroom and probably every side eye shift that looks from one to the other when actually we get into the testimony in the coming days, I think weakens the argument that each of these people can make that they are respectable human beings overseeing the future of AI in a very respectable way. And with bearing in mind Elon Musk already has that massive reputational risk The jury pool that has been selected from in this case has been three times larger than it is for most other cases in part because people have very strong opinions about if not necessarily both of these men, because I think you have to be very much within the AI world to have a view on Sam Altman and whether or not he is believable and honest or not. you certainly have a view about Elon Musk because he's been in the news, frankly, for the last five plus years right at the forefront and has done some pretty objectionable things. I saw some analysis which said that Musk, like you say, 33% chance of winning according to some betting sites. He has an uphill legal battle ahead of him, but in many ways has already won because it has precipitated. I mean, certainly recently there's been a lot of reputational damage for Sam Altman with the New Yorker piece and lots of other stuff before that as well. It reminds me of that saying, never wrestle with a pig because you both get dirty and the pig likes it. What's your thought on that? Yeah, well, I was on Times Radio earlier this week. I do a regular weekly tech slot with Shane Garvey and Fee Glover around about 2.45 every Monday. And one of the things that I picked up on was some really interesting reporting, which had spoken to various legal experts about what the actual merits of each party's side of the argument here in this case was. And there was a really standout quote from a legal scholar who basically said they don't think that actually Elon Musk's argument stands up to scrutiny. They think that he's just an incredibly rich man who chooses effectively to go through therapy in court by suing people that he doesn't like rather than actually working through his problems in person. And so when we look at the merits of this case, it seems highly likely, I think, that either we will get just OpenAI choosing to try and fight this through because they think that this isn't with any merit. And then most of the legal scholars believe that. But I was also talking in that independent piece to a guy called Andres Guadamuz, who believed that he has a kind of an understanding, a recognition, a belief that this case will probably end up being settled just because at some point it becomes more and more damaging to have it continue. And so it's far easier to just say, well, okay, can we make this problem go away by not setting precedence in a legal structure, by not having every single minutiae of every single text that we've sent over the last several years gone through and understanding the purposes of them and already we've seen the hugely damaging aspects there's greg brockman uh who is also going to be taking the stand alongside sam altman basically altman's right hand man at open ai um you know his diary has been gone through and his desire to try and make himself unfathomably rich has been uncovered and it doesn't really paint him in a very good light on on the other side of course we have so we have Elon Musk who had to face a deposition in advance of this trial faced very difficult and really probing questions about his personal life there was an extended series of questions about whether or not he had taken rhino ketamine at a music festival, which he denied. But nonetheless, the fact that that is in the public discourse now, I think is damaging for both sides. So what are the actual details of Elon Musk's case? We've said that it's unlikely to succeed, but he's looking for, aside from Altman setting down and reforming OpenAI for $134 billion of damages compared to, I think, his $38 million, specifically a donation which he gave at the start of OpenAI. I mean, also, I think we heard that Elon Musk dropped his fraud claims just before the trial started. So what is the actual case against OpenAI here? To understand this, we have to kind of go back in time a little bit and chart actually the journey of OpenAI as a company. So it was founded in 2015 as a nonprofit. Basically, Sam Altman, Elon Musk and a handful of others got together and said, you know what, we think that there is a good way to do this. It was a response to the risk that big tech would basically dominate the AI discourse and lead us in a way that was seen as pretty dangerous. Ironic now, looking back at what has come since. What happened was, though, about four years in, three years really, internally, OpenAI decided that they wanted to try and shift that because they realized that there was some money to be made in this. They wanted to be a going concern. So they created this capped profit subsidiary. and they submitted plans to do so. Elon Musk really didn't like that. He felt like that was going back on that initial founding principle to develop open AI as an AI lab as open to scrutiny, open to checking, basically open to developing AI for the benefit of humanity, but not pursuing it at the cost of people in favor of profit instead of people there. So they had this big bus stop, there was an argument also about a Microsoft investment into OpenAI, which has now reduced its kind of exclusivity clause literally this week on the eve of the trial, which I think, again, is interesting timing for these sorts of things. And OpenAI, as it now is, basically has a full profit arm, which operates as a public benefit corporation, but the