WEBVTT - A Broad Church: BRK/A, OpenAI, Medicaid 0:00:02.720 --> 0:00:09.360 Bloomberg Audio Studios, podcasts, radio news. I've been up since 0:00:09.400 --> 0:00:12.360 like three point thirty this morning because I saw a 0:00:12.440 --> 0:00:14.280 raccoon and barked at him, and then we have to 0:00:14.280 --> 0:00:15.800 go outside and chase the raccoon. 0:00:16.360 --> 0:00:17.040 And that took. 0:00:18.400 --> 0:00:20.040 That just woked me up, and then I just didn't 0:00:20.079 --> 0:00:21.840 get back to sleep. I get it pretty early anyway. 0:00:22.079 --> 0:00:22.720 That's brutal. 0:00:22.960 --> 0:00:25.360 My kid's got to boss them. Mostly, I have always 0:00:25.400 --> 0:00:29.920 been pretty good sleepers. The dogs turn today. 0:00:30.160 --> 0:00:32.080 I feel like we should note that we're in two 0:00:32.120 --> 0:00:33.400 separate places right now. 0:00:33.600 --> 0:00:37.280 We're in two separate places. I'm in the Bloomberg podcast studio, 0:00:37.280 --> 0:00:38.160 which is really cool. 0:00:38.320 --> 0:00:42.320 I'm at home, so I actually feel somewhat prepared for this, which. 0:00:42.159 --> 0:00:44.560 Is oh wow. I don't. It's gonna be great. It's 0:00:44.560 --> 0:00:45.520 gonna be all you. 0:00:45.840 --> 0:00:49.560 I don't feel that prepared. But let's let's dive in. Hello, 0:00:49.800 --> 0:00:52.559 something huge, Oh wait, we have to we have. 0:00:52.520 --> 0:00:54.480 To do you don't have to go ab something huge. 0:00:54.240 --> 0:00:59.760 Happened, something huge, the introduction. People know who we are, 0:01:00.160 --> 0:01:01.000 we speak for ourselves. 0:01:01.080 --> 0:01:04.400 Hello's Somebody's the thodcast, the stuff with the money. I'm mad, 0:01:04.520 --> 0:01:06.319 let's kitty, let's go all. 0:01:06.319 --> 0:01:10.959 Right, let's go Warren Buffett. 0:01:11.000 --> 0:01:16.839 Wow, I tell you it happened over the weekend. Berkshire Hathaway. 0:01:16.920 --> 0:01:18.959 Cheryloy reading Warren Buffer was like, by the way, I'm 0:01:18.959 --> 0:01:21.760 out at the end of the year, and you know, 0:01:22.400 --> 0:01:24.400 as happens on the weekend. I'm like, I got to 0:01:24.480 --> 0:01:28.120 write about this. On Monday, my WORFA was like, this 0:01:28.240 --> 0:01:30.640 really news. It's a ninety four year old man retiring. 0:01:30.840 --> 0:01:34.959 It's like, yeah, it is kind of funny and charming. 0:01:35.000 --> 0:01:37.600 How shocking it was, I mean not shocking, but still 0:01:37.680 --> 0:01:41.680 the only theme. Everyone was surprised, even though we also 0:01:41.760 --> 0:01:44.880 knew who his successor was going to be. Yeah, because 0:01:45.319 --> 0:01:47.160 it's been teased since like twenty twenty one. 0:01:47.520 --> 0:01:52.360 Not to be morbid, but like, if you are well regarded, 0:01:52.920 --> 0:01:58.240 successful person who is working successfully at age ninety four, 0:01:58.400 --> 0:01:59.960 people have a reason not to expect you to retire. 0:02:00.520 --> 0:02:02.080 That's like I'm going to be carried out, you know. 0:02:02.160 --> 0:02:03.440 So it's interesting that is your time. 0:02:03.640 --> 0:02:05.760 But at the same time, I feel like one of 0:02:05.760 --> 0:02:08.880 your legacies will be how well you pick your successor. 0:02:09.600 --> 0:02:11.720 That's true, but you're right, I mean, we knew who 0:02:11.720 --> 0:02:13.720 the successor was, but yeah, it's like having a sort 0:02:13.720 --> 0:02:15.480 of orderly transition is useful. 0:02:15.720 --> 0:02:17.400 I kind of want to talk about Craig Abel. I 0:02:17.400 --> 0:02:21.200 mean not to be disrespectful to Warren Buffett, but he's 0:02:21.520 --> 0:02:25.280 interesting in that he doesn't have much of an investing background. 0:02:25.520 --> 0:02:27.680 Like you think about do you think about Charlie Munger, 0:02:27.720 --> 0:02:31.160 you think about Warren Buffett, you think about fantastic investors, 0:02:31.400 --> 0:02:34.320 And he doesn't necessarily have that resume. He's more of 0:02:34.320 --> 0:02:36.280 an operator, like a business operator. 