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Elon Musk Sues OpenAI for Billions · Elon Musk Podcast

0:00
Greg Brockman, the president of Open AI, has a private journal
0:03
entry sitting in a federal courtroom that reads If three
0:06
months later we're doing B Corp, then it was a lie.
0:10
That single sentence is the centerpiece of a $150 billion
0:15
lawsuit brought by Elon Musk against Open AI and its chief
0:20
executive, Sam Altman. I mean, the sheer amount of
0:22
money involved here, it really requires a complete
0:25
recalibration of how we understand corporate wealth.
0:27
You know Musk is actively accusing the leadership of
0:30
executing essentially an elaborate corporate heist.
0:33
The legal argument centers entirely on this claim that they
0:36
took a tax exempt charity which was heavily funded by his
0:39
personal donations and system converted it into an $850
0:42
billion commercial empire. So the question that really
0:45
drives all of this is, how does a nonprofit research lab legally
0:49
restructure itself into a commercial entity of that
0:51
magnitude? And you know who exactly gets to
0:54
keep the profits? Today we're looking at a
0:56
mountain of legal evidence, court transcripts, internal
0:59
Microsoft emails, private text messages, just to figure out
1:02
exactly how this operation functioned from the inside.
1:05
Right. And to really grasp that, you
1:07
have to look at the origin of this entire conflict, which
1:09
actually stems from a profound sense of panic during the early
1:13
days of artificial intelligence research.
1:15
The development just wasn't spread out among thousands of
1:18
startups. The industry was controlled by a
1:20
very small number of highly capitalized players, and the
1:23
event that triggered the initial alarm was Google's acquisition
1:27
of a research lab called DeepMind.
1:29
And the testimony shows Musk was entirely fixated on DeepMind.
1:33
Specifically, his focus was locked onto his chief executive,
1:36
Demas Asabas. Musk was frequently asking his
1:39
colleagues if they thought his Sabas was, quote evil.
1:42
Yeah, he was completely consumed by the threat of a single
1:44
corporation holding the keys to artificial general intelligence.
1:48
You have to understand the specific flavor of this
1:50
paranoia. It really reached a boiling
1:52
point after a conversation Musk had with a Google Co founder.
1:55
They were discussing the future of technology, and the Google
1:57
executive allegedly called Musk A speciesist.
2:00
A. Speciesist like because Musk was
2:03
prioritizing the survival of humans carbon based life forms
2:07
over the potential future rights of digital life forms.
2:10
Exactly. Being accused of speciesism for
2:13
simply wanting to protect humanity.
2:15
While it deeply disturbed Musk, it functioned as a massive
2:19
catalyst. It galvanized his belief that a
2:22
counterweight was completely necessary to prevent Google from
2:25
controlling the future. So he started pushing for an
2:28
initiative described as a Manhattan Project for artificial
2:31
intelligence. Wow, a Manhattan.
2:33
Project The stated vision was to create a research laboratory
2:36
that would develop this incredibly powerful technology
2:39
as an open source project entirely insulated from the
2:43
profit driven motives of large tech monopolies.
2:46
So they decided the only legal mechanism to ensure the
2:48
technology wouldn't be monopolized or, you know,
2:50
weaponized for corporate gain, was to structure the new
2:53
organization as a 5O1C3 nonprofit.
2:56
It was supposed to be a strict charitable trust dedicated
2:59
entirely to building technology for the bends of humanity as a
3:01
whole. Right.
3:02
This founding structure was a direct defense mechanism against
3:06
Google. The entire corporate DNA was
3:09
engineered to be the exact opposite of a closed profit
3:12
seeking entity. They wrote the charter to
3:15
reflect this philosophy, promising that the resulting
3:17
technology would remain open source and that the organization
3:21
would never be organized for the private gain of any person.
3:24
I mean, I have to challenge the absolute nobility of that
3:27
founding narrative, though. Think about it like funding A
3:31
sprawling community garden entirely out of spite, simply
3:34
because you are convinced the local grocery store manager is
3:37
plotting world domination. That's a good way to put it.
