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Apple v. OpenAI: Trade Secrets and Corporate Espionage · In the Loop AI

0:00
Josh: Did OpenAI just steal the most critical secret hardware supply chain magic that
0:05
Josh: Apple has been working on for the last couple of decades?
0:07
Josh: The answer is probably yes, and it came in the form of this leaked text message
0:11
Josh: saying, LOL, I found out I can access the network storage so funny from an Apple
0:16
Josh: engineer who went over to OpenAI.
0:19
Josh: Now, this Apple engineer, his name is Chang Liu, and he had a company MacBook
0:23
Josh: that he kept after he left.
0:25
Josh: And he found later on there was an authentication bug that left his access alive
0:30
Josh: even while he was at open ai so he took this
0:32
Josh: stolen laptop and downloaded over a thousand pages of confidential material
0:37
Josh: covering a ton of unreleased products engineering presentations
0:41
Josh: and technical specs on unreleased apple hardware products now who's the best
0:45
Josh: hardware product maker in the world for consumers it's apple and now open ai
0:49
Josh: has this treasure trove of information that they have been using to build allegedly
0:53
Josh: been using to build their new hardware device that we're tremendously excited about.
0:56
Josh: So there is a lot of chaos going on in this story.
0:59
Josh: But right now, the story is Apple is suing OpenAI, and they have a lot of ammo to back this thing up.
1:05
Ejaaz: And all of this comes off the back of OpenAI releasing GPT 5.6 this week.
1:10
Ejaaz: So they had so many ups and so many downs. But yeah, Friday,
1:13
Ejaaz: 10th of July, they got slapped with a lawsuit from none other than Apple claiming
1:17
Ejaaz: that they've stolen a bunch of trade secrets specifically around how they build
1:21
Ejaaz: the future AI hardware devices.
1:23
Ejaaz: And as we know, OpenAI has been working on quite a few of these devices rumored
1:27
Ejaaz: to be going online around February 2027. They acquired Johnny Ives Startup.io.
1:33
Ejaaz: Johnny Ives famously one of the chief product designers at Apple for around
1:38
Ejaaz: six and a half billion dollars.
1:39
Ejaaz: So it's a big deal for Apple to make this claim.
1:42
Ejaaz: Now, imagine you are interviewing for a new job at OpenAI.
1:46
Ejaaz: Before going into your interview, they ask you to bring a piece of hardware
1:50
Ejaaz: from your current company, that being Apple, to show and tell during your interview
1:54
Ejaaz: to show how the circuitry design works to show how the engineering design completely works.
2:00
Ejaaz: In your interview itself. That's exactly what a 24-year veteran from Apple,
2:05
Ejaaz: ex-veteran, VP of design, he
2:06
Ejaaz: designed the iPhone, he designed the iWatch called Tang Yu did at Apple.
2:11
Ejaaz: He is officially OpenAI's chief hardware design officer, and he's responsible
2:16
Ejaaz: for launching their future AI devices. There's another guy that you mentioned
2:19
Ejaaz: earlier, Josh, called Chang Liu.
2:21
Ejaaz: He's an eight-year electrical engineer from Apple who also left and happened
2:25
Ejaaz: to have a laptop which still had access to Apple's file system.
2:29
Ejaaz: So he stole a bunch of blueprints.
2:31
Ejaaz: This basically reads like some kind of dramatic movie. I've got social network
2:36
Ejaaz: playing in my head, like from the meta kind of vibes, but this is a crazy lawsuit, if true,
2:42
Ejaaz: If it does end up getting taken to the end of this case where there's a judgment
2:45
Ejaaz: placed on open ai this could defer the launch of their ai hardware devices by as much as a year
2:51
Josh: It's pretty serious and if you scroll down just a tiny bit we'll see the three
2:55
Josh: people named or i should say the two people that you just mentioned and one missing name
2:59
Josh: now we have tang we have chang which sounds like a joke that these are the two
3:03
Josh: people at the core of this lawsuit but there is a third person who is notably
3:07
Josh: not names and it's Johnny Ive and his company
3:11
Josh: Love From or I guess specifically IO here who already had a lawsuit filed against
3:16
Josh: them for totally different reasons.
