Mike Isaac reports live from outside the courthouse on the Musk vs. OpenAI verdict

Speaker 2: Yeah. Go go go direct with the money. I like it. Well, we we have Mike Isaac from New York Times in the waiting room. We can come back to our data center today after we check-in with Mike. And I think he's on location. Is this correct? Mike, where are you? Welcome to the show. How are you doing? Fine.

Speaker 6: I'm good. Can you hear me? I'm sorry. I'm literally outside of the courtroom.

Speaker 2: Amazing. No. We can hear and see you. It's and clear. It's amazing. Well, take

Speaker 6: us My through actual.

Speaker 2: How has today been going? What's happened?

Speaker 6: It was crazy. Basically, today was supposed to be the first day of jury deliberations, and we were a few reporters in the courtroom because in the morning, it was about both sides presenting their case for remedies to the judge on basically how much money, if anything, would be dispersed as a result of the lawsuit. And literally, in the middle of this deliberation, the clerk goes and interrupts the judge and says, hey, something's happening basically. They're scurrying, and everyone's like, oh my god, what's happening? And this is like less than two hours into it, they reach a verdict. And so the jury comes back in and and delivers the verdict.

Speaker 2: Interesting.

Speaker 1: What was your expectation going into today? Did you think you'd be hanging out at the courthouse all week?

Speaker 6: I'm hired, Bill. Yeah. Yeah. I'll see you soon. Sorry. That's lead opening eye council walking by that I should go run after, but he's doing his thing.

Speaker 1: I mean, we're just hanging it.

Speaker 2: We're just hanging chase out. Gotta him down. No. You want.

Speaker 6: I'll bug him later. Very, literally, was just chilling and walking out. I Sorry. I can't see that. Forgot what you I'm so tired. What did you ask me?

Speaker 1: Yeah. I I was I was What was your expectation for your week? Were you expecting to be at the courthouse every day?

Speaker 6: Yeah. We were Like, I got here again at 6AM and, like, was ready for a long, like, sitting out in front of the court for days because the way these work is, like, you get ten minutes notice from when the judge gets the jury verdict to get down here. I live ten minutes away, but still like no reassurances. So we had Vinny, my colleague Kate Metz, and then Natalie Rocha, another colleague of mine, just like ready. And I was just like, thank God when they when they came back because I didn't want to sleep out here.

Speaker 2: Okay. So the actual verdict, it feels like victory on a technicality. And what I'm interested in is that over the last few weeks, it feels like the the core discussion or the or the talking point was Elon Musk, you can't steal a charity, very pithy phrase, easily memorizable, could stick with you or could bounce right off you, but you know what his grievance is. And then OpenAI sort of needs to say, well the charity still exists and we had an agreement that we would go this way and it was a little bit more complicated. But that doesn't seem like what the jury actually decided based on. And was that like as you think back to the last three weeks, do you think that there were that there were actually good seeds planted around the Statue Of Limitations and when the case should be filed? Because it feels like from the reporting and from the viral, you know, the the screenshots and the emails and the and the quotes, like, there was never like, oh, yeah. We all remember the smoking gun of statute of limitations. No. I don't. I remember the you can't steal a charity or the Brockman diary. Right? And and it feels like we got a different outcome here.

Speaker 1: I think I I think I remember at different points

Speaker 2: Okay.

Speaker 1: Like they this this only this whole debacle only became a thing after the launch of ChadGBT and you know, the the company was showing, you know Traction. Massive traction and growth. But I never heard specifically, like you said, this statute of limitations.

Speaker 2: Mhmm. Yeah. But how do you process that?

