Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: Well, Elon Musk is now the richest person on the planet.
Speaker 2: More than half the satellites in space are owned and
Speaker 2: controlled by one man. Well, he's a legitimate super genius,
Speaker 2: I mean legitimate.
Speaker 1: He says he's always voted for Democrats, but this year
Speaker 1: it will be different.
Speaker 3: He'll vote Republican.
Speaker 2: There is a reason the US government is so reliant
Speaker 2: on him. Alon Musk is a scam artist and he's
Speaker 2: done nothing.
Speaker 4: Anything he does, he's fascinating people.
Speaker 2: Hey, welcome to Elon, Inc. Bloomberg's weekly podcast about Elon Musk.
Speaker 2: It's March fifth, twenty twenty four. I'm Max Chafkin in
Speaker 2: for David Papadopolis. This week we have courtroom drama for you.
Speaker 2: We're looking at an Elon feud between him and open ai,
Speaker 2: the maker of chat GBT. Last Thursday, Elon sued Sam Altman,
Speaker 2: the co founder of open Ai, claiming that he breached
Speaker 2: his contract by pursuing profit over the public good. The
Speaker 2: funny thing is that Elon has his own for profit
Speaker 2: AI company, x dot Ai. So there's some question about
Speaker 2: whether or not this is like a high minded activity
Speaker 2: or another sort of brilliant troll by a very troll
Speaker 2: happy billionaire. We're going to talk about that, and then
Speaker 2: later in the episode we're going to be talking about
Speaker 2: another bit of legal action on Elon Musk stocket. The
Speaker 2: lawyers who got Elon Musk's pay package, the fifty five
Speaker 2: billion dollar pay package from Tesla, voided they want to
Speaker 2: be paid get this six billion dollars and they don't
Speaker 2: want cash, they want Tesla stock. So we will get
Speaker 2: into all of that, and to do so, we've got
Speaker 2: a great panel for you. We have gathered Sharene Geffar,
Speaker 2: who covers AI for Bloomberg. Hey, Dana Hull, now officially
Speaker 2: Bloomberg's chief Elon Musk reporter, Hello, Dana Hey. And Matt Levine,
Speaker 2: author of Bloomberg Opinion's Money Stuff newsletter, who always seems
Speaker 2: to get his vacations interrupted by Elon news Hello Matt.
Speaker 4: Yeah, I'm Bloomberg's unofficial Elon Musk correspondent.
Speaker 2: So this lawsuit, first, let's start with Sharen. Can you
Speaker 2: just give us an overview of what is in this complaint?
Speaker 2: What is Elon Musk alleging?
Speaker 1: Yeah, So, basically, Elon is claiming that when he invested
Speaker 1: in open Ai and made a deal with Sam Altman
Speaker 1: and the founders of the company that the plan was
Speaker 1: for open ay to be a nonprofit. And Elon's claim
Speaker 1: is that open ai has breached this contract and this
Speaker 1: agreement by turning into a for profit company with you know,
Speaker 1: heavy investment by Microsoft, and you know, the outcome is
Speaker 1: he Elon wants to see Openey's research become public and
Speaker 1: wants to rid open Ai of it agreement with Microsoft.
Speaker 2: At this point, Matt, does this make sense? Like, can
Speaker 2: a nonprofit donor sue a nonprofit for you know, not
Speaker 2: being sufficiently good to humanity?
Speaker 4: Not really? I mean, like normally the enforcement of nonprofit
Speaker 4: missions is a matter for like the state attorney general,
Speaker 4: not for individual donors, right, Otherwise you'd all the time
Speaker 4: see donors saying, you know, I gave one hundred dollars
Speaker 4: to this charity and they didn't do what I wanted.
Speaker 4: But so that's why he's bringing a breach of contract action.
Speaker 4: And it's very strange because they didn't sign any sort
Speaker 4: of contract, right, Like He's like, well, I have this
Speaker 4: email from Sam Altman from twenty fifteen that's basically a contract.
Speaker 4: So it's a bit of a stretch as a legal action.
Speaker 2: Yeah, there's an email, I think, and it's like there's
Speaker 2: this just sort of a bunch of vague principles and
Speaker 2: then this the articles of incorporation, and I guess there's
Speaker 2: some maybe additional agreement in Elon's head, Dana. Why is
Speaker 2: he doing this? I mean, I think it's tempting to
Speaker 2: just sort of say, like this is just a guy
Speaker 2: who loves a good stunt, keeping himself in the middle
Speaker 2: of the news.
Speaker 5: I think Elon just always has to be the man
Speaker 5: in the arena. And Tesla's valuation was all about being
Speaker 5: an EV company first mover advantage. Now it very much
Speaker 5: rests on it being an AI company. And he sees
Speaker 5: Sam as this big threat. I mean Sam is like
Speaker 5: the golden boy now, right, like raising all this money,
Speaker 5: and you know he's got this deal with Microsoft Open Ai.