0:02:36.919 --> 0:02:43.079 It's so unique to have a big company that is 0:02:43.120 --> 0:02:46.160 sort of best known as a vehicle for a guy's 0:02:46.320 --> 0:02:48.840 stock picks, and like the guy who made the stock picks, 0:02:49.080 --> 0:02:50.880 it's really good at making stock picks, right, And so 0:02:50.919 --> 0:02:54.000 it's like there's a lot of value created in that company. 0:02:54.000 --> 0:02:56.320 But also you know, they bought a lot of companies 0:02:56.320 --> 0:03:00.919 that they operate and manage, and it would be surprising 0:03:01.000 --> 0:03:03.440 if they took that giant company and transitioned it to 0:03:03.600 --> 0:03:06.799 like the second greatest stockpicker ever, right, Like it sort 0:03:06.840 --> 0:03:09.800 of makes sense to be like, well, like railroads and transcommusation, 0:03:11.040 --> 0:03:13.600 we should make the CEO a guy who knows how 0:03:13.600 --> 0:03:16.240 to run railroads and hopefully the stock picking will take 0:03:16.240 --> 0:03:18.400 care of itself. But like it would be weird if 0:03:18.440 --> 0:03:20.200 they picked a guy with a stockpicking back gund because 0:03:20.200 --> 0:03:21.160 you'd have to run a company. 0:03:21.440 --> 0:03:24.360 Yeah, that's what he's going to do. I mean, I 0:03:24.400 --> 0:03:27.640 read something I forget who it was from which publication, 0:03:27.800 --> 0:03:29.799 but you know, you think about Berkshire Hathaway. It has 0:03:30.960 --> 0:03:33.919 lessened its reliance on like the insurance side of things. 0:03:33.960 --> 0:03:36.560 It's a lot of the energy business now, and that's 0:03:36.600 --> 0:03:41.000 obviously where greg Abel, that's his sandbox. At the same time, though, 0:03:41.040 --> 0:03:45.000 it is fun to think about what Berkshire Hathaway under 0:03:45.040 --> 0:03:47.360 greg Abel could look like. There's a lot of speculation 0:03:48.080 --> 0:03:51.160 that maybe we could see some spin offs. It's this huge, 0:03:51.320 --> 0:03:55.000 sprawling conglomerate with like four hundred thousand employees. Do you 0:03:55.040 --> 0:03:58.040 start to break things apart a little bit? So far, 0:03:58.080 --> 0:04:00.720 greg Able seems to be saying that obviously they're going 0:04:00.760 --> 0:04:03.280 to continue on the track they're on. But it's fun 0:04:03.320 --> 0:04:04.080 to imagine. 0:04:04.240 --> 0:04:06.240 It's pretty early days for him since. 0:04:06.040 --> 0:04:08.520 He's not in charge, you know, but he's had a 0:04:08.560 --> 0:04:10.800 long time to think about it. And it's true it 0:04:11.920 --> 0:04:15.360 doesn't take over until January first of twenty twenty six, 0:04:15.520 --> 0:04:19.080 but I don't know. I imagine in his idle day dreams, 0:04:19.080 --> 0:04:20.440 he thinks about what he's going to do. 0:04:20.800 --> 0:04:22.920 It is in so many ways a weird company, including 0:04:22.960 --> 0:04:25.880 just being a sprawling conglomerate is not really you know, 0:04:25.920 --> 0:04:28.920 hasn't been in vogue for forty years now. And there 0:04:28.920 --> 0:04:31.040 are a lot of things that Berkshire gets away with 0:04:31.279 --> 0:04:34.560 or like is beloved for because of Warren Buffett's presence. 0:04:34.560 --> 0:04:36.960 But without Warren Buffett's presence, you know, at some point 0:04:36.960 --> 0:04:39.440 someone's gonna be like, wow, we could use capital more efficiently. 0:04:39.520 --> 0:04:42.680 We could you know, have a cleaner story to tell 0:04:42.680 --> 0:04:44.720 toone because the story you tells the investors now was like, ah, 0:04:44.800 --> 0:04:46.800 look it's Warren Buffett, right, but like you can't tell 0:04:46.800 --> 0:04:48.240 that story anymore, and then you have to tell a 0:04:48.279 --> 0:04:51.200 story like you know, ooh or an energy company or whatever. Right, 0:04:51.279 --> 0:04:55.560 you go from having this very straightforward, very widely appealing 0:04:55.640 --> 0:04:57.920 story about Berkshire Hathlo to being like, well, we do 0:04:58.120 --> 0:05:03.480 mobile homes and you know we have candy candy, Yeah, 0:05:03.600 --> 0:05:05.560 we want a big chunk of apple for some reason. 