3:18
Josh: So if you remember this image on screen when they made their big announcement
3:21
Josh: that OpenAI was acquiring Johnny Ive's company IO for I think it was like four
3:25
Josh: or five billion dollars.
3:27
Josh: They made this really nice announcement video. They published this blog post
3:30
Josh: about it and then immediately within the week
3:32
Josh: they got sued by another company named io and now they have to actually change
3:36
Josh: their name so that's a totally separate lawsuit but notably johnny is not named
3:41
Josh: at all in this apple lawsuit and you have to ask the question why well i think
3:44
Josh: one of those is like could you imagine apple
3:47
Josh: suing johnny that would be the most diabolical headline ever but perhaps the
3:50
Josh: reality is is that they actually didn't have a whole lot to do with this and
3:53
Josh: that a lot of the kind of ownership of this problem comes directly from the
3:58
Josh: open ai team and these two people because from the sounds of it,
4:01
Josh: the OpenAI team was very much aware of what was going on.
4:04
Josh: In fact, they were building and actively poaching,
4:07
Josh: up to 400 people from Apple's design, engineering, and their production teams
4:13
Josh: to help them build this new AI hardware infrastructure system.
4:17
Ejaaz: It's important to note that California, where all these companies reside,
4:21
Ejaaz: don't actually have a non-compete law.
4:23
Ejaaz: So technically, you can leave one company on one day and join a competitor immediately
4:29
Ejaaz: the next day, and there's no non-compete laws that can be enforced. So all of that is legal.
4:33
Ejaaz: What is potentially illegal is what these employees exactly did.
4:37
Ejaaz: So I want to just spend a moment kind of describing exactly what these executives
4:41
Ejaaz: did, which is what has got OpenAI into such hot water.
4:44
Ejaaz: So let's start with the 24-year Apple veteran. He was the VP of design.
4:49
Ejaaz: So he was responsible, heavily responsible for designing what the iPhone looked like, how it worked.
4:54
Ejaaz: And he did the same for the iWatch as well.
4:56
Ejaaz: He's now OpenAI's chief hardware officer. He has assumed that role since January
5:01
Ejaaz: of this year. So it's a pretty short term.
5:03
Ejaaz: And what he's reportedly done is before leaving Apple,
5:07
Ejaaz: he emailed himself a list of the suppliers that Apple has for their entire supply
5:12
Ejaaz: chain so that he knew who to reach out to,
5:15
Ejaaz: contacts and friendlies that he's made at those supplying companies so that
5:19
Ejaaz: he could replicate basically the same thing at OpenAI.
5:22
Ejaaz: Another thing he did is he reached out to a bunch of Apple employees immediately
5:26
Ejaaz: after he assumed the new role and gave them the guide as to how to evade Apple's
5:32
Ejaaz: restrictive policies around talking to competitors. Number three,
5:37
Ejaaz: He asked them to come to interviews and, as I mentioned earlier,
5:39
Ejaaz: bring a piece of hardware that they're designing to prove that,
5:42
Ejaaz: number one, they're working on Apple hardware, and two, to show them,
5:45
Ejaaz: you know, some of the secrets as to how to do this.
5:47
Ejaaz: And then, number three, he basically, like, outlined the entire policy at OpenAI
5:52
Ejaaz: as to why they could just kind of leave and join OpenAI.
5:54
Ejaaz: So, the idea is he allegedly made this incredibly obvious that he's trying to
5:59
Ejaaz: poach these specific types of hardware engineers, and I don't think that's just
6:03
Ejaaz: good practice in general, and Apple's just coming for blood.
6:06
Ejaaz: The second guy, Chang Liu, he kind of accidentally fell into this file case,
6:11
Ejaaz: if accidental is kind of like a term I'm using kind of generously here.
6:15
Ejaaz: He was an electrical engineer. He stole a laptop that was technically Apple's
6:19
Ejaaz: property. He didn't return it.