Speaker 5: He's back, you know, running open Ai. He's supposedly raising
Speaker 5: money for like a chip venture, and like Elon is
Speaker 5: very competitive, like he's got to be the alpha male.
Speaker 5: And if you look at the landscape of AI titans,
Speaker 5: Sam is like number one, and so Elon is going
Speaker 5: for the jugular.
Speaker 2: Yeah, I mean he's been like a lot of the
Speaker 2: language in this lawsuit. I noticed from like listening to
Speaker 2: all these podcasts that Elon's been doing over the last
Speaker 2: year or so, where he's sort of been, I don't know,
Speaker 2: kind of grumbling about about not getting enough credit for
Speaker 2: this and also criticizing open Ai. What is he actually
Speaker 2: looking for here? Like, what's the endgame? Is there any
Speaker 2: kind of hope for some kind of resolution that would
Speaker 2: be you know, advantageous to him.
Speaker 5: I guess in his ideal world, what like the whole
Speaker 5: open ai project falls apart, and like they have to
Speaker 5: like reveal to the whole world what they're working on,
Speaker 5: and I mean Stream knows better than I do what
Speaker 5: the endgame would be here.
Speaker 1: Yeah, So Elon's makes an interesting case here that open
Speaker 1: ai has already reached AGI or artificial general intelligence, this
Speaker 1: idea of when AI essentially surpasses or matches at least
Speaker 1: the intelligence of humanity. And you know that that is
Speaker 1: Openey's mission and has always been right to build AGI,
Speaker 1: as is Googles, as is several other leading A companies.
Speaker 1: Elon's making the case in this lawsuit that with GPT four,
Speaker 1: open Ai has already achieved AGI. And at that point,
Speaker 1: it actually is in their agreement with Microsoft that open
Speaker 1: ai and Microsoft's contractual agreements do no longer hold once.
Speaker 2: Open ai has reached AGI.
Speaker 1: Now open Ai says, no, we are far off from
Speaker 1: that GPT four. Our latest model is nowhere near being AGI.
Speaker 1: How does the case in Elon is making which is
Speaker 1: a bold one, and he actually cites some Microsoft research.
Speaker 1: It's very interesting where a few Microsoft researchers did do
Speaker 1: this paper recently saying that we see sparks of AGI
Speaker 1: in the latest model. So he kind of uses Microsoft's
Speaker 1: own researchers work to shoe their pail in this suit.
Speaker 2: And we should say that open ai has not yet
Speaker 2: commented on this lawsuit, although Bloomberg did report over the
Speaker 2: weekend basically a bunch a couple of memos in which
Speaker 2: they're waving it off, saying it's all bogus met Where
Speaker 2: do you think this goes? I mean, do you think
Speaker 2: this could wind up in court? Or is this gonna
Speaker 2: be one of those lawsuits that I don't know, we
Speaker 2: just never hear about again.
Speaker 4: I mean, he doesn't really settle, and like where are
Speaker 4: they going to pay him? Like there's no settlement here. Right,
Speaker 4: So it's going to go to court. My suspicion is
Speaker 4: that he will lose fairly early on because of sort
Speaker 4: of basic things like there was no contract, he has
Speaker 4: no standing to sue, et cetera. But if that's not true,
Speaker 4: I don't know. I mean, one reason, one strategic reason
Speaker 4: he might be bringing this lawsuit is because if he
Speaker 4: gets anywhere, he can get discovery right and he can
Speaker 4: like find out stuff about the inner workings of open Ai,
Speaker 4: which is really useful to him as a guy who's
Speaker 4: building a competitor to open Ai.
Speaker 2: And amazing tweet material to you.
Speaker 4: Yeah, I mean, I think that a lot of lawsuits
Speaker 4: settle because for most people it is unpleasant and expensive
Speaker 4: to conduct a lawsuit. For Elon Musk, it's extremely fun
Speaker 4: and he has a lot of money. So I think
Speaker 4: that he will end up not winning any substantive relief
Speaker 4: from this lawsuit, but we'll have a lot of fun
Speaker 4: doing it.
Speaker 2: To me anyway, as a stunt, it's like a win win, right,
Speaker 2: because on one hand, the judge could say, yes, open
Speaker 2: Ai got to Agi and therefore it has to give up.
Speaker 2: It's you know, has to this Microsoft partnership is dead
Speaker 2: or on the other hand, a judge will have to say, no,
Speaker 2: your your AI isn't very good, which would also be
Speaker 2: good for Elon Musk. I think, Matt, how do you
Speaker 2: rank this in the other sort of pantheon of dubious
Speaker 2: Elon Musk lawsuits.