Speaker 6: Well, that's a wonkier point too. Right? Like, it's it's very easy to And that's what I think, like, really the strategy on the must side was, was to go for really, like, clearly digestible talking points for a juror who may not be steeped in nonprofit contract law or statute of limitations and exactly what that is. And I think that's what they were betting on too. They're like, alright. If we can sell the jurors on this idea that Musk is, you know, selflessly trying to, you know, interrupt something that could be bad for the world versus OpenAI's more technical point of, look, you should have filed this lawsuit years ago. Maybe they can win it. And so I think that was going into it, what everyone was kind of thinking about, like, is this gonna be because certainly what I was thinking about, is this gonna be a battle of, the billionaires, who do you trust? Who do Yeah. You This like a character thing that is this a referendum on that? And exactly what you said, it's super surprising when they came back and essentially I would say statute of limitations was like, if that was that was the ballgame. Right? Yeah. And if they had blown past that, if they had not find them the burden to be met, then we would have seen how it really played out. But that was just that was the the whole thing, you know?

Speaker 1: Yeah. What so so last week, I was surprised that that Elon jumped on the China trip with with Trump.

Speaker 2: Oh, yeah. Was better

Speaker 1: addressed? Yeah. That that something I mean, a lot of the people online were just like, he's a billionaire. He can do whatever he wants. That was like

Speaker 2: president supersedes the federal judge. Yeah. I don't know if that's actually the case

Speaker 1: dialogue around like, hey, you're in the middle of this historic trial like Yeah. You should be present Yeah. Or at least able to be present. Mhmm. Did that Do you think he did that because he felt like it wasn't going his way, and he was just like, I need to make the most of my time?

Speaker 6: I think he So so I I Yeah. NBC wrote a good story on that. Like, he was not excused. He could have been recalled and asked to testify again. Mhmm. And it's typically bad form when you leave the country to do when that happened. And so what I was told or what I heard is that they had actually spoken to the judge beforehand to, like, make sure it was, like, okay and, like, that he probably wouldn't really recall. I think part of it also was that both sides were both sides were on a clock, so you only have so much time to to present your evidence. And the early testimony was running long, so OpenAI still needed to get through a lot of the testimony of their expert witnesses towards the end. So they decided Musk's side also decided they weren't gonna recall Musk. So, like, there was that part of it that probably made it okay. That said, like, it's probably about look, when you make it the first three days of the trial and Sam and Greg make it basically most of the time. But but at the same time, like, it didn't come down to character who pissed off the judge necessarily. It came down to, like, a legal technical argument, which seems to have. This jury was pretty sophisticated in at least in, like, focusing on something that I didn't know if it was gonna land or not. Mhmm.

Speaker 2: Yeah. Did I mean, it really makes all of the, like, the the the AI safety testimony feel like maybe a miscalculation because it sort of took the conversation in a completely different place and then they got focused on this, like, technical issue. I mean, the jury doesn't put out, like, a statement. Are we are we expecting any sort of like closing statement from the judge or is this what we get here?

Speaker 6: We so by the way, sorry. There's still like people protesting in the background if you want to see that. But I'm a very terrible laptop camera.

Speaker 2: Are they protesting the statute of limitations because they're on

Speaker 6: side Protest or there's actually this has been the best part of this because like there's many different protest camps and it's kind of hard to define who is is against what.

Speaker 1: Are any of the protesting other protesters?

Speaker 6: I mean, genuinely, yes. Yes. Probably. There's the Yeah. Yeah.

Speaker 2: Out there protesting the diesel.

Speaker 6: Genuinely, there there were supporters. No, a 100%.

Speaker 2: Yeah.

Speaker 6: So, actually, usually post trial, you people like me go and try to find the jury and chase them down, which is what we were doing. Mhmm. I think they probably are already out of the building. Yeah. I ran around the back and saw a van that was like all blacked out and this marshal that I had known the whole trial and like they were just like getting the hell out of here. So I'm guessing they didn't want to get mobbed by Yeah. Us. But the judge I'm gonna try to get the notes out. The judge left the jury with like a pretty good summation, not of the trial, but just like appreciating a jury

Speaker 2: Sure.

Speaker 6: And like respecting a jury finding like finding parties liable or not liable, you know. And and I think that the point of that was she didn't she some federal judges could like be like, no, I'm throwing your verdict out or whatever, but she respected the jury. Was the jury of their peers, and they were deliberate, you know, and they listened intently, and so she left them I'll find the exact quote and send it to you guys, but she left them on sort of like, we thank you for your service.