6:20
Ejaaz: And when he opened it on his first day at OpenAI, he realized that he still
6:24
Ejaaz: had access to the filing system and even the chat system at Apple.
6:28
Ejaaz: So he basically reached out and stole a bunch of files that were incredibly
6:33
Ejaaz: proprietary. And that's who Apple's going after.
6:36
Josh: Yeah, the allegations list is pretty long. You mentioned a couple here about
6:39
Josh: the things that he was doing, but then there's another one, which is the homework pattern, they call it.
6:44
Josh: And in one instance, an Apple employee screenshot it and downloaded files about
6:48
Josh: this like highly confidential project prior to the interview with Tan.
6:52
Josh: And then he asked about the project in the interview and Apple saw this and
6:56
Josh: they're like, wait, this is like an established pattern is what they call it.
6:59
Josh: Where candidates study confidential material before the interviews like it was
7:03
Josh: an exam prep because 10 was so familiar with the internal workings at Apple.
7:07
Josh: He already knew all of the insider projects, the things that weren't released,
7:11
Josh: but he didn't know all of it.
7:12
Josh: So what he did is he had these people come for interviews and he said,
7:15
Josh: hey, I know you're working on this project. Tell me all about it. Explain it to me.
7:19
Josh: And if you explain it well, you'll get a job here. And the reality is that they
7:22
Josh: were just filling in the blanks on the places that he wasn't either up to date
7:25
Josh: on or he didn't fully know.
7:27
Josh: And this was this way of allegedly, at least this way of kind of filling the
7:31
Josh: gaps in his knowledge base to fully understand what's going on at Apple so that
7:35
Josh: they could emulate it then inside of OpenAI.
7:38
Josh: A similar thing happened where he told people how they could offboard themselves
7:44
Josh: in a way that was discreet and it could get them the most information out of Apple.
7:48
Josh: He encouraged them to not say who the new employer was.
7:52
Josh: Allowing them to get two additional weeks of access to the servers to continue
7:56
Josh: to collect information and share it with their new employer and kind of reverse
8:00
Josh: engineering the exit process at Apple to optimize it for leaked information going to open AI.
8:06
Josh: So these allegations are pretty insane. This is like a lot of proprietary data.
8:10
Josh: And when you're thinking about companies who you would want to steal trade secrets from.
8:14
Josh: I don't think there's one better in the world than Apple, who has created exactly
8:19
Josh: what OpenAI has been trying to make.
8:21
Josh: And they've done it at a larger scale than just anyone else.
8:23
Josh: So this is like a huge amount of allegations that if found guilty,
8:27
Josh: you have to imagine it's going to cause some serious problems for their hardware
8:31
Josh: team over there at OpenAI.
8:32
Ejaaz: It also just seems so sloppy from these two executives at OpenAI.
8:38
Ejaaz: The whole thing is a mess. Like, asking someone to literally email their personal
8:42
Ejaaz: accounts is, like, so obviously out of practice when you're at a company that
8:47
Ejaaz: has confidential information. Like, I don't know why you would even try to do
8:50
Ejaaz: that, but obviously they thought they had some kind of advantage.
8:53
Ejaaz: But I don't think they made any kind of attempt to kind of keep it discreet.
8:58
Ejaaz: I mean, 400 employees from Apple have now moved over to OpenAI.
9:02
Ejaaz: Predominantly, most of them are working on the hardware thing specifically. me.
9:06
Ejaaz: Which brings me to the question, why is Apple going out of their way to file
9:12
Ejaaz: a lawsuit to what is relatively basically just still a startup?
9:16
Ejaaz: They don't have the cash balance. They don't have the profit margins that Apple has.
9:20
Ejaaz: Why are they worried about this startup, OpenAI? It brings me to think that
9:25
Ejaaz: They know OpenAI has built something quite effective.
9:30
Ejaaz: Now, the rumor mill basically says that OpenAI has been working on
9:33
Ejaaz: some kind of a screenless device, maybe a series of different devices that can
9:39
Ejaaz: sit inanimately on your desk and listen to everything you say,
9:42
Ejaaz: that can see things that you see, potentially maybe even an earbuds with a camera.