Speaker 4: I'm sympathetic to this one. Like, I don't think he's
Speaker 4: gonna win, you know, like I don't think that like
Speaker 4: there was a contract, and I think, like the legal
Speaker 4: theory here is dubious. But I look at this as
Speaker 4: like not a piece of strategy or whatever. I look
Speaker 4: at it as like he donated tens of millions of
Speaker 4: dollars to a nonprofit that is now an eighty six
Speaker 4: billion dollars startup that's raising money and commercializing stuff for MICROSOFTS.
Speaker 4: And he's like, well, how did that work? Like, I
Speaker 4: think that's a very reasonable complaint, like not as a
Speaker 4: legal matter, just as like a you know, personal matter.
Speaker 4: And so of course he's mad and he's bringing this
Speaker 4: lot suit. I don't know, I'm sympathetic to that.
Speaker 2: He's pointing to some real hypocrisy with open AI, which
Speaker 2: is that like he's gone Sam Altman has gone around saying,
Speaker 2: you know, AI is really out of control we got.
Speaker 2: We gotta save the world from AI, and his solution
Speaker 2: seems to be putting the AI into like every Microsoft product.
Speaker 2: And there's something I think Musk kind a quote on
Speaker 2: this that's been circulating where he said it says, if
Speaker 2: you gave you know, money to save the Amazon and
Speaker 2: instead it turned out that the saved Amazon charity was
Speaker 2: actually just like cutting down trees. Dana, what do you
Speaker 2: make of that?
Speaker 5: I guess on its face, the idea that a nonprofit
Speaker 5: is now like a financially very lucrative, highly valued part
Speaker 5: of Microsoft maybe is problematic. I could see the I
Speaker 5: could see the argument for that, But I think the
Speaker 5: larger context here is that, like, Elon isn't just like
Speaker 5: an investor who feels like he was duped. He is
Speaker 5: a competitor. I mean, he has his own AI company,
Speaker 5: and this is the same guy. Let us remind everyone
Speaker 5: who made this big show of like signing a letter
Speaker 5: saying that AI should be paused while he was like
Speaker 5: secretly creating his own startup. So, like, I just don't
Speaker 5: have a lot of empathy for Elon in this regard
Speaker 5: because he's always got his own interest at play, and
Speaker 5: right now his own interest is that through X and
Speaker 5: X dot AI, he's trying to start his own competitor
Speaker 5: to chat GPT, which is.
Speaker 2: GROCK And so yeah, they're two competitors. Actually XAI and
Speaker 2: Tesla is a competitor right in a sense.
Speaker 5: If you take the take the view that like, yeah,
Speaker 5: Tesla is trying to do full self driving, and like
Speaker 5: Tesla has all this data and Tesla is training all
Speaker 5: these models all the time. But I just want to
Speaker 5: make sure there's you know, as long as everyone realizes that,
Speaker 5: like you know, Elon is not just like an investor
Speaker 5: who said that open ai is no longer a nonprofit
Speaker 5: or is it really a nonprofit? He's like a tech
Speaker 5: titan who has his own AI ambitions and see Sam
Speaker 5: as the number one threat to what he's trying to accomplish.
Speaker 2: Yeah, Sharine, you're reading on this like as you look
Speaker 2: at the competitive landscape. You know, we've talked with you
Speaker 2: on earlier episodes about GROK. This kind of like, you know,
Speaker 2: kind of surprisingly competent cat GPT clone like cat GPT,
Speaker 2: but a little less woke. I mean, is this as
Speaker 2: simple as like he could harm a competitor with this lawsuit?
Speaker 2: He could He's you know, at the very least, you know,
Speaker 2: making things a little annoying for Sam Altman, if not worse.
Speaker 2: I think two things can be true.
Speaker 1: I think open ai is clearly a competitor to Elon's company,
Speaker 1: so he has an incentive there to go up against them.
Speaker 1: On the other hand, it is true that open ai
Speaker 1: started as a nonprofit and now it's not, and Elon
Speaker 1: did donate a lot of money toward it, And so
Speaker 1: I think that Elon's case brings up some valid questions
Speaker 1: about the trajectory of open ai. And I think, you know,
Speaker 1: his personal motivations and ins to can certainly be wrapped
Speaker 1: into this case. It's hard to separate that out. But
Speaker 1: I do think this is bringing some really you know,
Speaker 1: worthwhile questions to surface.
Speaker 2: What's like the realistic outcome though, could the judge be like, yes, yes,
Speaker 2: you know, Gavel, gavel chat, GPT, GPT four is dead. Sorry,
Speaker 2: you know, and now we have to like use Grock
Speaker 2: when we're doing Excel or whatever in the future.
Speaker 1: I mean, I don't think that the court is going
Speaker 1: to mandate that you use any certain software, probably certainly
Speaker 1: not Grock, but I do think I mean, look, I'm
Speaker 1: not a legal expert. But from the legal analysis I
Speaker 1: have seen, it seems like certainly this would be a
Speaker 1: difficult case. But you could essentially force open ai sure
Speaker 1: to like open source its models, or to go about
Speaker 1: abiding by its contract in a different way in the
Speaker 1: way that Elon wants it to, which is to say
Speaker 1: that now Openey's contract with Microsoft is severed, we have
Speaker 1: to open just license this stuff to the public, to
Speaker 1: Elon and anyone else. I think it's more about open
Speaker 1: sourcing the software of open ai rather than any certain
Speaker 1: person using any certain tool.