3:40
Right. It makes you wonder if creating
3:42
the charity was genuinely about helping humanity, or if it was
3:46
primarily A tactical maneuver designed to slow down a business
3:49
rival by creating an open source alternative they just couldn't
3:52
control well. The motivation was likely a
3:54
complex mixture of both altruism and competitive strategy, but
3:58
the legal reality they established was a strict
4:00
charitable trust. By choosing A5O1C3 designation,
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they bound themselves to very specific rules.
4:07
Because they charted the company as a pure charity, it was
4:10
completely reliant on donations. They could not legally sell
4:14
shares to venture capitalists, and they could not promise any
4:17
financial return to the people funding the research.
4:20
And because they couldn't legally promise a return on
4:22
investment, they eventually hit a massive wall.
4:25
They committed to a business model that relied entirely on
4:28
philanthropy right at the exact moment when the hardware
4:31
requirement for artificial intelligence began to explode.
4:34
Oh, absolutely. The cost of computer processing
4:37
power, referred to in the industry as compute it's
4:39
skyrocketed almost overnight. Within a very short period, the
4:43
hardware cost for their research jumped from roughly $30 million
4:46
a year to a projected $50 billion annually right back up.
4:51
30 million to 50 billion. Yes, billion with AB.
4:54
How does a charity fundraise for that?
4:56
We need to explain exactly what is causing that jump, because a
5:00
charity does not just accidentally spend $50 billion.
5:04
What physical machinery requires that kind of capital?
5:07
It comes down to how modern artificial intelligence actually
5:10
learns. It is not like writing a
5:11
standard software application on a laptop.
5:14
Training these models requires reading and processing almost
5:17
the entire Internet. To do that you need 10s of
5:20
thousands of highly specialized computer chips running at
5:23
maximum capacity simultaneously. We are talking about warehouses
5:27
just filled with servers. And those servers require an
5:31
unbelievable amount of electricity to run, plus massive
5:33
industrial cooling systems to keep the buildings from
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literally melting down South. Compute isn't just buying
5:39
computers, it is essentially funding the infrastructure of a
5:42
small utility company. Which creates A mathematical
5:45
impossibility for a nonprofit. A charity simply cannot
5:49
fundraise $50 billion through traditional philanthropic
5:53
donations. You cannot rely on goodwill to
5:56
secure that kind of capital every single year.
5:59
The founders quickly realized that the pure nonprofit model
6:02
they had championed was the exact thing preventing them from
6:04
achieving their technological goals.
6:06
So they started debating alternatives, right?
6:09
I know they discussed creating a for profit subsidiary and they
6:12
even debated launching their own cryptocurrency to fund the
6:15
operations, but Musk proposed a completely different solution.
6:19
He wanted to attach the organization to his car company,
6:22
Tesla. Yeah, Musk's idea was to use the
6:24
car manufacturer as an engine for revenue.
6:27
He believed that merging the research lab with Tesla's
6:30
existing engineering infrastructure and its financial
6:32
resources was the only viable way to fund the massive
6:35
computing needs and actually compete with Google.
6:38
From a purely structural standpoint, merging with Tesla
6:41
makes logical, strategic sense. If the immediate crisis is a
6:44
lack of hardware and computational power, attaching
6:47
the project to an established engineering company that already
6:50
builds massive data centers, well, that solves the immediate
6:54
financial problem. It does solve math problem,
6:56
yeah, but you have to look at the consequences regarding
6:59
control. Attaching the nonprofit to Tesla
7:01
reveals that Musk's objective was absolute authority over the
7:05
technology. By bringing the project under
7:07
his own corporate umbrella, he would dictate the direction of
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the research. It entirely contradicts the
7:12
original premise of a decentralized project working
7:15
independently for humanity. That financial pressure,
7:18
combined with the fundamental disagreement over who gets to
7:20
govern the technology, completely fractures the
7:23
founding team. They're forced into a position
7:26
where they must decide whether to abandon the restrictive
7:28
nonprofit model or abandoned Musk entirely.