9:47
Ejaaz: Now, if that sounds familiar, that's because a lot of the leaks from Apple themselves
9:51
Ejaaz: is that they're releasing a suite of devices that are going to look and sound very similar to that.
9:57
Ejaaz: And so I'm kind of piecing the the puzzle pieces together in my head right now, and I'm realizing,
10:03
Ejaaz: Oh, maybe they did blatantly just copy the designs that Apple had,
10:06
Ejaaz: and they're trying to beat them to the punch.
10:08
Ejaaz: Now, Apple's timeline is they're supposedly meant to announce three new devices,
10:13
Ejaaz: a bunch of AirPods that have cameras on it,
10:15
Ejaaz: some kind of necklace pendant device that can either sit in your pocket or sit
10:19
Ejaaz: around your neck, as well as a pair of smart glasses that can see everything you see.
10:24
Ejaaz: They're looking to announce it by the end of the year, which I think is around
10:29
Ejaaz: the time that OpenAI is planning to do theirs.
10:30
Ejaaz: But OpenAI is planning to launch theirs officially. So start distributing them
10:34
Ejaaz: by February of 2027. And they're aiming, according to Sam, for 100 million units.
10:40
Ejaaz: So it got me thinking, this is probably one of the better marketing schemes
10:45
Ejaaz: for OpenAI, even though it comes in the form of a lawsuit. It's just interesting to see.
10:49
Josh: In the case, it doesn't completely derail their hardware efforts,
10:52
Josh: which according to Mark Gurman, I was reading his tweets earlier,
10:55
Josh: he is like the guy when it comes to Apple leaks.
10:58
Josh: He's saying in the immediate aftermath of the lawsuit, OpenAI still believes
11:01
Josh: that it's on track to release their first product early in 2027.
11:05
Josh: That's the February release date, which is on track again with the kind of end
11:09
Josh: of year announcement that we're planning to get in terms of what the product's
11:12
Josh: going to look like, hopefully how much it's going to cost, kind of showing the usability of it.
11:16
Josh: He says the problem most likely is that they will now have issues with their
11:21
Josh: suite of products and any sort of iPhone competing device because of a lawsuit
11:25
Josh: like this, depending on how it goes.
11:27
Josh: So the hope is, is that we still get that OpenAI device version one,
11:31
Josh: but the second version of that, the third version, the family of devices might
11:35
Josh: find some complexities if it's found out that this is true and that OpenAI really
11:40
Josh: is guilty in a lot of these things.
11:41
Josh: And I have to think about Apple of today versus the Apple of maybe 15 years
11:45
Josh: ago and how different they've handled these situations, because this has been
11:49
Josh: going on for a while now, right?
11:50
Josh: It's like, this has been happening since February, they found out about it,
11:55
Josh: which is funny because there was a lot of people who went to WWDC and were talking to...
12:00
Josh: The Apple executives about the OpenAI partnership. And it wasn't really very
12:04
Josh: warm the way they were talking about it, but nobody knew why.
12:07
Josh: And it's because they were aware of what was going on in the background,
12:09
Josh: but they didn't actually do anything until so much later.
12:12
Josh: And if you remember, there's a current partnership with OpenAI and Apple where
12:15
Josh: Siri is serving a lot of queries to ChatGPT directly, which is crazy because,
12:20
Josh: I mean, we have this leaked email on screen from Steve Jobs back from 2005,
12:23
Josh: where they had a similar thing happen where Adobe started to hire a few engineers from Apple.
12:28
Josh: And this was a big no-go for Steve because nobody tries to poach engineers from
12:34
Josh: anybody's companies. They have to earn them through merit.
12:36
Josh: And he says, Adobe is recruited from Apple. They have hired one person already
12:39
Josh: and are calling lots more.
12:40
Josh: And this was only one person. He said, I have a standing policy with our recruiters
12:44
Josh: that we don't recruit from Adobe.
12:45
Josh: It seems you have a different policy. One of us must change our policy. Please let us know who.
