Natalie Kitroeff (3:22)

Right.

Mike Isaac (3:23)

I have a growing sense that everything I have learned over the last 30 years has led me to this place and to this moment. They announced that they were gonna bring him on for $6.4 billion to help develop the next great AI consumer product.

Natalie Kitroeff (3:44)

Wow.

Mike Isaac (3:45)

So Donny, I've is partnering with Open Air.

Natalie Kitroeff (3:49)

So much news from OpenAI this week, but six and a half billion dollars.

Mike Isaac (3:52)

To OpenAI, which is the leader in AI development, kind of muscling into the devices games. And it's a really huge deal. It's a ton of money, and everyone across the valley kind of chafed at it because they haven't given any details about what this device would actually be. And, and it's, you know, unclear if it'll work. But I think it planted the idea in a lot of executives minds at some of these other companies that, hey, this is now a talent war.

Natalie Kitroeff (4:22)

And I'm assuming, based on what we know, what they do with all that anxiety is channel it into spending. They open their wallet.

Mike Isaac (4:31)

That's right. I mean, the one thing that all of these companies have, especially the big companies, is, is cash. You know, all of them are doing well financially. But I think the one that really typifies the sort of excessive spending is Meta.

Natalie Kitroeff (4:46)

Okay, and what does that look like for Meta? Tell me about that.

Mike Isaac (4:49)

Yeah. So back in June, Sam Altman, the CEO of OpenAI, decides to go on a podcast that is conveniently hosted by his brother. Look, I've heard that Meta thinks of us as their biggest competitor. And. And he confirms, yes, Meta is aggressively trying to poach people. They started making these, like, giant offers to, you know, a lot of people on our team, you know, like $100 million signing bonuses. And Altman says Mark Zuckerberg, the chief executive of Meta, had been offering OpenAI employees, like, $100 million signing bonuses to come over and work on AI for Meta. I'm really happy that at least so far, none of our best people have decided to take them up on that. But Zuckerberg really doesn't get super far at this point because there's a lot of OpenAI employees who actually like working at OpenAI. They believe in the mission. But then Mark starts to ratchet things up. He decides $100 million is not enough. How about $200 million? How about 250? How about we front load half of that offer within the first year and then you get the rest of it over four years. He goes from hey, this is crazy, to this is generational wealth. I'm about to offer you someone who may be like a 22 year old researcher at OpenAI and does that work?

Natalie Kitroeff (6:09)

I mean, I'm sorry, but 250 million might work on me.

Mike Isaac (6:13)

Yeah, I mean, like, we could talk about, you know, I believe in the mission all day long. And then when someone, you know, backs a dump truck full of money up to your doorstep and says, here you go, it's hard to say no. So he did start getting people. He got someone at Apple who was very important for, you know, more than $200 million. This is Roming Peng, the most respected AI researcher and AI executive at Apple. He's basically holding everything together there. He started grabbing people from Google and DeepMind.

Natalie Kitroeff (6:43)

Meta has appointed Zhen Jia Zhao co creator of ChatGPT and a key contributor.

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Mike Isaac (6:52)

OpenAI hires that he started grabbing and bringing over to Meta. Look, I think they want to assemble the top 50 AI researchers that are out there, but I think a really big moment was when Zuckerberg announced they had purchased a 49% stake in this company called Scale AI, which is essentially a startup that kind of does this data labeling for $14.3 billion.

Natalie Kitroeff (7:19)

Whoa. Now, a source gave me more color around incentives as well, saying this is more about Scale AI founder Alexander Wang's AI network.

Mike Isaac (7:26)

And what he did was pay that money to bring over Skale's 28 year old CEO Alexander Wang and a number of his deputies to head up this new organization that Zuckerberg is calling Meta's new superintelligence lab.

Natalie Kitroeff (7:43)

And Zuckerberg's apparently moving desks in the office so that all of these people can sit right by him. Okay, so Zuckerberg is figuring it out. It's not just him though, right? There are other companies that have been getting in on this.

Mike Isaac (8:05)

Yeah, totally. This is when things get really wild. I think every other company in the Valley starts kind of freaking out and saying, hey, Zuckerberg is kind of messing up our compensation here. We need to figure out how to start coughing up more money to keep our talent. And, you know, some of these researchers have been there for a while. They certainly aren't getting paid, you know, hundreds of millions of dollars. And so I think what we started seeing is all of the talent kind of congregating together and strategizing for how they could take advantage of this situation.

Natalie Kitroeff (8:37)

Hmm. Can I ask who are, by the way, all these people, what do they do that makes them so valuable to these companies?