7:32
And the tension finally erupted following a major technical
7:35
victory. The research lab had
7:37
successfully developed software capable of beating the world's
7:40
best human player in a highly complex video game.
7:44
This was seen as a crucial milestone proving their specific
7:48
approach to machine learning was viable.
7:50
Right. And to celebrate this victory,
7:52
Musk hosted a gathering at a Haunted Mansion he had recently
7:56
purchased in San Francisco. A Haunted Mansion.
7:58
Literally picture yourself at this party.
8:01
It is a completely surreal setting for a corporate
8:04
showdown. You have this group of engineers
8:06
and executives sitting in a Haunted Mansion drinking whiskey
8:09
poured by Musk's girlfriend, and what should have been a
8:12
celebration degrades into a bitter fight over equity.
8:15
During this gathering, Musk demanded a significantly larger
8:18
share of any potential for profit entity they might create.
8:22
He argued that he deserved majority control because he had
8:24
provided the vast majority of the initial funding and because,
8:28
well, he had a proven history of building highly successful
8:30
companies. Altman and Brockman flatly
8:33
refused. They argued that giving one
8:36
single person absolute control over artificial general
8:39
intelligence was the exact scenario they founded the
8:42
organization to prevent in the first place.
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The argument escalated to a point that deeply unsettled
8:48
everyone present. According to the testimony, Musk
8:51
became so enraged by the refusal to grant him control that he
8:54
stormed around the table, grabbed a painting of a Tesla
8:57
Model 3 off the wall, and ripped it down.
8:59
The aggression in the room was palpable, leaving the founders
9:02
genuinely fearing that he might physically strike someone.
9:05
Wow. And that physical confrontation
9:07
breaks the relationship permanently.
9:09
Musk halts his quarterly charitable donations
9:12
immediately. He delivers an ultimatum.
9:15
Either they accept his terms for control, they leave and start
9:18
their own separate company, or they figure out how to survive
9:21
and fund the research without his money.
9:23
By stopping the donations, Musk completely severs the financial
9:27
lifeline of the nonprofit. The organization is left without
9:30
its primary benefactor exactly when their computational
9:33
expenses are climbing exponentially.
9:35
This clash is what leads directly to the evidence
9:38
presented in the trial, specifically Greg Brockman's
9:41
private stream of consciousness diary.
9:44
The entries in this journal, kept during the height of this
9:47
conflict, were entered into the court record.
9:50
In one entry, he explicitly debates the ethics of cutting
9:54
Musk out of the organization. He writes it'd be wrong to steal
9:58
the nonprofit from him to convert to AB Corp without him,
10:01
to be pretty morally bankrupt, and he's really not an idiot.
10:05
The defense argues these are just the private musings of an
10:07
executive trying to puzzle out a highly stressful situation.
10:10
Hold on, he actually wrote down the exact words.
10:12
Steal the nonprofit. Yes, those exact words are
10:15
preserved in the court filings. The diary reveals A fascinating
10:18
dual nature. On one hand, you see a genuine
10:21
internal struggle. He is expressing real anxiety
10:23
about the ethics of transitioning the company
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without its primary founder and acknowledging that the action
10:28
feels morally compromised. But on the other hand, the
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journal also contains entries where he asks himself
10:34
financially, what will take me down $1.00 dollars.
10:38
That points directly toward personal enrichment rather than
10:41
purely altruistic problem solving for the good of
10:44
humanity. And Musk's lawyers seized on
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these specific entries. They used the journal to paint a
10:50
picture of deliberate deception. They argued that the leadership
10:53
team was not just reacting to financial pressure, but actively
10:56
stringing Musk along. The legal argument is that they
10:59
maintain the facade of the non profit mission just long enough
11:02
to secure the intellectual property and the engineering
11:05
talent while privately planning to commercialize the technology
11:08
for their own financial gain. I do question the fairness of
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reading someone's private, unedited anxiety spiral aloud in
11:15
a federal courtroom. I mean, writing down a bad idea
11:18
or expressing we fear about a worst case scenario in a private
11:20
journal is fundamentally different from actually
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executing A deliberate corporate fraud.