Speaker 2: So, like Matt's saying, a public good right right.
Speaker 4: One thing I think is interested about this case is
Speaker 4: that like Sam Altman and Elon Musk that got together
Speaker 4: to found a nonprofit. These are guys who are like
Speaker 4: so deeply part of like the startup tech silicon value ecosystem,
Speaker 4: where like like Elon Musk clearly thinks he's doing a
Speaker 4: lot of good for the world by starting for profit companies.
Speaker 4: It's just strange that they decided the way to do
Speaker 4: their most good for the world is by starting a
Speaker 4: nonprofit because they never had that thought before about all
Speaker 4: of their other businesses. And like Elon Musk is running
Speaker 4: his own AI business out of a for profit company.
Speaker 4: It just feels like everyone here is unfamiliar with what
Speaker 4: a nonprofit is and uncomfortable with it, and everyone just
Speaker 4: kind of wants it to be a for profit business.
Speaker 4: But it gives Elan some some leverage to mess with
Speaker 4: Sam Altman's for profit nonprofit.
Speaker 1: I do think being a nonprofit was part of the
Speaker 1: pitch that appealed to certain researchers in the AI community.
Speaker 1: I think we have to remember that, like there's such
Speaker 1: fierce competition for these people who are are you know,
Speaker 1: PhDs and really understand AI, and so I do think
Speaker 1: that was a good way to differentiate what openee was
Speaker 1: doing compared to Google at the time. And that's really
Speaker 1: if you look at the history of OPENINGI, it was
Speaker 1: created as this antidote to Google's private development of potentially
Speaker 1: this life changing AGI.
Speaker 2: So I think that's why it started.
Speaker 1: Now, like like you're pointing out, whether everyone really understood
Speaker 1: what it means to be a nonprofit is a different question.
Speaker 4: Yeah. I think Also another thing that was very important
Speaker 4: to attracting researchers was paying them a lot of money,
Speaker 4: including in stock options, which you can't really do it
Speaker 4: a nonprofit and they did anyway, so like, yeah, the
Speaker 4: for profit is also very important to attracting researchers.
Speaker 3: Yeah, absolutely well, and not only that, but like it's
Speaker 3: not only a form of governance that they're all unfamiliar with,
Speaker 3: but it's one that they've in previous years talked about
Speaker 3: how how bad it is, right, Like, Like the whole point,
Speaker 3: the whole premise of Elon Musk's like thing is that,
Speaker 3: you know, Silicon Valley, this like startup tech, startup way
Speaker 3: of doing.
Speaker 2: Things is uniquely you know, innovative. It's like it's like
Speaker 2: basically the way to solve all the world's problems, and
Speaker 2: you kind of have open AI maybe pursuing that, and
Speaker 2: like Elon Musk is on the outside of it for
Speaker 2: a change and is like, I don't know, a little jealous.
Speaker 4: Yeah. I think if you asked Elon Musk on any
Speaker 4: day except last week, who does more good for the world,
Speaker 4: nonprofits or for profit startups? You would have said for
Speaker 4: profit startups, right, But then last week it's like nonprofits.
Speaker 2: Okay, that's it for AI. We're gonna leave Scharen, let
Speaker 2: her get back to reporting on this as it develops.
Speaker 2: Thank you, Sharen. For your time today.
Speaker 1: Great, thanks for having me.
Speaker 2: All right, let's turn to Delaware, where in January Elon
Speaker 2: Musk's enormous fifty five billion dollar pay package was invalidated
Speaker 2: by a judge and now we have a new fight
Speaker 2: over how much the lawyers who won that class action
Speaker 2: lawsuit are going to get paid. And I just I
Speaker 2: read this in Matt's newsletter. The plaintiff lawyers want to
Speaker 2: be paid in stock. I believe six billion dollars in
Speaker 2: Tesla stock. Matt, you wrote, the obvious thing to say
Speaker 2: is this is absurd.
Speaker 4: It's a lot of money for taking away his pay package.
Speaker 4: Like what I said was that you know, Tesla's shareholders
Speaker 4: did vote to give Elan Musk fifty six billion dollars
Speaker 4: of Tesla's stock if he could raise Tesla's market cap
Speaker 4: by like one thousand percent, And then he did do
Speaker 4: that thing, and they wanted to give him the stock,
Speaker 4: and these lawyers went to court and clouded it back
Speaker 4: from him. And now the lawyers are like, we want
Speaker 4: ten percent of that amount of money. Now, have they
Speaker 4: raised Tesla's market cap by six hundred million dollars, No,
Speaker 4: they have not, or even by sixty billion dollars. So
Speaker 4: it is a strange. It's a very large ask.