Mike Isaac (8:45)

So the people that are really in high demand these days are folks who are doing kind of niche research called frontier research, which means they've been pursuing far flung parts of AI research that maybe most researchers are not looking into. And it's a pretty small number of them are studying what's called reasoning, which is basically helping to teach a computer to think more like you and me when it's trying to solve problems. And there's just not a lot of people who do this and do this.

Natalie Kitroeff (9:19)

Well, you know, I've heard people refer to this as the kind of sportsification of the tech industry. And this is why, right? I mean, typically you really only hear of athletes getting lured to new companies or teams with this kind of money. You know, like Shohei Ohtani getting paid hundreds of millions to go play for the Dodgers.

Mike Isaac (9:39)

And look, hey, we don't chafe at that when we hear it. I mean, totally, it's crazy money. But at this point, it's sort of normalized, I think. Like, of course Steph Curry is getting like a huge contract. Of course you want to pay LeBron a crazy amount of money because they made these teams like championship teams. Right? That is the analogy that a lot of tech CEOs are making right now. And frankly, a lot of the people inside of these companies, like the rank and file, are starting to see these folks as, as superstars, as difference makers. Yeah, I mean, they may not be household names to you or me, but certainly around Silicon Valley they have really good reputations. There's even this show that has developed over the past year. It's called TBPN. You're watching TVPN. We start at 11:00am sharp. It streams five days a week, three hours a day. Speaking of AI research, we have a ton of stories in the AI trade deal world. Zuckerberg continues to be in a tear. And it's basically a running commentary on the tech industry, the media industry.

Natalie Kitroeff (10:45)

Amazing.

Mike Isaac (10:46)

That kind of treats it like an ESPN Sports center type show. But for business. Got a red flag. We got a red flag. Elon Musk and Sam Altman are fighting. Mom and dad are fighting. It's really funny. They, they do this stuff where if someone goes to Meta, they'll spin up a funny graphic that's like traded OpenAI guy becomes chief scientist at Meta's super intelligence labs and they have fun with it. Apple Inc. Is plotting its artificial intelligence comeback. Don't call it a comeback. Actually, you can call it A comeback. Give you?

Natalie Kitroeff (11:17)

Yeah. And it sounds like there's a lot of people that are interested in this news and that that is kind of reflective of how attuned the industry is to these moves at this moment.

Mike Isaac (11:30)

Very much so. I think, you know, everyone in Silicon Valley is paying very close attention to who's going where, who's got the next big hire, who's getting paid the craziest salary. And, you know, really, just like in sports, everyone is watching to see how these moves, or these trades, if you will, is going to affect other companies and see who comes out on top.

Natalie Kitroeff (12:04)

We'll be right back.

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Natalie Kitroeff (13:11)

Okay, I want to get into those questions of how this money is actually changing things, how the money is affecting the landscape of AI as you're seeing it.

Mike Isaac (13:22)

Yeah. So look, I think we should remember we're literally in the middle of all of this happening right now. You know, this is like a moment in time. All of this stuff is like a wild flurry of trading people back and forth. These companies are building new things. Everything is up in the air. I do not feel comfortable saying who's going to win the race.

Natalie Kitroeff (13:44)

Sure.

Mike Isaac (13:45)

That said, I think we can still look at the landscape and see where companies are right now and, you know, who's got a great lead or who's the biggest long shot. And I think that's something that we can still just try to suss out.

Natalie Kitroeff (14:00)

Yes, let's do that. Give me a power ranking of these companies, as it were.

Mike Isaac (14:06)

Okay. When I think of this market, I like to think of it in terms of companies creating consumer facing products. And I say that because while a lot of the rhetoric around AI is about building the next robot God or this all seeing, all knowing AI, a lot of these companies, you know, aside from OpenAI, haven't been able to do something pretty basic, which is just to convince people to use artificial intelligence in their everyday lives and build a business around that. And so when I think about that metric, I try to break these companies down into three different tiers. There's the bottom tier companies that are definitely in the mix, but are probably more of like a long shot in this greater race. You have Perplexity, which is a startup that creates this Google search like product. You have Anthropic, which is certainly bigger. They have their own chatbot called Claude, which is used by people and enjoyed, but certainly not as widely used as some others. And then you have Xai, which is the artificial intelligence wing owned by Elon Musk and kind of grafted on to X, the social network formerly known as Twitter that has this chatbot called Grok, which you know, has done some interesting, even impressive things. But when it screws up, it screws up in a big way. There was this moment where it decided it was a Mecca Hitler bot and offended basically everyone at the same time before they had to apologize for it.

