Batch brew #28

Hey, Caffeine Capitalist here!

Silicon Valley AI drama!

Grab your flat-white and let’s get right into it!

7 minutes and 18 seconds this time.

Dept. of Tiny Thoughts

With the Open AI mess this sounds even more relevant, huh? Satya Nadella smirking in the background.

Dept. of Insights - Open AI. What the hell is happening?

Since Friday, news about Open AI are jumping on us from all media sources. Still uncertain how everything evolves but what a drama! The biggest drama from Silicon Valley in years, waiting to be recreated into a Netflix Series.

So, while you sip your flat-white a quick recap:

• Sam Altman, CEO of Open AI got a message from his co-founder Ilya Sutskever (also board member and the AI mind behind Open AI, formerly working for Google) to hop on a quick google meet on Friday 3 PM, with no context. And yes, its hilarious that even after a 10bn USD investment from Microsoft, Open AI still uses Google meet internally!

• Sam Altman joins the call, quickly realises he is part of an official Open AI board meeting, where the board tells him he is fired from his CEO position. As they are in the middle of capital raise, pricing the company at around 80bn USD. Risky move!

• Open AI’s CTO Mira Murati appointed as interim CEO by the Board.

• Microsoft who invested 10bn USD into Open AI and owns 49% was not consulted, got an echo just 5 minutes before the call this will happen. First WTF - why do they not have a board position?

• Second WTF - why was Sam even fired? Board says that he was not sincere and transparent to them. We will get to this later.

• As it is Friday evening, public markets are still open. Microsoft’s market cap drops by 49bn USD!

• Greg Brockman, another Open AI co-founder and Board member publishes a tweet that he also resigns from his position, in support for Sam Altman, as he was missing from the board call, not knowing about what was planned. Speculations about Sam Altman’s wrongdoings fall and whole public interest comes right back to the board members. Why did they do that?

• On Sunday we start hearing that:

  • some Open AI investors are pushing the Board to hire Sam back as CEO

  • Employees of Open AI sign a letter. If Sam is not appointed back as CEO, they are leaving. With over 90% of all employees.

  • There is a lot of fuzz whether Sam and Greg will create their own Open AI competitor, with their former employees by Monday. And these guys are in the godtier league of entrepreneurs, able to raise 1bn USD from VCs just over the weekend.

  • Board starts to communicate with Sam to bring him back. Sam demands they should resign and he would recreate the Board composition.

• So what does the Board do? They are pushed by their investors, by their employees, even by their biggest investor and partner Microsoft.

• Well, they appoint the co-founder of Twitch, Emmet Shear as Open AI’s new CEO and their employees go crazy.

• It’s Monday, Satya Nadella, CEO of Microsoft comes into play. And he does a boss move. Announces that Sam Altman is joining Microsoft and leading it’s newly established AI subsidiary. But still supporting Open AI.

• On Monday, the market cap of Microsoft jumps back again.

• Push from employees and investor’s pays off at the end. Sam Altman comes back as CEO of Open AI on Thursday 22.11 with changes in Board composition as well. And it seems that Emmet Shear (% day long new CEO, was also negotiating between Board and Sam to make Sam CEO again.

Wow what a ride!

But now the the interesting part.

Why did the Board fire Sam Altman from one minute to the other?

There is a lot of speculations and untransparency but here are some options:

1. Envy, board felt that Sam Altman’s image is getting more important than Open AI, he is getting all the credit.

2. With the recent Open AI’s DevDay, Board of the non-profit organisation, overseeing the for-profit Open AI organisation (really complicated set-up, yes), felt that the original non-profit mission of Open AI is getting out of the way. And Sam Altman was pushing the commercialization more than the true research for the security and preparedness of humanity when AGI (Artificial General Intelligence) will be created. Which is just a question of time.

3. Sam really did something unforgiving, but the departure of Greg Brockman from the Board in Sam's support makes this option less likely.

4. Important AI innovation was created inside of Open AI and there was a lot of concern how to move forward with this. Creating misalignment between the commercially minded (including Sam Altman) and the safety minded behind the original Open AI mission (Ilya Sutskever and the rest of the Board. This is of course just speculation, but definitely not unrealistic. This is exponential innovation, acceleration to hitting AGI is just getting started. Open AI just started to train it’s GPT 5 model. This was the reason why Sam Altman was touring around US and also meeting various investors and family offices in Europe last weeks. Trying to raise 10bn+ USD at 80bn USd valuation to train the new model. Because Open AI is still hugely unprofitable.

So is there a AGI or near AGI situation here or some new important innovation?

Probably yes, we just don’t know the full extend of it.

Here is the AI run-up summary

What has leaked yesterday from Open AI is a new foundational concept Q* (Q-Star). Not AGI yet of course. But AGI might be more near on the roadmap now.

There were rumours that beginning of November, there was a demonstration of 4th biggest breakthrough of Open AI in the past 8 years. This might be also why Sam decided to raise additional 10bn USD. To push for it.

And Ilya Sutskever, as the main scientist behind AI in Open AI might just get completely scared about the next evolvement of this and all of the risks coupled with that.

Saga continues.

Dept. of Twitter Thread Research (we can’t get our head around the generic “X”):

1/ Work life balance anyone? Nick Huber is doing a great job of shining light on some of the “not so popular” themes associated with entrepreneurship.

2/ Boring HoldCos? Nice take from Michael Girdley on the different type of holding companies when you are building a boring business portfolio.

Dept. of Visual Research:

Greg Isenberg is a serial entrepreneur. This is his playbook on building companies without investors, you can dive deeper here.

News from our portfolios & where to shake hands:

• Who is coming to Slush in Helsinki end of this month? Andrej will be there so let’s meet.

• Slavo & Martin will be talking about No Code in Prague on the 5th of December. Truesdays in Prague, sign up!

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Enjoy your coffee fresh, allocate capital, repeat! See you in 2 weeks 👋

The Caffeine Capitalist is a bimonthly newsletter written by Slavo Tuleya, Andrej Petrus & Martin Nemecek. It is written in partnership & in support from ZAKA.VC and Chop Chop Ventures.

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