0:05:05.600 --> 0:05:08.800 You know, it's like when it's like all of this 0:05:08.920 --> 0:05:11.360 disparate stuff is stuff that Warren Buffett likes. Everyone, Oh, 0:05:11.400 --> 0:05:14.280 Warren Buffett likes it, but it's like all this disparate 0:05:14.320 --> 0:05:17.080 stuff that Warren Buffett liked a long time ago, then 0:05:17.120 --> 0:05:18.760 it's like a less compelling story. 0:05:19.720 --> 0:05:22.919 Also a question maybe they'll have to confront is you know, 0:05:22.960 --> 0:05:25.680 we don't pay a dividend, which is fine because you 0:05:25.720 --> 0:05:27.880 had Warren Buffett there, But now maybe they'll start paying 0:05:27.880 --> 0:05:29.120 a dividend. I don't know. 0:05:29.880 --> 0:05:31.280 Yeah, it's the thing I think about a lot, right, 0:05:31.320 --> 0:05:35.280 Like I write often a headline, a section header. People 0:05:35.320 --> 0:05:38.320 are worried about stock buybacks, right Like, there's this idea 0:05:38.360 --> 0:05:41.839 that like, either a company allocate's capital, right like, it 0:05:42.000 --> 0:05:45.200 has money and it uses that to invest in building 0:05:45.279 --> 0:05:47.720 factories or buying other companies or doing whatever it does 0:05:47.760 --> 0:05:51.000 with the capital, or it returns the capitol to shareolders 0:05:51.040 --> 0:05:53.680 and says you would do a better job of investing 0:05:53.720 --> 0:05:58.200 this capital than we would. Right Nobody is agitating for 0:05:58.320 --> 0:06:02.000 Berkshire to return capital. The shit sareholders because if you're 0:06:02.000 --> 0:06:05.320 an investor in Berkshire, you're not buying a piece. You're like, oh, 0:06:05.320 --> 0:06:07.039 I'm making you like a very focused bet on like 0:06:07.200 --> 0:06:08.960 energy or whatever. Right You're not like I just want 0:06:09.000 --> 0:06:11.040 like their energy exposure. You're buying because you want Warren 0:06:11.040 --> 0:06:14.600 Buffet exposure. And you're buying it because you're certain that 0:06:14.680 --> 0:06:17.520 Warren Buffett is a better alligator of capital than you are. Right, 0:06:17.600 --> 0:06:20.480 you're buying it because you want Warren Buffett, you know 0:06:20.520 --> 0:06:23.400 who has the giant cash pile. You're willing to wait 0:06:23.440 --> 0:06:25.080 around until he finds what he wants to do with 0:06:25.120 --> 0:06:27.320 that cash pile because you're certain that he's going to 0:06:27.320 --> 0:06:28.960 do a better job invest in that cash pile than 0:06:29.000 --> 0:06:33.680 you are. But like most companies, there's some shareholder agitation 0:06:33.800 --> 0:06:38.680 to say, look, you CEO of a company, if you 0:06:39.160 --> 0:06:41.000 hang on to a lot of cash, you'll probably to 0:06:41.080 --> 0:06:43.240 play it in some wasteful way. You'll probably like do 0:06:43.360 --> 0:06:46.120 some vanity project or like invest in some dumb idea. 0:06:46.240 --> 0:06:48.320 You should returned the cash to shareholders, and the shareolders 0:06:48.360 --> 0:06:50.120 will do a better job of figuring out what to 0:06:50.120 --> 0:06:52.279 do with the cash then you will. Yeah, and once 0:06:52.320 --> 0:06:54.600 Warren Buffet Lelys called those normal pressures kind of come 0:06:54.640 --> 0:06:55.040 into play. 0:06:55.200 --> 0:06:57.120 For those keeping track at home, the cash pile is 0:06:57.120 --> 0:06:59.720 currently a like three hundred and fifty billion dollars, so 0:07:00.320 --> 0:07:01.159 it's quite a bit. 0:07:01.520 --> 0:07:02.440 That's a big dividend. 0:07:02.680 --> 0:07:05.640 I'm interested to see what happens to the shares in general. 0:07:06.000 --> 0:07:09.680 We talk about the so and so premium on the 0:07:09.720 --> 0:07:12.920 show frequently. Usually it's the Elon Musk premium. In this 0:07:13.000 --> 0:07:16.000 case it's the Warren Buffett premium, which ties into the 0:07:16.000 --> 0:07:17.960 discussion over the dividend nicely. 