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People write things in Diaries precisely because they are
11:27
unprocessed. Thoughts.
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Regardless of the fairness, the presence of these written
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thoughts changes the legal strategy of the case completely.
11:35
Initially, Musk had filed claims of active fraud against the
11:38
executives. Proving fraud in a court of law
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requires demonstrating a specific, premeditated intent to
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deceive someone from the very beginning.
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Which is incredibly hard. Proving what is in someone's
11:51
head is notoriously difficult. In court.
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You have to prove they were lying on the exact day they
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signed the original document. Precisely so.
11:58
Right before the trial begins, Musk drops the act of fraud
12:01
claims entirely. Instead, his legal team focuses
12:04
on the financial outcomes and the structural changes.
12:07
They center their arguments on breach of trust and unjust
12:10
enrichment. By dropping the fraud claims.
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They no longer have to prove that the executive intended to
12:15
lie from day one. They only have to prove that the
12:17
executives unjustly profited from assets that legally belong
12:21
to a charitable trust. And the profits we were talking
12:23
about are astronomical. During his testimony, Greg
12:27
Brockman had to detail his financial standing.
12:30
He testified that his current equity stake in the for profit
12:32
arm of the organization is worth almost $30 billion.
12:36
Yeah, 30 billion. The trial exposed a highly
12:39
complex web of financial entanglements among the
12:42
leadership. It is not just about the huge
12:44
equity stake in the main company.
12:46
The court examined Brockman's other investments as well.
12:50
For instance, he held personal shares in an artificial
12:53
intelligence chip startup. I need to clarify why that
12:55
matters. He held shares in a company
12:57
making the exact hardware that the nonprofit desperately needed
13:01
to buy, and he was advocating internally for them to merge
13:04
with or acquire that specific chip startup.
13:07
If a charity buys hardware from a company you personally own,
13:11
you are using the charity's funds to enrich yourself.
13:13
Exactly. Furthermore, Sam Altman gave
13:15
Brockman a $10 million stake in Altman's own personal family
13:19
office. For those unfamiliar with the
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term, a family office is a private wealth management
13:24
advisory firm that serves ultra high net worth individuals.
13:28
It manages investments and trusts for a single family.
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The head of Musk's financial office actually flagged this
13:34
specific arrangement in an e-mail.
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He warned Musk that giving Brockman A substantial stake in
13:39
Altman's personal wealth vehicle meant Brockman would ultimately
13:43
have a greater allegiance to Altman than to the
13:45
organization's charitable mission.
13:47
The reason this family office stake is highly problematic for
13:50
the defense isn't just the dollar amount.
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It comes down to the mechanics of trust law.
13:55
If you are a board member of a charity, your absolute loyalty
13:58
must be to the charity. If your personal wealth is
14:02
locked in a private vault controlled by your Qi executive,
14:05
your loyalty is legally compromised.
14:07
This extensive web of cross investments severely weakens the
14:11
defense's narrative. The leadership claims that
14:13
transitioning to a for profit model was a reluctant necessity,
14:17
a structural change made purely to secure the funding needed to
14:20
fulfill their mission. But when the executives are
14:23
holding $30 billion stakes investing in the hardware
14:26
suppliers and sharing personal family wealth, well, it limits
14:30
their ability to claim pure altruism.
14:32
It directly opens them up to the accusations of unjust enrichment
14:36
because the outcome looks exactly like they use the
14:38
charitable foundation to incubate a vehicle for
14:41
unprecedented personal wealth. Which brings us to the mechanics
14:45
of how they actually commercialize the charity.
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This involves their alliance with Microsoft.
14:51
Microsoft agreed to invest $13 billion into the newly formed
14:55
for profit subsidiary of the organization.
14:58
We need to examine how A501-C board legally overseas a
15:02
commercial arm. The structure of this subsidiary
15:04
is incredibly unusual. They designed it as a capped
15:07
profit entity. The public messaging was that
15:09
investors could only make a certain multiple on their money,
15:12
and anything above that cap would be returned to the
15:14
nonprofit to benefit humanity. Think of a capped profit
15:17
structure like a massive bucket with a hole near the the top.