non-profit has the controlling majority stake in there. And Musk effectively says look I bankrolled this company foundation on the premise that this would always be a non that it would be benefiting humanity with the development of AI I believe both of these things have gone wrong. He initially said that this was defrauding him. Now, he's dropped that, as you say, basically after the recommendation of the judge in pre-trial hearing, who said, don't think you're really going to stand much chance on this. And also, I think probably some decisions by their legal team, which says, well, actually, that would have been decided on by a jury. Most of the decision making that's happening in this case will actually be done by a judge. The jury will be there and listening and advising. But the reality is that the judge will decide on this. And I think probably it was an entirely no go situation had it been a jury case for that defrauding aspect. so now it's effectively just Elon Musk saying well I need more money because I put in money here on the basis that you would stay a non-profit you went against that you've made a shared load of money now a lot of investment going into OpenAI I haven't really seen my return on that and so it is very important that I get that money back because I want to try and nobble OpenAI so both the money aspect and also the removal of Sam Altman and Greg Brockman, who he believes are leading OpenAI down that wrong path is what he is aiming for. One of the difficulties in this is that the initial investment that Elon Musk gave to OpenAI or refused OpenAI with was, depending on who you ask, what I think generally agreed was a donation rather than a straight up investment for shares, for example. and that i if i'm correct me if i'm wrong that holds a lot of a lot of weight because the precedent for that this legal case might set would then change if if a charity starts to do something you're not quite as happy with with the money you gave them then you could start asking for that money back yeah and this is something that i discussed with anu pam chanda who's a really brilliant academic uh specializing in law at georgatown university he basically said that actually this could have wider ramifications than just the future direction of AI. It could effectively make charities far more cautious inviting those donations because they worry about the legal liability here. He basically says that actually this could effectively break the entire charitable sector, which I imagine is not really what Elon Musk intended to do, though many people have very strong opinions about what he wants to do and sometimes he leans into that supervillain character but I don't think that he's necessarily going quite as strong as wanting to kind of wreck all of that but it just shows how dangerous these things can be once they enter a court it sets legal precedents that can have much broader consequences beyond this initial squabble which I think is why this is quite such a fascinating case is this is two people who have been butting heads for a long time. They're basically saying that we're going to fight this out in court. And the reality is that we all end up being impacted by whichever way the judge rules in this case. OpenAI says that it had to become a for-profit organization or develop a for-profit wing of the company in order to attract essentially investment for the colossal amounts of capital expenditure for building data centers. Is there much merit to that argument? Is there a reason they couldn't raise investment capital while still being a non-profit? Yeah. I mean, if you're an investor, you want to see a return on your investment. And when we're talking about the difference between charitable donations and investment. We are charitable people. Generally, our society is quite charitable. But if you're asking us to dip into our pockets and spend five pounds or five dollars versus investing a hundred billion dollars or a hundred billion pounds, there is quite a significant difference here. And unless you are incredibly rich, and Elon Musk, bear in mind, is incredibly rich. He's one of the world's richest men, if not the world's richest man. So So we have to take him as kind of the head of the table here and deciding what is and is not acceptable for the ultra rich to do in terms of charitable donations. He's basically saying, well, I wouldn't have given this amount of money. He's arguing that he wouldn't have given that small tens of millions of dollars investment as peppercorn funding to set up OpenAI without seeing a return on investment. So OpenAI in that case, yes, absolutely seem correct. When we're talking about the sort of trillion plus dollar investments, multi trillion dollar investments of these leading AI labs. if you're a Microsoft, if you're an NVIDIA, if you're any of these companies that have invested money into these firms, of course you're going to want to then be able to sort of buy out or see a return on your investment rather than just giving it away and never expecting anything back. We talked a lot about what happens if Elon Musk wins, but what happens if OpenAI wins? You mentioned that there'll be ramifications on us. Will it just be that you can now start a non-profit, get all the goodwill, get all the nice PR, and then be like, actually, we're going to make a for-profit wing and just do that every time to earn loads of money. Yeah, which sounds great if you want to do that. But also, if you're investing, then it means that you become much more skeptical, or if you're willing to fund things in their early days. And I think that is the reality that we have to contend