0:07:18.440 --> 0:07:20.040 Yeah, I don't have a great empirical sense of how 0:07:20.040 --> 0:07:22.600 big the Warren Buffet premium is. I've heard people argue 0:07:22.640 --> 0:07:25.000 that it has historically been large and it's smaller now 0:07:25.040 --> 0:07:30.440 because even like three months ago, like you were discounting 0:07:30.440 --> 0:07:33.280 your relatively short period of the Warren Buffett premium, right, 0:07:33.360 --> 0:07:35.480 You're like, well, Warren Buffett will be investing this money 0:07:35.480 --> 0:07:39.200 for some period of time, but not perpetuity. But yeah, 0:07:39.680 --> 0:07:42.000 it's interesting to see what the Buffet premium will sort 0:07:42.040 --> 0:07:43.600 of watch out to be. 0:07:43.840 --> 0:07:47.800 So we're talking about greg Abel, the successor to Moren 0:07:47.840 --> 0:07:54.040 Buffett in Berkshire Hathaway, but perhaps a less formula has 0:07:54.080 --> 0:07:57.200 also emerged this week. Can I guess, please. 0:07:58.520 --> 0:07:58.720 Guess? 0:07:58.720 --> 0:08:01.880 Friend of the show, black Man Bill Ackman. He's executive 0:08:01.920 --> 0:08:04.120 chairman of Howard Hughes. He finally did. 0:08:04.320 --> 0:08:06.680 He's striking while the iron is hot, Like these are 0:08:06.720 --> 0:08:10.080 like simultaneous actions, right, like he like strike his deal 0:08:10.160 --> 0:08:15.600 with Howard Hughes to take like almost control forty. 0:08:14.080 --> 0:08:20.240 Seven of Howard Hughes holdings. So he is weighing plans 0:08:20.240 --> 0:08:24.560 to build and insure expand the real estate company's remit 0:08:24.680 --> 0:08:28.000 and as he stated plenty of times before, he's trying 0:08:28.040 --> 0:08:32.520 to basically model himself after Berkshire, Hathaway become a modern 0:08:32.600 --> 0:08:36.880 day Berkshire. And the timing was interesting. Buffett announced this 0:08:37.240 --> 0:08:40.120 over the weekend and then this news for Bill Ackman 0:08:40.240 --> 0:08:43.160 broke on Monday. So maybe they just guess at the 0:08:43.200 --> 0:08:44.440 time their real rush. 0:08:44.240 --> 0:08:47.520 To get get it done, Like it's like twenty four 0:08:47.520 --> 0:08:48.960 hours to start the new. 0:08:49.160 --> 0:08:50.079 Four hour turnarounds. 0:08:50.160 --> 0:08:53.920 Yeah, it is like Berkshire in the sense that it 0:08:54.040 --> 0:08:57.120 is not an insurance company that he is acquiring control 0:08:57.160 --> 0:09:02.160 of in order to eventually at an insurance company like Berksure. 0:09:02.160 --> 0:09:04.120 Hathway started as a textile company and then like you know, 0:09:04.440 --> 0:09:07.600 a wired insurance and insurance turned out to be a 0:09:07.720 --> 0:09:11.000 big part of Buffet's success, right because you have like 0:09:11.080 --> 0:09:14.040 the sort of like cheap non callable leverage that allows 0:09:14.080 --> 0:09:16.839 you to make a lot of interesting bets. The Lackman 0:09:16.880 --> 0:09:19.280 would also like to do that but acquiring and ensure 0:09:19.360 --> 0:09:23.040 it would be too easy, so he acquired a real 0:09:23.160 --> 0:09:26.480 estate company to build his Berkshire out of. I don't know, Yeah, 0:09:26.559 --> 0:09:29.160 it is interesting to me as a guy who like 0:09:29.200 --> 0:09:31.920 reads and writes about like hedge funds and high ricercy 0:09:32.000 --> 0:09:35.680 trading prims and stuff. How are the eard Warren Buffett 0:09:35.720 --> 0:09:38.240 is for doing this like really old school thing, which 0:09:38.280 --> 0:09:43.079 is like fundamental analysis, long term buy and hold long 0:09:43.200 --> 0:09:44.720 investing in stocks. 0:09:44.760 --> 0:09:44.920 Right. 0:09:44.920 --> 0:09:46.800 I mean he also, you know, as we're talking about, 0:09:46.800 --> 0:09:48.719 like he also runs a conglomerate, right, and there's a 0:09:48.720 --> 0:09:51.240 lot of operating businesses there. But like he's famous for 0:09:51.320 --> 0:09:53.400 being like ooh, I like coke. I'll buy coke and 0:09:53.440 --> 0:09:55.520 coke COO's op. Right, and he holds it for decades. 