Natalie Kitroeff (15:44)

That's a pretty big error.

Mike Isaac (15:45)

Yeah, that's not great. And I think it's one of these things where they have the advantages of having Elon Musk and his endless bank account, but they also seem to stumble in a very high profile way.

Natalie Kitroeff (15:57)

Yeah, it's interesting that Elon, who's, you know, often seen as out ahead on so many things, does not seem to be leading the pack on this. So what's Tier two?

Mike Isaac (16:08)

So Tier two, I would probably put the more established tech companies think Apple, Meta, Google, and these companies have two key advantages, scale and cash. But they have a lot of disadvantages too. Let's take Meta, which we've already established is behind. A lot of researchers are sort of worried that Mark Zuckerberg doesn't have a clear vision for what AI will look like at Meta. And frankly, they don't want to work on building the next algorithm that keeps you in Instagram or Facebook for longer because it's suggesting better content using AI that is not exactly what they signed up for when they got into the field.

Natalie Kitroeff (16:54)

Hmm.

Mike Isaac (16:55)

Then you know, Apple, I think they're weak because, you know, even though they've sold billions of iPhones at this point, Siri, the AI tool that comes with it is not even really thought of as an AI tool. It's like a voice assistant that only works half the time and is considered pretty bad in Silicon Valley circles. And even Apple acknowledges Siri is not where it should be right. It should be this incredible assistant. It's what they promised it to be. And it just hasn't been. It hasn't panned out because for years Apple has not really invested in the type of technology that these other companies have. So I would say they have a lot of potential, but they're just not there yet. And Google, Google is interesting. Google has been working on AI, arguably the longest of most of these companies. They have made huge advances, they're very mission oriented. They're likely literally want to cure cancer that is huge in helping recruit talent. But I think the AI that most people are familiar with from Google is the little summaries at the top of search results that happen these days. And they've had some, you know, pretty high profile stumbles with that summary. There was this moment where they gave a recipe putting glue on pizza, which is like, I don't know about you, that's not something I'm super into.

Natalie Kitroeff (18:20)

But like, it's not quite Hitler chatbot, but it's pretty bad.

Mike Isaac (18:24)

I think in the rankings of bad, it's down the ladder a little, but still, like the entire point of Google is getting you the best search results. And that is clearly not the best.

Natalie Kitroeff (18:35)

And I think we're now at the top tier, right, Which I assume is the company we've been talking about that everyone's been chasing. OpenAI.

Mike Isaac (18:44)

That's right. OpenAI really kicked this whole thing off a few years ago. They were the ones that first released the most successful chatbot. Millions of people downloaded it overnight basically. And to this day, they still have an enormous amount of people using it and continue to grow every single day. But they do have some disadvantages. You know, for one, they're losing enormous amounts of money because it costs a lot of money to keep this successful chat bot running. I think it's, it's one of these things where they're dramatically ahead as far as the number of people using it. But that can change almost overnight sometimes if a company puts out another better product.

Natalie Kitroeff (19:28)

And yet there is something remarkable about the fact that this company is so far ahead right now, at least. And I think it's because the American tech industry is a place where there has been a lot of talk of monopolies. You know, there's these massive companies that Just own so much of the Internet. And then you have this industry that is like the most important thing on earth to many people right now. And there's a company outside of the big ones that's dominant.

Mike Isaac (20:02)

I mean, this is honestly classic Silicon Valley as a story. Right. You may look at Google, Meta, Apple. I think these companies are going to be dominating the landscape forever. But like I would have said the same thing about Blockbuster Video 20 years ago. Right. Where of course, I go every Friday night and get a movie and I go home and watch it on dvd. Yep. And then Netflix comes along and now they're mailing you DVDs, and then a few years later, they're streaming every video to your TV at home, so you don't even have to leave your couch. Right. It's the classic idea of the innovator's dilemma. If you're big, if you're dominant, you don't need to worry about creating the next big thing because you can just sort of coast on your laurels and. I don't know, let's milk the sports analogy. You can keep playing defense rather than offense.

Natalie Kitroeff (20:54)

Yeah. And that leaves you behind when an upstart comes in with something new.

Mike Isaac (20:59)

That's exactly right. And all these companies are now kind of on their back foot and trying desperately to catch up to OpenAI, which, as you said, came out of nowhere and lapped them all.

Natalie Kitroeff (21:11)

We ranked. Well, you ranked these companies based on their relative positions in the race toward a kind of consumer product, the effort to capture the consumer market, I mean, and the stakes for that, for getting people to use this stuff, seem pretty high given how much we've said they're spending and investing in this. And it's not just salaries, it's the data centers. It's developing these models in the first place.