15:21
Microsoft and other investors get to fill the bucket and drink
15:24
the profits. The promise is that once the
15:26
water hits that specific hole, every drop that spills over
15:30
belongs entirely to the charity. However, the cap was set
15:34
extremely high. The structure requires the for
15:36
profit subsidiary to generate profits exceeding 1/4 of a
15:39
trillion dollars before any excess funds flow back to the
15:43
charity. Wait a quarter of a trillion
15:45
dollars in profit before the charity sees the excess?
15:47
Yes, that cap is so high it functions essentially as a a
15:51
traditional forrofit company for the foreseeable future.
15:54
A California only matters if you actually reach it.
15:57
And Microsoft's internal communications regarding this
15:59
investment were brought into evidence, and they are highly
16:01
revealing. Microsoft's chief technology
16:04
officer wrote an internal e-mail analyzing the situation, he
16:07
stated. Ideologically, I can't imagine
16:10
that big donors funded an open effort to concentrate machine
16:13
learning talent so that they could then go build a closed for
16:16
profit thing on its back. Wow.
16:19
So Microsoft's own executive is articulating the exact legal
16:22
argument Musk is making in court.
16:25
The internal doubts validate the premise that the original donors
16:28
were deceived by the structural pivot.
16:31
If you're listening to this and wondering how a charity gets
16:34
away with this, you can see that even the executives funding the
16:36
transition were questioning the ethics of it.
16:39
That internal e-mail directly ties Microsoft to the lawsuit.
16:43
It provides the foundation for claims that the tech giant aided
16:46
and abetted the breach of fiduciary duty.
16:49
The argument is that Microsoft knowingly funded the
16:51
commercialization of assets that were developed under a
16:54
charitable trust, fully aware of the ideological conflict it
16:57
presented for the original donors who paid for the early
17:00
research. The defense team attempted A
17:02
fascinating legal maneuver to get the entire lawsuit dismissed
17:06
before it ever reached a jury. They argued that Elon Musk
17:09
actually has no legal standing to sue them at all, based
17:12
entirely on the way he routed his donations.
17:14
Right, their argument focuses heavily on the actual transfer
17:18
of money. Wait, so they aren't arguing
17:20
they kept the charity's promise? They are arguing Musk isn't
17:22
legally allowed to complain about the broken promise.
17:25
Exactly. The defense focuses on the
17:28
mechanics of donor advised funds.
17:30
These are financial accounts managed by large institutional
17:33
firms like Vanguard and Fidelity.
17:35
The defense points out that Musk did not write a personal check
17:38
from his own bank account directly to the nonprofit.
17:41
Instead, he put his $38,000,000 into these donor advised funds.
17:46
We should explain why a billionaire uses a donor advised
17:49
fund. The psychology and the tax
17:51
incentives are crucial here. When someone has a massive tax
17:54
liability, they want an immediate tax write off, but
17:57
they might not know exactly which charities they want to
17:59
support yet. So they place the money into a
18:01
donor advised fund. They get the tax deduction
18:04
immediately, but the money sits in a holding tank managed by
18:07
Vanguard or Fidelity. The donor then advises the
18:10
managing firm on where to send the money over time.
18:13
And the legal argument from the defense relies on the strict
18:16
rules governing those tax advantage accounts.
18:19
Once a donor places money into a donor advised fund and claims
18:23
the tax deduction, they legally surrender absolute ownership and
18:27
control of those funds to the managing term.
18:30
Vanguard or Fidelity is the entity that actually makes the
18:33
donation to the end charity. I see.
18:36
Therefore, the defense argues, since Musk legally surrendered
18:40
the money to the managing firms, he is not the actual donor who
18:43
gave money to the organization. And if he's in the direct donor,
18:46
he has no standing in a courtroom to sue over how the
18:49
charity spends the money or changes its corporate structure.
18:52
The federal judge firmly rejects this defense, though.
