This Is How OpenAI Goes Broke — ft. Sebastian Mallaby
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Cracks are forming in the OpenAI story. Last week, the company reportedly proposed giving the US government a 5% stake worth roughly $43 billion as a way to share the upside of AI with the public. Critics, however, argue it would amount to a government bailout and see it as a troubling signal for both OpenAI and the broader AI boom. That news came after reports that OpenAI had pushed back its IPO plans until 2027, adding to concerns about the company's financial position. So we wanted to speak with someone who has spent years studying the history of AI and who also believes that OpenAI could run out of money in the near future. Sebastian Malaby is a prominent journalist, author, Pulitzer Prize finalist, and senior fellow at the Council on Foreign Relations.
And today, he's joining us to discuss what is next for OpenAI, what is next for the AI industry, and what investors should be watching. Sebastian, thank you so much for joining me on the show. I'd love to start with an article you wrote back in January that was titled, This is What Convinced Me OpenAI Will Run Out of Money. And you said back then, quote, my bet is that over the next 18 months, OpenAI runs out of money. We've been seeing a lot of red flags since then, the delaying of the IPO, Later, we saw this proposal for the U.S. government to take a stake in the company. I guess I'll just start with what do you make of the recent news and do you hold to your prediction?
Yeah, I do hold to my prediction. Back in January, the burn rate was just crazy. So that although OpenAI had good products and quite a lot of traction, 900 million consumers, they won't be able to charge money for the product. Like 5% of the retail consumers were actually paying. If you look at a chart of where these users are, You know, the U.S. is the number two market, India is first, and the next three are kind of Brazil, Indonesia, and so forth. So these are not rich consumers. You can't charge them very much money. And so they had a business model that they imagined that they could throw money in all directions. You know, a collaboration with Johnny Ive to have a new form factor which would supplant the iPhone, serving SORA video generation models and all this stuff, all of which is very expensive, and yet the revenue side simply wasn't there.
So the burn... seemed to me to be totally unsustainable.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:01–15:25
2
Why does Sebastian Mallaby predict OpenAI could run out of money in 18 months?
15:25–24:01
3
How did OpenAI’s fundraising and IPO delay raise concerns about its business model?
24:01–49:54
4
How does Anthropic’s enterprise-focused strategy compare to OpenAI’s approach?
49:54–1:05:53
5
Is the AI sector a bubble or just an OpenAI problem?
1:05:53–1:06:16
Speakers
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