Speaker 2: Yeah. Yeah. That seemed also a little bit unexpected because when the jury verdict became popularized or publicized as like advisory, a lot of people were sort of interpreting that as well, like, it doesn't matter at all in that case. But it seems like the judge did wind up sort of, you know, giving the jury a lot of weight and very quickly reacting to the jury's verdict.

Speaker 6: And I think that's really important as far as appeals go because you could argue

Speaker 2: By his charge.

Speaker 6: Cut out. Like, you could argue like, oh, the the judge yeah, exactly. The judge didn't care, the so jury I think there's real incentive to be in line.

Speaker 2: Yeah. Yeah. That's very interesting. What was the snack set up today? Are you gonna get a proper lunch now? I feel like

Speaker 6: Oh my god.

Speaker 2: I I feel like that was one of the most disappointing arcs if I'm gonna be completely honest with you. The lunch game just didn't seem to evolve.

Speaker 1: You were saying that You were learning from your lessons know the Nathan all you've got you know the Nathan for you episode where he's got the chili We

Speaker 2: were gonna do that for you. Because it just felt like they day okay. Day three, you show up with an apple and a banana. It's like, okay. He's still learning his lesson, but, like, fool me seven times. I was expecting a Chipotle burrito or something with a little more substance. Get get into the four digits of calories, please.

Speaker 6: God. People were, like, giving me saying I have, like, scurvy or rickets by the end of this trial. I think I just have, like, a really disturbing diet overall. So yeah. And then today, I forgot. I was out last night until way late at a show and I'm hungover and I forgot to bring food. So it's just this is basically my you get to see my slow descent into madness. But thank God we're done.

Speaker 2: Okay. So we I mean, we asked you earlier, is this the stuff of movies? Is there gonna be a movie about this or was this anticlimactic?

Speaker 6: I think like I think this that the movie is still going, man. Like Yeah. This thing is still there's so much. I feel like this is an exciting time in AI because OpenAI is really on his back foot in a lot of ways. This gives them some relief in the many fronts that they're being intact on, whether it's going public this year with a messy balance sheet or Anthropic coming after them, Google coming after them, Google IOs tomorrow. So like, if anything, it's a brief reprieve, you know? But I wouldn't I wouldn't make the movie now. I'd wait a wait a couple of years.

Speaker 2: Okay. Okay. Anything else, Jordy?

Speaker 1: The story continues.

Speaker 2: Story continues.

Speaker 1: I'm expecting to see model wise around San Francisco that say, bought this after Elon lost his landmark trial against OpenAI. Yes. The sticker. New bumper sticker.

Speaker 6: Right on.

Speaker 2: Well, have a great rest of your day. Thank you so much for taking the time.

Speaker 1: We'll talk to you, Great

Speaker 2: to see you Flint forecast.

Speaker 6: Next time.

Speaker 2: We'll talk to you soon. So Mark Cuban has another proposal for how to deal with data centers and internalize all those negative externalities. He says we should tax tokens federally at the provider level. Tyler, you're going to have to interpret what this would mean in all the ways that companies would wind up getting around this with maybe, you know, less less robust answers potentially. But this is not a lot, less than 50¢ per million tokens. It will accomplish four things at least. It will push the big AI players to optimize tokenization, caching, routing, and localization, which will reduce energy usage, saving them in energy costs more than what they paid in tax and reducing strain created by the growth in energy consumption, which will generate maybe $10,000,000,000 a year to start. But over the next ten years could grow 30 x to a 100 year a 100 x. So he's he's thinking two orders of magnitude in a decade in terms of growth for AI. That's low end of what a lot of people think. And then four, create a source of funding to pay down the federal debt or deploy in response to the things AI brings that we don't expect or don't like. At some point, the models will pass it on to consumers. Of course, that's okay. Consumers will have the ability to choose between providers or do or to do everything using open source models locally, which I guess wouldn't be taxed.