Speaker 5: It's like the largest like lawyer fee that anyone has
Speaker 5: ever asked for. I mean, what other in what other
Speaker 5: scenario has any has any plaintiff lawyer asked for six
Speaker 5: billion dollars worth of stock?
Speaker 2: Like never like it?
Speaker 4: Well, I mean their argument is they got fifty six
Speaker 4: billion dollars of value for the shareholders.
Speaker 5: Yeah, but Anne Lipton was telling me, telling us that
Speaker 5: this is like the largest fee request she's ever heard of,
Speaker 5: and yeah, it's absurd, but it's also cheaper than like
Speaker 5: most lawyers feed. Right, Like usually if you win, you
Speaker 5: get like thirty percent of like the final judgment, and
Speaker 5: this would be like eleven percent. So like it's like
Speaker 5: absurdly large and yet less than what most lawyers get.
Speaker 5: And the plaintiffs lawyers are arguing that, like they don't
Speaker 5: want to cripple Tesla, they don't want Tesla to have
Speaker 5: to give them six billion in cash, so they just
Speaker 5: really like to have six billion worth of stock, which
Speaker 5: everyone is like outraged about it. I mean, Elon is
Speaker 5: like this is criminal, and all the fans and a
Speaker 5: lot of TESL executives are like on x al weekend,
Speaker 5: just talking about how ridiculous it is.
Speaker 2: Is there any precedent? Like do people ever like sue
Speaker 2: Kroger for slipping and falling and then get Kroger shares?
Speaker 2: Like does this ever happen where you get shares in
Speaker 2: the company you sue?
Speaker 4: Yeah, Like especially those bankruptcies, tobacco bankruptcies. Like the answer is,
Speaker 4: if you like take all of a company's money, then
Speaker 4: you get shares. Because they don't have any money. That's
Speaker 4: not the case here, but like, but yes, Like they
Speaker 4: don't want to cause financial distress by taking six billion
Speaker 4: dollars in cash from Tesla, and so the only way
Speaker 4: for them to ask for an absolutely absurd size of
Speaker 4: award is by asking for it in stock rather than cash.
Speaker 4: Like that's what's happening here. They don't want to stock.
Speaker 4: They just they can't with a straight face ask for
Speaker 4: six billion dollars of cash, so they're asking for stock.
Speaker 2: It really plays into kind of Elon Musk's narrative about
Speaker 2: this case, right, because he has said all along, this
Speaker 2: is just the lawyers. You know, this pay package actually
Speaker 2: made Tesla stronger, and now Dana you have the lawyers
Speaker 2: essentially like playing right, into his hand at least his
Speaker 2: sort of social media his like social media pattern.
Speaker 5: Yeah, and I mean and Elon does have a point,
Speaker 5: Like the plaineiff here is like a pocket plane iff.
Speaker 5: I mean it really is the law firm that took
Speaker 5: this on and you know, like had a rare win.
Speaker 5: I mean, Elon almost never loses in any kind of court.
Speaker 5: And you know, not only is he pissed about it,
Speaker 5: but it'll be interesting to see what happens, Like the
Speaker 5: judge is going to have to have a hearing on
Speaker 5: this fee request and there's going to be scores of
Speaker 5: objections and is she gonna knock down the fee or
Speaker 5: go along with it. I mean it's hard for me
Speaker 5: to imagine her going along with a fee of this size.
Speaker 5: But I mean it was this rare you know, like
Speaker 5: his pay package was this like moonshot, unheralded, unprecedented pay package.
Speaker 5: Now we have the same kind of moonshot unprecedented fever requests.
Speaker 5: I don't know, Matt, do you what do you think? Oh?
Speaker 4: Yeah, I mean you're completely right, Like this is this
Speaker 4: is an entrepreneurial law firm that is in the business
Speaker 4: of finding problems with companies and seeing if it can
Speaker 4: you know, spin up some cash for itself by identifying
Speaker 4: those problems. And if you were in a case like
Speaker 4: this that they put a lot of time and effort
Speaker 4: into and took a lot of risk because it's you know,
Speaker 4: it's a long shot case. If you win a case
Speaker 4: like this, you do owe it to yourself to ask
Speaker 4: for six billion dollars. Right, you may not get the
Speaker 4: six billion dollars, but like you'd feel like a fool
Speaker 4: if you didn't ask, because like, right, it's modest. That's
Speaker 4: like only ten percent of the amount that recovered, and
Speaker 4: they did such a great job for shoulders, it'd be
Speaker 4: crazy not to ask for it. I assume they expect
Speaker 4: it to be cut back to some somewhat more reasonable number.
Speaker 4: But if you start high, you get cut back to
Speaker 4: a still very large number.
Speaker 2: So like, like it'll still be enormous, but not six billion.