Mike Isaac (21:39)

Yeah.

Natalie Kitroeff (21:39)

And so I have to ask, how sustainable is that? I mean, many of these companies are public companies. They have shareholders, they have investors. How long can this last? Is there a limit?

Mike Isaac (21:54)

It's a good question. I appreciate you bringing us back down to earth with money, because all this stuff is insanely expensive. This is not just billions, but hundreds of billions of dollars in spending on infrastructure. Building data centers is not cheap.

Natalie Kitroeff (22:09)

Sure.

Mike Isaac (22:09)

Developing products that maybe people use, maybe they won't, is not cheap. It's adding up and it's adding up quickly. I think the companies have been given a lot of latitude for years just because they all basically print money. Google created the perfect Internet business model with search ads. Meta has me buying stuff on Instagram Incessantly. And makes billions every quarter. You know, as long as their businesses have been running smoothly, investors have allowed them to pursue these far flung ideas that are losing big amounts of money.

Natalie Kitroeff (22:45)

Hmm.

Mike Isaac (22:46)

But I think we're starting to see the limits of that mentality. In recent weeks, Wall street has started to get a little shaky on. They've seen how much this stuff costs to build and they're starting to ask more questions saying, hey, can this be an actual business? And do people want to use this stuff?

Natalie Kitroeff (23:05)

Yeah. On that, there has been some talk, right, of whether this might be a bubble, you know, reminiscent of the kind of dot com bubble in the early 2000s where you had this huge amount of Internet startups that had these insane valuations and then that bubble popped. Do you see that here? Is, is that a parallel?

Mike Isaac (23:30)

Well, no one likes the B word out here, but yeah, I think, I think it's totally. I think it's fair. Look, I mean, there's so much money tied up in this. Every VC firm is spending insane amounts to get into AI companies. There's AI companies built atop of AI companies, data and infrastructure companies that are relying on the success of this stuff. It's kind of like all interconnected and really dependent on each other's success. And I think it's really fair and important to question whether this stuff is going to even work out, not treat it as an inevitability.

Natalie Kitroeff (24:08)

What does that mean for the economy? Because so much of our economy is being driven by this huge spending and this, this massive new industry. If the bubble does go population, what does that mean for the rest of us?

Mike Isaac (24:24)

I mean, look, it reminds me of how tied into this we all are. You have to remember the big tech stocks often lead the entire market, Right. Sometimes the Dow is up and down based on the performance of Meta or Google or Apple or whatever. My 401k is probably tied up to this, as is yours. You know, this is kind of woven into our economy, whether we want this version of the future or not. So in a way, we are kind of tied to the success here. The idea that if you choose not to use ChatGPT, doesn't insulate you from the idea that AI is not going to affect you at all. I think it's more woven into different parts of how the world works than you and I might realize.

Natalie Kitroeff (25:10)

Right. It's like even if you personally are not bought in, the entire economy is. So you're on this train.

Mike Isaac (25:18)

Yep. Welcome aboard.

Natalie Kitroeff (25:28)

Mike. Thank you.

Mike Isaac (25:30)

Thanks for having me.

Natalie Kitroeff (25:45)

We'll be right back.

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Natalie Kitroeff (26:54)

Here's what else you need to know today.

Mike Isaac (26:56)

After we do this, we'll go to another location and we'll make it safer. Also, we're gonna make our. We're going to make our cities very, very safe.

Natalie Kitroeff (27:05)

President Trump said that he planned to target Chicago for his next federal crackdown on crime.

Mike Isaac (27:10)

Chicago's a mess. You have an incompetent mayor, grossly incompetent, and we'll straighten that one out probably next. That'll be our next one after this.

Natalie Kitroeff (27:19)

Trump said the national guard deployment in D.C. was helping clean up the city and suggested that he was also willing to use active duty troops on city streets.

Mike Isaac (27:29)

We haven't had to bring in the regular military, which we're willing to do. We have to.

Natalie Kitroeff (27:35)

But the president may not be able to easily replicate the show of force in D.C. in other major cities because D.C. is a federal district, not a state. Trump has more control there than anywhere else in the country. That includes the ability to take control of the local police force. Today's episode was produced by Diana Wynne, Alex Stern and Carlos Prieto. It was edited by Lexi Dio, Mark George and Maria Byrne, with help from Michael Benoit, and was engineered by Alyssa Moxley. That's it for the dailies. I'm Natalie Kitroweff. See you tomorrow.

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