Speaker 5: What do you This is kind of like the opposite of what we were saying before of like going direct, right? Yeah. Because we were saying, okay, you know, the actual data centers are gonna make so much revenue. You can just tax the data centers and then the the money goes to the local community and then that that's where you see the benefits. But isn't this going like up the chain even more so you're taxing the companies? Yeah. So then people in the community like definitely won't it like the the money will be like so abstract if it's at the federal level. Yep. I feel like this is the wrong way.

Speaker 1: Here's something here's something else.

Speaker 2: You should

Speaker 1: be giving people You should get

Speaker 5: a check from Open Anthropic every month maybe. That's I think the better version of his. Sure. If you wanna

Speaker 2: tax the company.

Speaker 1: Sure. What if we tax companies, you know, what what if what if we had something like like a sales tax or, you know, what profit. What if when when Income tax. Yeah. Like if someone when someone paid, what if some of that money went to the government to help pay for public, you know, services. And maybe even if your company is doing really really well, then you could take a percentage of their profits. Yeah. Because that

Speaker 2: company And has investors sold their stakes, they would

Speaker 1: They would also

Speaker 2: a tax.

Speaker 1: Pay on

Speaker 2: whatever gain

Speaker 1: And then every single what about every single underlying vendor that the company you had the same sort of like structure for every underlying

Speaker 2: company if NVIDIA serves sells a bunch of GPUs and they make a bunch of money, they don't

Speaker 1: to pay

Speaker 2: tax on the profits on that.

Speaker 1: Yeah. Or even somebody like a contractor that, you know, manages a building. Sure. Right? So they have a, you know Yeah. Maybe it's a small local business. Yep. They manage an office

Speaker 2: million dollars.

Speaker 1: Some of that.

Speaker 2: Are only half 1,000,000. Yeah. That that half 1,000,000 profit, that gets taxed.

Speaker 1: Has anyone thought of that?

Speaker 2: That might work. Anyway.

Speaker 1: And then you could use that money to sort of, you know, cover the costs of operating the government and

Speaker 2: then Potentially.

Speaker 1: Even potentially use some of the extra to pay down the debt.

Speaker 2: Potentially. Well, Palmer is going back and forth with Mark Cuban about this. Palmer Lucky says there are already massive economic incentives to optimize. This is just a tax on American companies that makes foreign models and products more attractive along with creating the infrastructure for government to track all AI usage and punish anyone who doesn't report. Mark Cuban says those incentives change over time. Right now, the incentive is to grow and spend market share over optimization. You know this. Don't do you think the marginal cost of some bips on a token is going to make those buyers choose differently, or do you think the models are just a commodity and price is the only differentiation space and then the question mark every time. You know it's not AI. And the tax would only be on what providers sell, not open source models, not local, not internal, and what foreign models are you referring to? Palmer, Mark, you are essentially making an argument for central planning. The burden is on you to show you where it's worked before. No quotas, no mandates, just good old capitalism and competition. Palmer says, this is obviously not capitalism or competition by any reasonable definition. It is a tax that specifically disadvantages one type of AI business to the benefit of others artificially propping up their business models. And my business is one of the ones that would benefit because he's not token heavy. That is an interesting

Speaker 1: Semi analysis says 50¢ per mTalk is a lot of money. Mark, are you considering considered cash hit on prefill or just output tokens?

Speaker 2: These are the hard questions.

Speaker 1: Thank you. Steven says imagine a bit tax in 1995.

Speaker 2: Yes. Flops tax. I don't know. What what else is going on in the AI slop world? The bot farms

Speaker 1: What about every time you how about this? What about every time you move your cursor, it's just 1¢?

Speaker 2: Right? Yeah. I don't know. Tax on something.

Speaker 1: It's pretty funny. Was saying last week when I was saying like you're basically reinventing the US postal service. Yeah. A lot of people were messaging me saying, you know people, you know this exists already. It's like, man, it's tough when the sarcasm Doesn't

Speaker 2: break through.

Speaker 1: Doesn't break through.