0:09:56.080 --> 0:09:58.320 And when you look around it like people who are 0:09:58.320 --> 0:10:02.120 financial celebrities these days forty years ago, like Warren Buffett 0:10:02.120 --> 0:10:04.920 was the best of a group of people who are 0:10:04.920 --> 0:10:07.640 competitors in that business. Right, Like you know you would 0:10:07.640 --> 0:10:10.560 comp him to like celebrity mutual fund managers. Right, but 0:10:10.600 --> 0:10:12.800 you look at it like financial celebrities these days, there's 0:10:12.800 --> 0:10:14.880 not a lot of that, you know, It's mostly like 0:10:15.520 --> 0:10:18.720 people who run hedge funds and are not giving you 0:10:19.080 --> 0:10:21.040 long exposure to large cap equities, but that they are 0:10:21.080 --> 0:10:24.240 doing some more complicated, more market neutral, more like alpha 0:10:24.280 --> 0:10:27.680 generating thing. Stockpickers not stock pickers, and certainly not like 0:10:27.840 --> 0:10:30.920 very long term stockpickers. And the guy who has really 0:10:31.040 --> 0:10:34.240 positioned himself as being that is Bill Ackman, right, Like 0:10:34.440 --> 0:10:37.400 you look at his fund and it's you know whatever, 0:10:37.440 --> 0:10:39.400 it's like twelve or fourteen names that don't turn over 0:10:39.480 --> 0:10:41.600 that often, right, And I'll tell you know, they do 0:10:41.880 --> 0:10:43.680 derivative stuff on the side to the kind of like 0:10:43.720 --> 0:10:46.320 smooth returns, but like the main business is like long 0:10:46.400 --> 0:10:50.160 term fundamental stock picking. So it is interesting that he 0:10:50.200 --> 0:10:51.920 wants to get into the Warren Buffett game and he's 0:10:51.960 --> 0:10:54.480 like the only person who's doing the thing that Warren 0:10:54.480 --> 0:10:56.120 Buffett was doing, which I think is you know, kind 0:10:56.120 --> 0:10:58.480 of passe in many respects, but you know, it still 0:10:58.559 --> 0:10:59.720 has an obvious appeal. 0:11:14.880 --> 0:11:18.120 If you thought the Berkshire Hathaway was an unusual company 0:11:18.240 --> 0:11:21.920 not a normal company, boy, do I have a corporate 0:11:22.000 --> 0:11:23.559 structure for you? Open ai. 0:11:24.120 --> 0:11:26.640 See I think that open aa is a normal tech company, 0:11:26.840 --> 0:11:30.360 Like I think open a is totally normal. Open Ai 0:11:31.120 --> 0:11:35.640 is a private tech company that is backed by venture capitalists. 0:11:35.720 --> 0:11:38.800 And also Microsoftware is a big stake and like Softing, Right, 0:11:38.840 --> 0:11:41.320 so the classic capital structure except for Microsoft like venture 0:11:41.320 --> 0:11:43.440 capitalist and has like a giant slug up money from Softing, 0:11:43.920 --> 0:11:47.720 and it is run by a charismatic visionary CEO, Sam Altman, 0:11:48.280 --> 0:11:55.120 And the explicit proposition of the company to like investors is, look, 0:11:55.160 --> 0:11:58.559 we're not going to like be focused on maximizing profits 0:11:58.600 --> 0:12:00.320 for you in the short term. We're not going to 0:12:00.360 --> 0:12:03.680 be run as a business. We have a vision about 0:12:03.679 --> 0:12:05.920 what is good for humanity, and we're going to pursue 0:12:05.960 --> 0:12:07.760 that long term vision. And when I say we, I 0:12:07.760 --> 0:12:09.520 mean Sam Altman has a vision for what is good 0:12:09.520 --> 0:12:11.199 for humanity and he's going to pursue that long term 0:12:11.240 --> 0:12:15.320 vision and shareholders will not have much ability or desire 0:12:15.440 --> 0:12:18.080 to meddle with that in the pursuit of short term profits. 