The AI Economy: Why Elon Musk Is Suing OpenAI

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The on-again, off-again world’s richest man sues one of the world’s biggest artificial intelligence (AI) companies. But how does his case fare when the defendants have all the receipts? Plus, a recap of my visit to San Francisco where I attended the Llama Lounge and the inaugural renAIssance networking salon.

The Prompt

Elon Musk played an early part in helping create OpenAI back in 2015 as a nonprofit but walked away three years later. Publicly, he cited a conflict of interest with his responsibilities at Tesla. Fast forward to March 1, 2024, and the eccentric billionaire has filed a lawsuit against the company and its co-founders, Sam Altman and Greg Brockman. Musk alleges OpenAI abandoned its founding principles, opting to pursue artificial general intelligence (AGI) for profit instead of the betterment of humanity.

At first glance, it might seem that Musk has the more noble high ground. However, OpenAI has the emails, documents and legal filings to back up its case. The company released several of Musk’s emails from his early days with the company that suggest the billionaire knew OpenAI needed to raise exorbitant cash to fund its AI ambitions.

In one such communique, Musk tells Altman the company needed to raise more than $100 million to “avoid sounding hopeless” and proposed a $1 billion funding commitment. However, OpenAI claims he failed to fulfill on his promise, providing only $45 million.

The company says its mission has not changed and that “we’re sad that it’s come to this with someone whom we’ve deeply admired — someone who inspired us to aim higher, then told us we would fail, started a competitor, and then sued us when we started making meaningful progress towards OpenAI’s mission without him.”

Ouch.

The rift between Musk and his OpenAI co-founders has been far from amicable, and this lawsuit will likely only add to the growing animosity between everyone. Musk has even made at least one attempt to take control of OpenAI; reports surfaced that in 2018, he proposed acquiring the company and managing it independently (as if he didn’t have enough on his plate already) or merging it with Tesla. He was worried OpenAI was falling behind its rivals, including Google’s DeepMind.

There might be some validity to Musk’s argument, especially as OpenAI faces a growing host of competitors. Anthropic, Meta, Hugging Face and Mistral are some of the more well-known LLM providers. And there are more emerging models claiming to exceed the performance of OpenAI’s GPT.

OpenAI’s recent management woes factor into Musk’s lawsuit against the company. It’s alleged when Altman was ousted and reinstated, Microsoft’s role underscored the “significant leverage” the Windows maker held over OpenAI. The relationship between the two companies is apparent proof to Musk that the AI company has now become a closed-source unit of Microsoft, not the open-source provider the billionaire claims he envisioned.

What does Musk hope to achieve with his lawsuit? According to his filing, he wants an order compelling OpenAI to follow its “long-standing practice of making AI research and technology developed at OpenAI available to the public” and to stop Microsoft from benefiting from the technology.

It’s worth mentioning possible ulterior motives for this legal maneuver. Namely, the worsening relationship between Musk and Altman. Once allies, it’s been reported to have turned toxic. And if Musk’s views about AI safety are genuine, this could be another effort by the “effective altruism” side to change OpenAI.

On the other hand, it could also be an attempt by Musk to slow down a market leader to give his xAI startup time to ramp up and become a viable contender.

Legal experts consulted by multiple media outlets cast doubt on the lawsuit’s success, especially since much of what Musk argues against is written down.

Go Deeper:

A Closer Look

After four years away, I made my return to San Francisco to attend the latest edition of the Llama Lounge. Profiled in The AI Economy last month, it was everything I expected it to be and instantly brought back memories of the City by the Bay I recognized two decades ago.

Organizer Jeremiah Owyang welcomed the hundreds of attendees to responsible AI studio GenLabs by blowing a conch horn — certainly a unique approach. Proudly declaring “San Francisco is back,” he spoke about how the city has become the epicenter for AI innovation.

Beyond the speeches and networking, we had a chance to interact with ten AI startups, all building specialized agents:

Agent Lunar: Digital workers built for small businesses
AgentOps: Agent benchmarking, testing, compliance
Claros: AI personal shopper agents
Commit: AI talent agents for software developers
Evabot: Your AI research assistant in sales
Floode: Personalized AI assistant for daily comms
Infinityy: Sales agent for property leasing
Instalily: Autonomous AI agents
Lutra: Coding agents integrated with your apps
MultiOn: A personal AI agent provider

Admittedly, I was taken aback by the Llama Lounge, reminded of the times when I would attend any number of startup launch events in a single evening. I left the GenLabs office inspired and ideating stories to share in this newsletter.