12:50
Josh: That was one employee. Could you imagine 400 employees with trade secrets going
12:54
Josh: to another company and what that would have looked like open ai would have been
12:57
Josh: that contract would have been ripped apart the next day
12:59
Josh: app iphones would not have been serving any queries and they would have been
13:03
Josh: in an all-out war probably in the public within 24 hours.
13:07
Josh: This has been going on for, what, close to six months now? And this is the difference
13:11
Josh: in Apple. It's like Tim Cook is very much the peacetime CEO.
13:14
Josh: He was great at building a business, great at building revenue,
13:16
Josh: not much of a jerk. Apple hasn't really had a jerk in charge in a long time.
13:20
Josh: And that's what I'm hopeful that John Ternus can start to do.
13:22
Josh: Hopefully he is kind of maybe the one pushing this. We know John Ternus is very
13:26
Josh: much in the hardware industry.
13:27
Josh: He would be very close to this. In fact, he worked very close with,
13:31
Josh: I think it was Tan, in terms of the guy actually wanting to take John Ternus' job.
13:37
Josh: As that lead of hardware. He didn't get it, John Turnus found it being CEO,
13:40
Josh: but he's very deeply involved and he understands this.
13:43
Josh: And I have to imagine that's probably where the lawsuit came from,
13:45
Josh: is Turnus kind of stepping into a CEO role and saying, no, I'm not going to stand for this.
13:49
Ejaaz: And if you're wondering the measures or the extents that Apple goes to to try
13:53
Ejaaz: and catch you leaking their information, we have a list over here.
13:57
Ejaaz: So the tweet goes, they include invisible watermarks in documents and files,
14:02
Ejaaz: subtle color changes for one pixel in an image, so they'll know if it's you
14:07
Ejaaz: specifically that shared a specific artifact externally outside of the company.
14:11
Ejaaz: So you can imagine that it ranges, it's individual for a particular employee.
14:15
Ejaaz: Typeface, one letter in a memo italicized or different font size.
14:20
Ejaaz: File name, slightly different identifiers for a file.
14:22
Ejaaz: Basically, they run through this entire list to make sure that they can not
14:26
Ejaaz: only know when someone's leaked information, but catch the specific individual responsible.
14:31
Ejaaz: And I wonder if they made this same assessment when they figured out that Tang
14:35
Ejaaz: Yu and Chang Liu were the ones that leaked all of this information.
14:39
Ejaaz: Now, it's interesting, the point you made around, you know, John Ternus is assuming
14:44
Ejaaz: the new CEO role in a couple of months now at Apple, and he is a hardware expert.
14:49
Ejaaz: And Apple, I think, has realized over the last two years, as they've missed
14:53
Ejaaz: the entire AI model race,
14:55
Ejaaz: Their number one moat, aside from having the most consumer users for any kind
14:59
Ejaaz: of tech company in history, is hardware.
15:02
Ejaaz: It's one thing being able to have a really cool AI model. It's another thing
15:06
Ejaaz: being able to distribute it effectively to billions of people all over the world.
15:10
Ejaaz: It is something that the company Snap is trying to figure out.
15:13
Ejaaz: It's something that OpenAI is trying to figure out. It's something that Google
15:15
Ejaaz: is trying to figure out with Android and their mobile phone distribution.
15:18
Ejaaz: But Apple has been the number one winner. It's the reason why they're like the number
15:22
Ejaaz: two or three most valuable company in the world. And I think that Apple realizes
15:26
Ejaaz: that OpenAI poses a significant threat if they're poaching not only 400 of their
15:30
Ejaaz: employees, but all their trade secrets completely.
15:33
Ejaaz: Now, if you're wondering how the software and the hardware component kind of
15:38
Ejaaz: melds together, imagine you're talking to an AI model every single day on your
15:42
Ejaaz: laptop, or it builds up this personal history of you.
15:45
Ejaaz: You want it to travel wherever you go. You want it to eventually leave the computer
15:49
Ejaaz: and see the things that you see and ingest the information that you see. Why?