0:12:18.120 --> 0:12:21.360 And that's like very explicitly the proposition that like Facebook 0:12:21.400 --> 0:12:23.720 put in its ip of perspectives, and that has become 0:12:23.760 --> 0:12:26.320 like standard in Silicon Valley, right, It's like what you 0:12:26.440 --> 0:12:31.280 want as a venture capitalist is a visionary CEO with 0:12:31.400 --> 0:12:34.960 a like mission that is not the short term pursuit 0:12:34.960 --> 0:12:37.680 of profit but has some grand vision of like humanity's 0:12:37.679 --> 0:12:40.200 future and you want to invest in that and kind 0:12:40.200 --> 0:12:41.960 of like take your hand off the wheel and let 0:12:41.960 --> 0:12:47.120 the visionary CEO cook. And that's what's happening here. But 0:12:47.160 --> 0:12:49.959 it's like it's like a nonprofit. There's like all this stuff, 0:12:50.559 --> 0:12:53.640 but like that's what's happening, right. Like the news is 0:12:53.640 --> 0:12:57.720 that like open Aye is a nonprofit that controls a 0:12:57.720 --> 0:13:00.800 for profit basically, and they were going to convert to 0:13:00.800 --> 0:13:03.080 being a regular for profit and now they're not, and 0:13:03.200 --> 0:13:05.959 instead they're gonna be you know, there's gonna be like 0:13:06.000 --> 0:13:08.080 a for profit company and it's gonna be pretty normal, 0:13:08.120 --> 0:13:10.960 and it's gonna have shareholders and one of the big 0:13:10.960 --> 0:13:14.559 shareholders will be the open AI nonprofit. But the nonprofit 0:13:14.600 --> 0:13:17.240 will control it, right, it will have I've said it'll 0:13:17.240 --> 0:13:20.320 have super voting shares something that like rhymes with that, right, 0:13:20.360 --> 0:13:22.199 Like maybe it'll have super voting shares. Maybe it'll have 0:13:22.200 --> 0:13:24.240 a contractual right to appoint the board, but it'll appoint 0:13:24.240 --> 0:13:28.400 the board of the for profit. And you know who 0:13:28.440 --> 0:13:31.719 will run the nonprofit, Well, there's a nonprofit board and 0:13:31.760 --> 0:13:33.960 like the board will sort of perpetuate itself, right, Like 0:13:34.000 --> 0:13:36.360 the current board will pick future board members, and like 0:13:36.400 --> 0:13:39.640 the board is like I don't want to say handpicked 0:13:39.679 --> 0:13:42.200 by Sam Altman, but like there was a nonprofit board 0:13:42.240 --> 0:13:44.199 that fired Sam Altman and then he came back, and 0:13:44.240 --> 0:13:46.080 as a condition of him coming back, he fired that 0:13:46.120 --> 0:13:49.840 board and replaced it with his board. So you know, 0:13:50.480 --> 0:13:53.520 who's gonna disagree with his vision of what's best for humanity? 0:13:53.600 --> 0:13:56.640 Like SoftBank probably not so. I just think it's like 0:13:56.679 --> 0:13:58.679 a very normal tech company with like a lot of 0:13:58.960 --> 0:14:02.120 weird like thing. Yeah, it's a story that like you've 0:14:02.120 --> 0:14:03.760 heard before about Facebook. 0:14:03.360 --> 0:14:05.360 You know, I find it a little bit exhausting, Like 0:14:05.400 --> 0:14:08.440 the lip service. Maybe it's not lip service, but that 0:14:08.640 --> 0:14:12.240 these visionary founders pay to like bettering humanity makes a 0:14:12.280 --> 0:14:14.480 little bit more sense when you're talking about the mission 0:14:14.480 --> 0:14:17.920 of open Ai. The mission of Facebook is pretty rich. 0:14:18.040 --> 0:14:19.840 I mean when you phrase it that way, it just 0:14:19.840 --> 0:14:20.720 sounds like another form. 0:14:20.760 --> 0:14:23.040 I believe it in some form, you know, it's. 0:14:24.000 --> 0:14:26.080 It kind of it rhymes with it. 0:14:26.080 --> 0:14:28.560 It's like very grandiose, right, Yeah, it's in many ways 0:14:28.560 --> 0:14:32.320 like one person's idiosyncratic vision of benefiting humanity. Right, there's 0:14:32.320 --> 0:14:35.440 a broad category of ways that AI can go where 0:14:35.480 --> 0:14:37.560 Sam Altman will be like that was great for humanity, 0:14:37.560 --> 0:14:39.320 and everyone else will be like, no, it wasn't right, 0:14:39.400 --> 0:14:41.720 Like that's like a distinctly possible outcome. 