Speaker 2: Well, the bot farms have figured out anti a a I anti data center posts on Facebook engagement. But ironically, they're using AI Slop to do it. You don't know this is AI Slop. This might be the most perfectly designed set of stones ever visited upon a beach. It's not worth thing it's not worth giving up an inch of this to a data center Indiana. Breaking an Indiana resident of reportedly arranged stones to make an anti data center message. This is 99% slop. And this one is really sloppy. Wow. Wisconsin's forest farms, lakes, rivers, small towns, not a single square inch of Wisconsin is worth giving up for an AI data center. Interesting that the I in is is capitalized makes me think that that was added after the fact, but the rest is pretty sloppy, but kinda beautiful. I kinda like the perspective on this image with the big farm and the the barn in the background and the

Speaker 1: This makes me wanna visit Wisconsin.

Speaker 2: Yeah. Does Wisconsin actually look like this? If it does, perfect place to build a data center. Yeah. That's the only thing that's missing.

Speaker 1: Well No. I want yeah. We we have to go and find we have to go find the the the the the ugliest 10,000 acres in Wisconsin. New challenge, Tyler.

Speaker 2: We gotta we we gotta cover Everlane. We gotta cover Everlane. There was a big Well,

Speaker 1: just to close out, should we should we should we cover this post from Ken Griffin that was going

Speaker 2: I wanna cover this but like the trick is that this is a Ken Griffin clip. So basically he pivoted on AI three months ago. He was saying like, it's not really useful. The reports that we get from AI models are not actually relevant to our business. And now he's saying for us at Citadel, it's allowed us to unleash a much broader array of use cases. It's been really interesting to watch. Work that we would usually do with people with masters or PhDs in finance over the course of weeks or months is being done by AI agents over the course of hours or days. And it's seen as sort of a black pilling moment because he says like I got home and I was sort of I gotta tell you I went home one Friday. Barely depressed by this because you could see how this was gonna have such a dramatic impact on society. And it is like a weird moment and it's sort of like, oh okay, he's he's waking up. But then if you actually watch the full interview, this is one minute from a forty minute interview or something. And he goes on to enumerate a whole bunch of different benefits and where he is allocating his workforce. And also Citadel's in a very interesting game theoretic dynamic where it's not they are not a monopolist. So by definition, like they are in competition with all their other funds. And so there's there there is a world where like, even if they're getting incredible value out of AI, they wind up using AI and humans in conjunction to compete because we are in like the centaur era, which is sort of what he enumerates. But anyway, what

Speaker 1: did you one one thought I had is that, you know, Citadel has, you know

Speaker 2: AI psychosis. That's what you're saying.

Speaker 1: No. They they have a team of thousands of, you know, PhD level talent

Speaker 2: Yeah.

Speaker 1: That are doing things that AI can do pretty well now. And him driving home on a Friday Yeah. Being depressed, part of me was thinking, is he depressed because he realizes everyone will soon have access to a thousand That's people with PhD level talent that they can turn on. Yeah. And maybe they can't cover the whole market. Yeah. Obviously, you know, he talked a lot about, you know, how much software there is to build. He's like, we'll never build enough software. Yeah. But at the same time, he was thinking like, wow, this this like resource that I've accumulated, this like capability, this like this this team, when AI can do what they do and everyone can access AI, like, how is my business gonna change?

Speaker 2: Yeah. So funny reflecting on the time I worked at Citadel and my job was basically to copy and paste cells in an Excel spreadsheet. And so I wrote a visual basic script to sort of just do it for me. And then I was able to just, like, have seven hours free time every day. And and I and I wound up being able to do a lot of other stuff. And it was a story of automation. And and I can tell you at least back in 2011, I spent the summer over there as an intern. There was a lot of stuff you could automate for sure. A lot of stuff in the back office, middle office, and, yeah, some some research in the front office. But Citadel's Edge is more than just it's more than just research. They do a lot of CEO interviews. They talk to a lot of people off the record. They have a lot of information that does not exist on the Internet.

Speaker 1: Yeah. Scale.

Speaker 2: Yeah. There's a lot

Speaker 1: of So

Speaker 2: I don't know. It's interesting.

Speaker 1: Yeah. Let's let's talk about Everlane.

Speaker 2: Yeah. Well, we have our I think we have our next guest already here. But we can go through Everlane quickly or we can come back to Everlane at 12:45.