Speaker 4: It'll buy all of them a lot of yachts. Yeah,
Speaker 4: I mean, it's like this, This is not like an
Speaker 4: industrial company that nude to invest you know, like this
Speaker 4: is like you know a dozen lawyers or whatever. Right,
Speaker 4: Like they'll they'll they'll have a nice you know Christmas
Speaker 4: this year.
Speaker 2: So there have two questions for both of you. One is,
Speaker 2: has Elon appealed? I know we've been expecting him to appeal,
Speaker 2: and then how do they actually get the money back?
Speaker 2: What does that look like? Are these options? Has he
Speaker 2: exercised these options? Does he write a fifty five billion
Speaker 2: dollar check? Or like what does the actual payback look like?
Speaker 5: So there's sort of like a sequence of things that
Speaker 5: have to happen. First, there needs to be a hearing
Speaker 5: on the sphe request, and then the judge has to
Speaker 5: enter like her final judgment, and then that starts the
Speaker 5: thirty day clock by which Elon has to appeal. So
Speaker 5: he hasn't appealed yet because the clock hasn't started yet,
Speaker 5: because the judge hasn't entered her final ruling yet, because
Speaker 5: there hasn't been the hearing on the fee yet. So
Speaker 5: like we all expect him to appeal, but it's not
Speaker 5: going to happen till they or the spring, and then
Speaker 5: the shares get returned to Tesla, like it's a derivative lawsuit.
Speaker 5: So the sort of argument is that, you know, Elon
Speaker 5: doesn't have to cut a check, but like all the
Speaker 5: other shareholders who were deluded by the fact that he
Speaker 5: got this pay package will now not be deluded because
Speaker 5: all the shares go back to like the pool, and
Speaker 5: which is why Elon is surprise surprised, like basically letting
Speaker 5: it be known that he wants a new pay.
Speaker 2: Package, but that's a separate paypack. I mean, his idea
Speaker 2: right is to have to get the keep the fifty
Speaker 2: five billion he was already paid and they get a
Speaker 2: new fifty five billion or something like that.
Speaker 5: Regardless of whether he wins or loses on appeal, he
Speaker 5: still wants another pay package so that he can keep
Speaker 5: doing AI and robotics. But I mean, it's hard to
Speaker 5: imagine him winning on appeal. I mean, I don't know.
Speaker 5: Jeff Feely, our colleague in Delaware, Chance Recurt, doesn't think
Speaker 5: that Elon is likely to win on appeal, just because
Speaker 5: the judge's ruling was like this two hundred page opinion
Speaker 5: that was very carefully written.
Speaker 4: You could have objections to this ruling, and I think
Speaker 4: it's possible to imagine a courd reversing it on appeal.
Speaker 4: I probably agree that it's less likely than not. By
Speaker 4: the way, the other thing, like it's not at all
Speaker 4: or nothing, like he wins on appeal or he gets
Speaker 4: the fifty five billion taken away. First of all, the
Speaker 4: fifty five billion number is fake, Like that's it's stock options.
Speaker 4: He has no stock. The options are not worth fifty
Speaker 4: five billion number. That was like a number in the disclosure.
Speaker 4: They're worth a little bit less than that now, but
Speaker 4: like they've been worth more or less than that as
Speaker 4: the stock price moves. But also, like the fix here
Speaker 4: is not necessarily like when on appeal, it's have Tesla
Speaker 4: give him that pay package again and then maybe also
Speaker 4: another pay package. Right, Like what this ruling says is
Speaker 4: that the pay package they gave him in twenty eighteen
Speaker 4: was invalid. But it's still a company with the board
Speaker 4: of directors that can make decisions, and if they made
Speaker 4: a decision, like we think he deserved half of that
Speaker 4: pay package, Like we take the judge's point that he
Speaker 4: couldn't deserve fifty five billion, but he deserves thirty billion.
Speaker 4: And we're going to submit it to a vote to
Speaker 4: the shareholders. We're going to fix what happened last time
Speaker 4: where the judge found that the shareholder vote was not
Speaker 4: fully informed. So we're going to give the sharelders more
Speaker 4: information about the decision making and We're going to ask
Speaker 4: the sharelders to vote again to give him thirty billion
Speaker 4: dollars of options based on his twenty eighteen performance. Like
Speaker 4: the scharelders vote yes, right, and then it's just the
Speaker 4: question of, like, well that hold up in court, And like,
Speaker 4: I think they can do things to fix the problem
Speaker 4: and they make it more bulletproof in court next time.
Speaker 4: So I don't think that this is like he gets
Speaker 4: nothing or he gets fifty five million dollars. And I
Speaker 4: think even if he loses on appeal, there are ways
Speaker 4: for Tesla to continue pumping money to him.
Speaker 5: If they moved to Texas, right, that could be that
Speaker 5: could that's one avenue, Right if they move the incorporation
Speaker 5: of the company to Texas, that's a.