15:53
Ejaaz: Because the more information that you feed these AI models, the smarter and
15:56
Ejaaz: more intelligent they become around you.
15:58
Ejaaz: So imagine the best way to do this is I'll have it on my iPhone.
16:02
Ejaaz: I mean, Josh, you probably interact with your AI agents or your AI models from
16:07
Ejaaz: your phone pretty frequently.
16:09
Ejaaz: I know I do it as well. I speak to it in voice mode. And I always wonder like,
16:13
Ejaaz: I wonder if you could see what I see. I mean, I already do it.
16:15
Ejaaz: I take pictures of different things and I send it to my chatbot and I'm like,
16:19
Ejaaz: hey, can you explain this to me? Or like, this is what I'm looking at.
16:22
Ejaaz: This is the information that you need. And it just reads it and ingests it.
16:25
Ejaaz: It would be cool if it did it 24 seven or if you could hear the conversation
16:28
Ejaaz: or the meeting that I was in.
16:30
Ejaaz: And all these different software features, all these different kind of inputs
16:34
Ejaaz: for all these various parts of data are kind of fracture at the moment.
16:38
Ejaaz: But Apple is the number one company that can pull off an amazing hardware suite.
16:43
Ejaaz: And so they know this and they see OpenAI stealing their stuff and they're like,
16:46
Ejaaz: I'm not going to let you do this. So I kind of understand the extent and measures that they're taking.
16:51
Ejaaz: And I hope John Ternus goes ham on this. I hope the lawsuit yields something quite interesting.
16:57
Ejaaz: OpenAI currently is the only major frontier lab that has faced like,
17:00
Ejaaz: I don't know, what is it, five lawsuits? I saw Elon Musk taking a dunk earlier,
17:05
Ejaaz: but he actually forewarned this in 2024.
17:08
Ejaaz: It's patently absurd that Apple isn't smart enough to make their own AI,
17:12
Ejaaz: yet is somehow capable of ensuring that OpenAI will protect your security and
17:17
Ejaaz: privacy, referring to the deal that they signed with OpenAI where ChatGPT will
17:20
Ejaaz: be used in Apple products.
17:21
Ejaaz: So I get it. I see why he's doing this.
17:24
Josh: Yeah, I think Apple needs to harden up a little bit. And it's been funny actually
17:27
Josh: seeing the commentary from Elon publicly because he is just really leaning into
17:31
Josh: Sam and he has been roasting Sam on Twitter for the last couple of days.
17:34
Josh: It's been rough. But you mentioned all the safeguards that they do to keep leaks from happening.
17:39
Josh: And yet simultaneously, just I think at the end of June, like a couple of weeks
17:44
Josh: ago, there was a 630 gigabyte leak of the new iPhone product suite from their
17:50
Josh: Indian manufacturer, Tata, I believe the name is.
17:52
Josh: And it was the biggest leak in apple history by far it had all the quality assurance
17:57
Josh: testing it had literal images and cad design files
18:00
Josh: of the next iphone that we're going to be getting in september and it was this
18:03
Josh: huge leak that kind of showed a lot of company secrets just open to the public 630
18:08
Josh: gigabytes of leaks so apple has a serious problem on their hand they need to
18:11
Josh: harden up they need to lock things down because it seems like they're really
18:15
Josh: just running on these these processes that have existed for a very long time
18:18
Josh: but there's no one there to really enforce or strengthen them.
18:21
Josh: And I really hope that Apple gets hard again. And with John at this as the leadership
18:24
Josh: position, he starts to clamp down and he starts to actually cause some havoc.
18:27
Josh: It's like Apple has been run by by Mr. Softee for a long time.
18:30
Josh: And he's an incredible CEO. And he's done amazing things.
18:34
Josh: But like Apple is very much in wartime right now. The iPhone legacy is not going
18:38
Josh: to last much longer with all these incumbents kicking their ass in AI and building
18:42
Josh: somewhat competitive hardware products, TBD, assuming they're allowed to get them out the door.