0:14:42.040 --> 0:14:45.240 Yeah, so how it stands right now? So Sam Altman 0:14:45.440 --> 0:14:50.160 wanted to completely separate from the nonprofit board his nonprofit 0:14:50.240 --> 0:14:54.280 over verseers. That's not happening. They're now a PBC, which 0:14:54.800 --> 0:14:57.440 it seems like wasn't a common structure until you started 0:14:57.480 --> 0:14:59.920 seeing these AI labs. 0:15:00.320 --> 0:15:02.360 Yeah, there were a bunch of them. Like it's been 0:15:02.400 --> 0:15:04.200 a thing for like more than a decade. 0:15:04.280 --> 0:15:04.520 Nap. 0:15:04.600 --> 0:15:07.600 Yeah, the non open AI AI labs got really into 0:15:07.760 --> 0:15:10.520 being public benefit corporations. The idea of a PBC is 0:15:10.560 --> 0:15:13.680 that you can run the company. The board can run 0:15:13.680 --> 0:15:16.280 a company with like the explicit ability to consider things 0:15:16.280 --> 0:15:18.680 other than shareholders right to consider the good of humanity, 0:15:18.920 --> 0:15:20.600 which I kind of think companies can do. Anyway, I 0:15:20.840 --> 0:15:23.040 don't know how material it is to be a PBC, 0:15:23.640 --> 0:15:25.480 I mean, reading between the lines, just the teeny bit. 0:15:25.680 --> 0:15:27.840 They wanted to be a for profit company where the 0:15:27.840 --> 0:15:32.200 nonprofit board owned a minority of the shares and a 0:15:32.280 --> 0:15:36.720 majority of the directors were elected by normal shareholders, and 0:15:38.600 --> 0:15:42.120 what they have now gotten is that, except that the 0:15:42.160 --> 0:15:45.320 nonprofit board controls the for profit board controls the you know, 0:15:45.440 --> 0:15:49.040 as a majority of voting stake in the for profit company, 0:15:49.080 --> 0:15:50.520 and so it gets to a point the board of 0:15:50.520 --> 0:15:53.040 the for profit company. But it's a pretty minor difference, 0:15:53.080 --> 0:15:56.320 I think, well, sorry, it's not a minor difference. It's 0:15:56.360 --> 0:15:59.000 a minor structural difference. It's a major difference whether the 0:15:59.000 --> 0:16:01.440 company is sort of alter controlled by a board answerable 0:16:01.480 --> 0:16:06.160 to shaholders, or ultimately controlled by a board you know, 0:16:06.640 --> 0:16:10.320 answerable to the good of humanity as somewhat filtered through 0:16:10.400 --> 0:16:12.000 Sam Maltman's visions. 0:16:12.480 --> 0:16:14.920 I don't know. Again, it kind of reminds me of 0:16:15.400 --> 0:16:18.320 ESG because you think about oil companies getting dinged for 0:16:18.480 --> 0:16:22.280 not prioritizing shareholders and starting to like care about the environment. 0:16:22.760 --> 0:16:25.760 Maybe if they were PBCs, they would be insulated from 0:16:25.760 --> 0:16:26.480 those critiques. 0:16:26.720 --> 0:16:28.240 Yeah. I think it'd be hard to convert a whole 0:16:28.240 --> 0:16:30.720 company to a PBC, but it would be interesting to try. 0:16:30.960 --> 0:16:33.200 Yeah, it would be fun. If I were starting a 0:16:33.240 --> 0:16:36.520 company right now, I would probably structure myself as a PBC. 0:16:36.720 --> 0:16:38.960 It seems like it just gives you a layer of protection. 0:16:39.280 --> 0:16:41.760 Yes, yes, exactly like a PBC. This is what I'm 0:16:41.760 --> 0:16:43.480 saying about. Like the vision if you're any like a 0:16:43.520 --> 0:16:47.200 PBC at the margin, makes you less answerable to shareholders 0:16:47.240 --> 0:16:49.000 and gives you more ability to be like, no, we're 0:16:49.040 --> 0:16:51.800 considering other stakeholders or other interests, right, and like that's 0:16:52.440 --> 0:16:56.080 always additive to the flexibility of a CEO and a board. 0:16:56.160 --> 0:16:56.240 Right. 0:16:56.280 --> 0:16:58.360 It always gives you an ability to say no to 0:16:58.400 --> 0:16:59.760 something you don't want to do because you're like, oh, 0:16:59.760 --> 0:17:03.840 we can a difference stakeholder, right, Like it's insulation from pressure, right. 