Speaker 4: Really complicated avenue where someone will sue to prevent them
Speaker 4: from moving to Texas, and then we'll have a really
Speaker 4: really fun court case. But I think even without I
Speaker 4: think that, like I think the right move strategically and
Speaker 4: legally is for them to pay him more in Delaware
Speaker 4: even before trying to move to Texas. But like Elon
Speaker 4: may not want to hear that advice.
Speaker 2: It sort of feels like to me that these two
Speaker 2: things are connected, these two topics we've been talking about,
Speaker 2: you know, because Elon is threatening essentially to do his
Speaker 2: AI stuff outside of Tesla unless he gets another big
Speaker 2: pay package. At the same time, he's filing this you know,
Speaker 2: mega lawsuit, super fun, chock full of details and sort
Speaker 2: of hilarity about how instrumental he was in the creation
Speaker 2: of open Ad, this super valuable startup. I mean, these
Speaker 2: two things are related, right, Like this is part all
Speaker 2: part of some kind of strategy to get the Tesla
Speaker 2: board to pay him another fifty billion dollars.
Speaker 4: I mean, he doesn't need that much strategy. Like he
Speaker 4: could go to Tesla and be like, please pay me
Speaker 4: one hundred million dollars and then it'd be like here
Speaker 4: you go. Now there's like there's some legal strategy in
Speaker 4: the background where like like, yes, he needs a credible
Speaker 4: threat so that when they go back to court, he
Speaker 4: can be like, see, I would have left if they
Speaker 4: didn't pay me that money.
Speaker 2: But do you think it strengthens his case, like like
Speaker 2: on appeal or whatever, that he's an AI pioneer, that
Speaker 2: he's clearly he's thought about leaving before, you know, like
Speaker 2: that this is swirling around it.
Speaker 4: A little bit. I think that, like when you read
Speaker 4: the judge's decision in this case, she's like, you know,
Speaker 4: they said they needed to pay him this much to
Speaker 4: retain him, but in fact, he had said things like
Speaker 4: I'm a Tesla lifeer, I'm never going anywhere. This is
Speaker 4: my legacy, and so they didn't really need to pay
Speaker 4: him this much to retain him. And that was all
Speaker 4: stuff he said in twenty eighteen. Like now you know,
Speaker 4: now he's like got seven other companies and he's you know,
Speaker 4: publicly saying how Distractedy is and how how he's lost
Speaker 4: interest in Tesla. Like they do need to pay him
Speaker 4: more to retain him. So I think they will have
Speaker 4: a you know, the next pay package they give him,
Speaker 4: they will have a better case that they need to
Speaker 4: do it to motivate him, which is like a double
Speaker 4: edged sword. It's sort of like it sort of suggests
Speaker 4: that he is not fulfilling his fiducial i duties to
Speaker 4: Tesla shareholders in some way. But I think that like
Speaker 4: probably does help him at the margin.
Speaker 5: I also wonder if this is sort of an attempt
Speaker 5: to just try to bring some real change to Tesla's board.
Speaker 5: I mean, it seems like the board is really the problem, right,
Speaker 5: Elon has stack the board with very close friends. They
Speaker 5: vacation together. I mean, this all came out in testimony.
Speaker 5: So I wonder if, like part of the judge's role
Speaker 5: here is to try to push for real governance change.
Speaker 5: But then that's hard to imagine too, because I just
Speaker 5: I don't really see a lot of big outsiders coming
Speaker 5: in and like starting like a board fight with Elon.
Speaker 5: I mean, it's Elon's board, it always it always has been.
Speaker 5: And you need a way to motivate Elon, Like how
Speaker 5: do you motivate the richest person on the planet to
Speaker 5: stick with the company when he has like a billion
Speaker 5: startup ideas in his own head and is running He's
Speaker 5: currently running six companies, and so Tesla has always struggled
Speaker 5: with how to keep him engaged in Tesla because if
Speaker 5: he walked completely, like the valuation of that company would
Speaker 5: be very much in question. And so the board is
Speaker 5: always wrangled with like, oh, how do we keep Elon engaged?
Speaker 5: Like how do we keep him here when his first
Speaker 5: love is clearly SpaceX And it's wild I mean because
Speaker 5: he is a part time CEO. I mean there's no
Speaker 5: other who just works part time like this, It's pretty
Speaker 5: it's pretty amazing how like little time Mealon spends at Tesla.
Speaker 5: I mean granted, like you know, he would argue that
Speaker 5: he sleeps there when he needs to and he's working
Speaker 5: around the clock, but I mean the man hyper focuses,
Speaker 5: but then he is like a wall and doing his
Speaker 5: other things.
Speaker 2: We're going to go to our ending segment called is
Speaker 2: this a thing? And in which you too have to
Speaker 2: tell me is this a thing? And the topic of
Speaker 2: this as a tweet from Elon Musk on February twenty eighth. Tonight,
Speaker 2: we radically increase the design goals for the new Tesla Roaster.