with here is it will make people much more skeptical again because that legal precedent will have been set I mean look I think it likely that OpenAI will win or that this will just not go to a judgment that there be some sort of settlement. In terms of what happens after that, well, only Elon Musk really knows, but prior precedent would suggest he'll probably try another lawsuit or try some other way of trying to bring Sam Altman and OpenAI back down to size. This is one of four lawsuits that Musk has filed in recent years, frankly, in the last sort of 18 months or so against OpenAI. And so, you know, he has money to spend on this sort of stuff. I wouldn't put it past him to continue his argument of waging lawfare against OpenAI in this way. So, you know, he might say, well, actually, fine, you got me on that case, but that's just a technicality. I can try and find another argument, another court, another judge and another judgment. And yeah, I think that He really feels wronged here. So OpenAI might well continue, but they'll always have that threat, I think, of Elon Musk breathing down their neck and saying, well, yeah, I made you. Perhaps also I can destroy you. How would the outcome of this lawsuit affect OpenAI's expected IPO this year? I mean, win or lose? Yeah, well, this is the big thing that is looming large. And I think probably why they might want to settle in order to get it over and done with. The trial will last, we know, for several weeks. But I imagine that is just the baseline. There might be many legal challenges, many arguments. These things tend to roll on quite a long time. And we know that OpenAI is targeting an IPO later this year. They haven't announced it publicly, but it's kind of Silicon Valley's biggest secret that is not very well kept. And I think that they will want that out of the way in order to remove all of the potential risks and to enable to lay the ground for public investment into their company at the most strongest, highest value that is possible. So it's kind of looming large over them, I think, is perhaps worrying them that this pushes that IPO pipeline further down the road. And that is a big problem for them because you have to bear in mind, we have also got SpaceX, the company run by Elon Musk, including XAI, as we once knew it, in there as well. They are going to be launching an IPO later this year. And there is a big question mark over the extent to which public investors would be willing to bankroll all of these mega IPOs that we're expecting coming down the lines in the next few months. because you've got SpaceX, you've got OpenAI and also Anthropic perhaps eyeing some sort of public offering. If they did so, then they would effectively break the IPO market in terms of what has gone on in historical precedent because each of the valuations that they're asking for would be larger than pretty much every single company combined that is ever IPO'd in a single year. So there's a change in scale here, which I think is why you never want to be the third company to be IPO-ing out of those three companies, because you might find that actually those investors, their wallets are all tapped out. Just finally, for those that have been really reading up on the Elon Musk, Sam Altman lawsuit, why is Microsoft a co-defendant in this? And why is Microsoft CEO Satya Nadala going to be testifying specifically in the lawsuit as well? Yeah, it's because ultimately when Microsoft invested into OpenAI and Satya Nadella being at the core of that in terms of the decision making, that was the thing that was the justification for stepping away from the nonprofit position. It was the thing that was seen as, well, you need to do this in order to be able to get that Microsoft investment. And so when we see Satya Nadella on the stand, it'll be to ask about what were the conditions of this? Why were you asking, or were you indeed asking for OpenAI to have this change? What kind of return on investment were you thinking about? Why is that so important to you as Microsoft? Because ultimately that's where this argument hinges of OpenAI saying, well, we had to do this for a reason, versus Elon Musk saying, well, you did this for a reason. In many ways, they're both arguing the same sort of thing. It's just that they have different interpretations of what that means and what the consequences are. But yeah, Microsoft, I think, don't really want to see themselves dragged into this case. What's really interesting about this is this isn't the first time that Satya Nadella has been brought in to try and sweep up the mess that has been caused through OpenAI. Obviously, we saw the departure for a short period of time of Sam Altman as CEO around about Thanksgiving 2023, thanks to a boardroom coup. That came as a surprise to Microsoft and to Satya Nadella. He was basically compelled, forced to come out and comment publicly about this, offered OpenAI staffers and Sam Altman a home in Microsoft if the board didn't change their mind on this. And that, amongst other things, was I think perhaps what compelled the board to step back from that coup to reinstate Sam Altman and to basically get us onto this path that we're on now, where Elon Musk believes Sam Altman thinks that he's made of steel, that he's infallible, that you can't bring him down. And that really worries Elon Musk. And I think that's ultimately at the heart of this case. Well, Chris Stoker-Walker, thanks for taking the time. Thank you. If you enjoyed today's episode and you want to hear more of The Tech Report, please consider liking and subscribing. Also, you can get episodes of The Tech Report wherever you get your podcasts.