0:17:04.560 --> 0:17:08.679 And it is phrased or interpreted as like, this company 0:17:08.680 --> 0:17:12.000 has more obligations because it has obligations to humanity as 0:17:12.040 --> 0:17:13.919 well as sharelders, But in fact, it means it has 0:17:13.960 --> 0:17:15.800 fewer obligations because it means it doesn't have like a 0:17:15.800 --> 0:17:18.240 binding obligation to shaolders in the same way that a 0:17:18.280 --> 0:17:21.600 regular company does. And like the obligations to humanity are 0:17:21.600 --> 0:17:23.320 not particularly binding, and so you just get to make 0:17:23.320 --> 0:17:25.760 more decisions based on what you want to do rather 0:17:25.800 --> 0:17:29.400 than what the s shelders want. This is my cynical take. 0:17:29.960 --> 0:17:32.840 I like this, so, I mean, I don't know, it's 0:17:32.920 --> 0:17:36.040 just it's a it's humanity is a broad church, and 0:17:36.080 --> 0:17:38.040 what's good for it is open to interpretation. 0:17:38.320 --> 0:17:39.800 I do. I'm gonna say two other things about this. 0:17:39.840 --> 0:17:43.760 So one, I'm saying that open AI is now in 0:17:43.800 --> 0:17:45.800 a position where it can do what it thinks is 0:17:45.880 --> 0:17:48.280 best for humanity based on Sam Waltman's vision or what 0:17:48.359 --> 0:17:51.080 is best for humanity. That's not quite true. So first 0:17:51.080 --> 0:17:52.679 of all, there is a board, and the board you know, 0:17:53.200 --> 0:17:56.320 has to exercise its own independent judgment, and like you know, 0:17:56.400 --> 0:17:58.399 it's not totally under the control of Sam Waldman, who 0:17:58.480 --> 0:18:00.639 is not a sheldering, because only whatever moral power he 0:18:00.680 --> 0:18:02.920 brings to it, and like one board seat, moral power 0:18:03.000 --> 0:18:05.480 is quite big because when he got fired, all the 0:18:05.480 --> 0:18:07.679 board got fired too. But anyway, but the other person 0:18:07.720 --> 0:18:11.640 who has a lot of say over open AI's vision 0:18:11.680 --> 0:18:14.679 for humanity is the Attorney General of the state of California, 0:18:14.800 --> 0:18:18.399 also other attorneys like Delaware, but like largely California. Because 0:18:18.400 --> 0:18:21.280 open a is controlled by a nonprofit, the nonprofit is 0:18:21.520 --> 0:18:26.359 subject to like state attorney general jurisdiction, and the attorney generals, 0:18:27.280 --> 0:18:30.719 particularly of California, had a lot of input into this 0:18:30.720 --> 0:18:33.879 this for profit conversion. And I think still do like 0:18:33.960 --> 0:18:37.840 get to sign off on like the current structure, and 0:18:38.320 --> 0:18:43.440 they presumably have some power going forward. If, like open AI, 0:18:43.880 --> 0:18:48.920 the nonprofit says we are going to appoint Skydeat to 0:18:48.960 --> 0:18:51.800 the board of the public company so it can slay humanity, 0:18:51.840 --> 0:18:54.080 the California Attorney General can be like, no, that's not 0:18:54.400 --> 0:18:56.880 in the best interests of humanities who don't do it right. 0:18:57.320 --> 0:19:02.080 There's some oversight of nonprofits that exists here that wouldn't 0:19:02.160 --> 0:19:04.840 exist if it was just a regular public company. So 0:19:05.480 --> 0:19:08.520 I don't know how that's going to work. I don't 0:19:08.560 --> 0:19:14.000 normally think that's super activist oversight, but because of all 0:19:14.040 --> 0:19:15.960 the weird, you know, stuff that has gone on with 0:19:16.000 --> 0:19:19.120 open AI, you know, you know, the California Attorney General 0:19:19.200 --> 0:19:21.439 is paying close attention, and so there is some opportunity 0:19:21.440 --> 0:19:24.159 for that oversight to matter. The thing I think is 0:19:24.160 --> 0:19:26.040 interesting is, like, you know, I've said, this is a 0:19:26.040 --> 0:19:28.680 normal company with a founder with a vision, blah blah blah. 0:19:28.800 --> 0:19:30.439 But the one thing that makes it not normal is 0:19:30.440 --> 0:19:35.040 that Sam Altman owns zero shares of this company, and 0:19:35.119 --> 0:19:37.080 I don't know how that plays out, right, Like, one 0:19:37.119 --> 0:19:39.479