Speaker 2: There will never be another car like this, if you
Speaker 2: could even call it a car. Tesla slash SpaceX collab
Speaker 2: production design complete and unveil at the end of the year,
Speaker 2: aiming to ship next year. Dana, is this real? Yes?
Speaker 5: I think it's real. Like, are they gonna stick to
Speaker 5: the timeline?
Speaker 4: No?
Speaker 5: But the backdrop of this is that, like byd is
Speaker 5: now Tesla's biggest competitor. They're the Chinese company that makes
Speaker 5: a lot of cars. They're like the leader in ev sales,
Speaker 5: and they also have some kind of like new supercar,
Speaker 5: like remind everyone. Like Tesla first said that they were
Speaker 5: working on a next generation roadster in twenty seventeen.
Speaker 6: Tesla with a sports called Tesla Royster. It was the
Speaker 6: foundation of the whole company, was the Tesla Royster. People
Speaker 6: who asked us for a long time, when are you
Speaker 6: going to make a new roadster. We are making it now.
Speaker 5: I was there at that event that was back in
Speaker 5: the day when like Tesla invited you know, mainstream financial
Speaker 5: journalists to their product launches, and it was this awesome event.
Speaker 5: I mean, Tesla pulled out all the stops. It was
Speaker 5: in La Fronds von Wholshausen, the lead designer for Tesla,
Speaker 5: was actually like in the roadster as it came back
Speaker 5: out of the back of the semi. But what's weird
Speaker 5: to me is that like Tesla needs to go down
Speaker 5: market and make this next generation cheaper, twenty five thousand
Speaker 5: dollars car in order to remain competitive. So I'm not
Speaker 5: really sure why they're like now talking about this high
Speaker 5: end niche product when like the future of the company
Speaker 5: is really about the downmark it cheaper product. But I
Speaker 5: think he's just trying to remind everyone. Oh yeah, that
Speaker 5: this like product that we promised years ago is still happening.
Speaker 5: And I'm sure that when he tweeted that that that
Speaker 5: was it. That was news to probably all the engineers, like,
Speaker 5: oh now this is backfront center again, Matt.
Speaker 2: What's your what's your take on this? Is this? Are
Speaker 2: you going to put down your deposit for the new
Speaker 2: new Tesla roaster?
Speaker 4: I'm the wrong person to ask that. I will say that,
Speaker 4: like after he tweeted about radically increasing the design goals,
Speaker 4: which I don't know that that means. It's a funny phrase.
Speaker 4: He also did a callback to his twenty eighteen tweeter
Speaker 4: he said SpaceX option package for new Tesla Roadster will
Speaker 4: include ten small rocket thrusters arranged seamlessly around car. Maybe
Speaker 4: they will even allow a Tesla to fly. So you know,
Speaker 4: it's always like a little bit of not a thing,
Speaker 4: But you know, I believe that on that like there
Speaker 4: will you know, there'll be a roadster and stuff like that.
Speaker 2: So do you think it's like eleven rocket boosters with
Speaker 2: the radical radically increase the design goals? Maybe that's what
Speaker 2: he means he.
Speaker 4: Did retweet or re crock whatever he did call that back.
Speaker 4: Sarah he wants.
Speaker 5: He also had some joke about like, oh, like we
Speaker 5: were promised flying cars and all we got was two
Speaker 5: hundred needy characters, and now he's basically kind of promising
Speaker 5: wing wink that there will be flying cars.
Speaker 2: All right. On that note, let's end here. Thank you
Speaker 2: for listening to Elon, Inc. And thanks to Dana and Matt,
Speaker 2: Thank you, thank you, thanks guys. Before we go, a
Speaker 2: programming note, Elon Inc. Is going to south By Southwest
Speaker 2: next week in Austin, Texas. We're going to be doing
Speaker 2: a live taping on Tuesday, March twelfth at ten am.
Speaker 2: If you're in Austin at south By Southwest, please come
Speaker 2: say hi to us. We'll be talking to suel Chan,
Speaker 2: the editor in chief of the Texas Tribune, and Rachel Monroe,
Speaker 2: the New Yorker's Texas correspondent. We're going to be talking
Speaker 2: about how much or how little Elon has impacted his
Speaker 2: home state, and perhaps how much his home state has
Speaker 2: impacted Elon. This episode was produced by Stacy Wong. Naomi
Speaker 2: Shavin and Rayhan Harmanci are senior editors. The idea for
Speaker 2: this very show came from Rayhan Blake Maples Handles Engineering
Speaker 2: and we get special editing assistants from Jeff Grocott. Her
Speaker 2: supervising producer is Magnus Hendrickson. Huge thanks to Joel Weber,
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Speaker 2: Bauman is a head of Bloomberg Podcast and Brendan Newnham
Speaker 2: is our executive producer. I'm Max Chapkin. If you have
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