I appreciate Owyang’s curation of the Llama Lounge, which involved placing a cap on attendees to ensure more intimate and meaningful conversations occur. Whether you’re an investor, corporate executive, founder, or journalist interested in AI, this is an event you simply can’t afford to miss.

The next Llama Lounge is scheduled for March 28 in San Francisco. Request an invite here. Don’t delay because spots fill up fast!

Afterward, I participated in another networking event organized by marketing and communication professional Vanessa Camones and ServiceNow’s Head of Global Innovation Brian Solis. Known as RenAIssance, this event provided another opportunity to engage with people about the future of AI.

Similar to the Llama Lounge, the guest list was carefully selected to foster intimate conversation. Investors, founders, advisors, executives, and media professionals were all present, from Owyang and GenLabs’ co-founder Brady Forrest to Foundry and TechStars founder Brad Feld, Zoom’s product lead Ross Mayfield, ServiceNow Ventures’ Shuchi Rana, Monochrome Capital’s Ben Metcalfe, author and co-founder of AI Trailblazers Shiv Singh, analyst and author Charlene Li, podcaster and tech commentator Robert Scoble, and many others.

Among my most rewarding experiences was having a lengthy conversation with a rocket scientist!

This evening certainly delivered abundant opportunities for networking and education, highlighting, in my opinion, the profound impact artificial intelligence is making in the annals of tech history.

I hope to make more return visits to San Francisco and experience more of these events in the future.

Today’s Visual Snapshot

This week, Amazon Web Services published a study conducted with Access Partnership to understand AI workplace usage in the Asia Pacific region. An estimated 15,000 workers across 5,000 organizations were polled.

Its research finds AI-enabled technology is expected to “transcend jobs, tasks and departments, enabling teams across organizations to improve work processes and business outcomes as well as driving significant benefits for individuals, businesses and the region’s economies.”

The above graphs are taken from the 28-page report. Exhibit 4 (left) shows the share of workers (sorted by type and country) who will use gen AI “significantly” by 2028 — those in technical roles are expected to be the biggest users.

An overwhelming 93 percent of respondents anticipate receiving some benefit from AI. 83 percent say they want to develop AI skills to advance their careers. But for which roles in the APAC region are employers willing to offer higher wages to workers with AI skills?

Exhibit 5 (right) unsurprisingly shows IT workers would receive the highest pay increase (44 percent), followed by those in research and development (41 percent), sales and marketing (39 percent), business operations (39 percent), finance (37 percent), legal (33 percent) and human resources (33 percent).

Read the full AWS report here (PDF)

Quote This

“The AI revolution is already producing some of the most investible themes of all time. We just need to look in the data center, peer into the cloud and harvest these incredible ideas, while being mindful of the geopolitical issues that could make this business vulnerable.”

— CNBC’s Jim Cramer commenting how AI will be essential to big market rallies over the next few years

Neural Nuggets

🏭 Industry Insights

The AI revolution: Innovation moving exponentially faster — years not decades — and the ongoing debate over whether AI will be a net positive or net negative (City Journal)
Former Google engineer charged with stealing AI technology while secretly working with two Chinese companies (Associated Press)
Research suggests prompt engineering is best done by the LLM itself, not by a human engineer — are these jobs a fad? (IEEE Spectrum)
Why AI benchmarks tell us so little (TechCrunch)

💰 Funding

AI server maker Super Micro Computer to join the S&P 500 Index on March 18 as shares soar more than 1,000 percent in the past 12 months (Business Insider)

⚖️ Copyright and Regulatory Issues

💥 Disruption and Misinformation

🔎 Opinions and Research

Should we use AI to remake the U.S. government (and save our country)? (The Washington Post)
UN: Gen AI systemically produces ‘pervasive’ gender and sexuality-based bias (CIO)
3 steps to getting your board to embrace Gen AI (Conor Grennan)

End Output

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Profits vs. Humanity: The Musk-OpenAI Lawsuit