18:55
The judge examines the reality of the transactions, noting that
18:58
Musk actively advised the managing firms on exactly where
19:02
the money should go, and he attached specific conditions to
19:04
the funding regarding the open source nonprofit nature of the
19:07
research. Yeah, the judge's ruling hinges
19:10
on trust law. The ruling states that because
19:12
of his active involvement and the specific conditions he set,
19:15
Musk retains a special interest exception.
19:18
This special interest grants him the legal authority to enforce
19:21
the terms of the charitable donation, regardless of the
19:24
intermediary accounts he used to secure his tax deductions.
19:28
And this specific ruling keeps the massive lawsuit alive.
19:31
But it also establishes a chilling precedent for the rest
19:34
of Silicon Valley philanthropy. Many wealthy individuals in the
19:37
technology sector use donor advised funds.
19:40
This ruling signals that funneling money through tax
19:43
advantage holding tanks does not shield the receiving charity
19:47
from being sued by the original individual who provided the
19:50
capital. The failure of that defense
19:52
strategy basically guarantees A courtroom showdown.
19:55
Musk takes the stand. He arrives in a black suit and a
19:57
black tie. Given his usual highly animated
20:00
public persona, his testimony is surprisingly flat and
20:03
uncharming. During cross examination, he
20:05
actually admits Underoath that he did not read the fine print
20:08
of the term sheet sent to him regarding the for profit
20:10
transaction. He only read the headlines.
20:12
That flat courtroom demeanor contrasts sharply with his
20:15
aggressive tactics outside the legal proceedings. 2 days before
20:19
the trial was set to begin, Brockman reached out via text
20:22
message suggesting a peace settlement where both sides
20:25
would walk away. And Musk's reply to that peace
20:27
offering was completely uncompromising, He texted back.
20:30
By the end of this week, you and Sam will be the most hated men
20:34
in America. If you insist so it will be.
20:37
The trial itself has been surrounded by extraordinary
20:39
chaos. The judge has been forced to
20:41
admonish both the plaintiff and the defense for posting insults
20:45
about each other on social media while the proceedings are
20:47
ongoing. The security environment is also
20:50
incredibly tight. The heightened measures are a
20:52
direct response to a recent firebombing incident at Altman's
20:55
personal home, reflecting the intense public emotions and the
20:58
perceived stakes surrounding artificial intelligence
21:01
development. Inside the courtroom, the
21:03
proceedings have been equally volatile.
21:06
During the testimony of Musk's financial manager, the witness
21:09
accidentally blurted out a heavily guarded secret a $97
21:13
billion bid that have been made for the nonprofit assets.
21:17
This unprompted disclosure caused massive disruption,
21:21
prompting the judge to interrogate the witness directly
21:24
and eventually send the jury home early for the day.
21:26
Furthermore, former executives of the organization took the
21:29
stand and provided damaging testimony regarding the internal
21:32
culture. They testified Underoath that
21:34
Altman deliberately sowed distrust among the leadership
21:38
team and created chaos within the organization's daily
21:42
operations. So the jury is ultimately left
21:44
to decide between two deeply flawed narratives.
21:48
On one side, you have a founder who admits to not reading
21:50
crucial legal documents, who uses his men's wealth and legal
21:53
action as weapons against competitors, and who openly
21:56
admits to trying to absorb the charitable project into his own
21:59
corporate empire. Right.
22:01
And on the other side, you have a leadership team holding equity
22:04
worth 10s of billions of dollars, who wrote in private
22:07
Diaries about making billions and stealing the nonprofit, and
22:11
who are accused by their own former executives of systemic
22:14
manipulation. The trial exposes the
22:16
fundamental friction between the idealism of creating technology
22:20
for the public good and the staggering financial realities
22:24
required to actually build it. Yeah, and if the court allows a
22:27
tax exempt charity to successfully intubate an $800
22:31
billion commercial monopoly, you have to wonder what stops every
22:35
future technology startup from using the exact same playbook to
22:39
avoid taxes during their research phase.
22:41
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