18:46
Josh: But OpenAI is doing what they need to do to win, and Apple is not really doing
18:49
Josh: anything to stop that or to put their foot on the gas. We haven't had any new
18:53
Josh: products from Apple in a long time in terms of categories.
18:55
Josh: They still have not shipped the new Siri. So there's definitely a bones pick
19:00
Josh: with Apple there, and I hope this is the first step of them really turning it
19:03
Josh: around and shifting the tides.
19:05
Josh: It's also important to note that OpenAI tried to sue Apple earlier this year,
19:08
Josh: which I thought was funny, for not really fully doing what they promised for
19:13
Josh: their contracts around chat GPT integration. and.
19:16
Josh: The reality is, is that they probably clawed that back real quick once they
19:19
Josh: found out what was actually going on.
19:20
Josh: It's just a disaster. It's been a train wreck for everybody involved.
19:23
Josh: Apple actually reached out to OpenAI in February, alerting them of all of these
19:27
Josh: findings and happenings.
19:28
Josh: OpenAI did not reply. So it's like, this whole thing is kind of a train wreck here.
19:33
Josh: And it's going to be interesting to follow the lawsuit and see what else comes
19:36
Josh: out. Because if this is already public and this is just in the initial filing,
19:39
Josh: oh my God, the emails that are going to be leaked are going to be spectacular.
19:44
Ejaaz: Well, that's one thing about this entire thing. If the lawsuit does go to court,
19:47
Ejaaz: we are like, Open Air has to give up all the confidential information.
19:51
Ejaaz: We're going to see the designs.
19:52
Ejaaz: We're going to know exactly the code names of what hardware devices they're
19:55
Ejaaz: trying to build, what that looks like, all exposed for everyone to see.
19:59
Ejaaz: I saw a blog post from Satya Nadella over the weekend. I don't know if you saw
20:04
Ejaaz: this, Josh, but it was called The Reverse Information Paradox.
20:08
Ejaaz: Now, it's a long essay, but I'll summarize what he's basically saying.
20:12
Ejaaz: He's basically saying that typically in an information world where you have
20:17
Ejaaz: a buyer and a seller of information, the seller bears all the risk,
20:22
Ejaaz: meaning in order for a buyer to know that the information is good,
20:25
Ejaaz: they have to see the information first.
20:27
Ejaaz: So technically they're getting the product before they even buy it.
20:30
Ejaaz: And then, you know, if the seller kind of like,
20:32
Ejaaz: shows a buyer and they're like, oh, well, I don't really want this anymore,
20:36
Ejaaz: but they have the information. They can just get away with it.
20:39
Ejaaz: In the world of AI, it's reversed. If you are an AI lab like OpenAI,
20:43
Ejaaz: like Anthropic, you and I use these models. We impart all our information over,
20:49
Ejaaz: Which becomes more valuable for the model to train and become more intelligent.
20:53
Ejaaz: But we're just giving that away for free. In fact, we're paying them for the privilege.
20:57
Ejaaz: We pay hundreds of dollars a month to access this model that only gets smarter
21:02
Ejaaz: from personal information that we voluntarily give them.
21:05
Ejaaz: And so the point that Satya Nadella was making here is in a world where this
21:09
Ejaaz: is the case, enterprises need to safeguard their information.
21:13
Ejaaz: They need to harden down their systems and they need to make sure that there's
21:16
Ejaaz: no proprietary information leaking.
21:18
Ejaaz: This is the exact same thing that's happening with Apple, just on hardware secrets specifically.
21:23
Ejaaz: But I think it's going to become a growing issue for all these major companies,
21:26
Ejaaz: whether you're Salesforce, whether you're Microsoft, whether you're Google,
21:29
Ejaaz: whether you're Apple, you need to contain your secrets because the more that
21:33
Ejaaz: leaks out to these models, it'll just be trained from these Frontier Air Labs.
21:36
Ejaaz: And technically, they can replace and do what you do. Now, of course,
21:39
Ejaaz: there are physical constraints. You need to get the supply chain manufacturers
21:42
Ejaaz: and all that kind of stuff.
21:43
Ejaaz: But that's just a matter of time, in my opinion.
21:46
Ejaaz: And it's this weird kind of internal warfare that's waging between the tech
21:50
Ejaaz: industry that I honestly haven't seen before. It's very, very weird.
21:54
Josh: The value of proprietary IP is so high. Huge. And the cost of it leaking is
21:59
Josh: so high. It's like when you think about...
22:01
Josh: An LLM breakthrough. Well, how much code is actually put into a transformer? There's not that much.
22:06
Josh: And if there's a small efficiency breakthrough to be had anywhere,
22:09
Josh: the downstream implications of that are billions to hundreds of billions to trillions of dollars.
22:13
Josh: And that could be something as short as 40 lines of code.
22:16
Josh: So the proprietary information, this IP has never been more valuable.
22:19
Josh: And therefore, the stakes have never been higher to try to capture whatever
22:23
Josh: amount of it as you can and make that value apply to your company.
22:27
Josh: So it's going to be a wild race. I'm sure this isn't the last instance we're
22:31
Josh: going to see of somebody stealing IP, stealing employees. I mean,
22:34
Josh: this is only becoming a more vicious trend.
22:36
Josh: We found out before starting this recording that California does not enforce
22:40
Josh: non-competes, which is a crazy thing that I learned today.
22:43
Josh: So anybody who's working in California can just leave and go work at a competitor
22:47
Josh: the very next day. So you have to imagine that plays a big role in all of this.
22:51
Josh: And it's kind of baked into the culture. This is just what happens.
22:54
Josh: And companies have to work really hard to try to retain their talent, retain their IP.
22:59
Josh: And just do the best they can. But that is the lawsuit, I think.
23:02
Josh: That's what we know so far. Oh, I cannot wait for this to go into court if it
23:06
Josh: does. We're going to read through every single one of those emails.
23:09
Ejaaz: Josh, let me ask you a question before we round out.
23:13
Ejaaz: Do you think Apple is concerned and worried at OpenAI? Or do you think this
23:18
Ejaaz: is just a tactic where they're like, I just kind of want to put the little guy down? What do you think?
23:23
Josh: I think they have to be concerned. I think it'd be irrational not to be concerned.
23:27
Josh: OpenAI has, what, a billion plus monthly active users and they...
23:32
Josh: Have figured out AI in a way that Apple has not. AI is very clearly ascending
23:36
Josh: and the traditional consumer software space is clearly descending.
23:40
Josh: There's going to be this increased trend towards an AI first operating system
23:44
Josh: in a way that an iOS operating system is not.
23:48
Josh: And I think that's like a serious cause of concern. I mean, you have the guy
23:52
Josh: who designed all of the flagship Apple products over at OpenAI now working on
23:57
Josh: this new hardware suite.
23:58
Josh: We know what him and his team are capable of, now that they have the manufacturing
24:02
Josh: capabilities, probably, and they have a lot of the secrets of how Apple works,
24:05
Josh: that's a serious threat.
24:07
Josh: I mean, if they can create consumer-grade products at Apple level with a software
24:12
Josh: stack that OpenAI is capable of, that's a really compelling product.
24:15
Josh: And this might be the first time that I actually buy a device other than an
24:18
Josh: Apple device to use as my daily driver.
24:20
Josh: Like, I can't think of the last time I used anything other than an Apple device
24:24
Josh: on a day-to-day basis. I have my AirPods, I have my MacBook,
24:27
Josh: I have my iPhone, I have my Apple Watch.
24:29
Josh: If OpenAI releases a hardware product, I'm buying their version of it.
24:32
Josh: If there are smart AirPods with cameras with full AI baked in that look really
24:36
Josh: cool, like those cufflinks, I'm buying.
24:39
Josh: And I think that's a serious threat to Apple. So I would be concerned if I was
24:41
Josh: them. And I think this probably comes out of a place of concern.
24:44
Josh: Should they have done it sooner? Yes.
24:46
Josh: After they filed that, they reached out to OpenAI in February,
24:49
Josh: they probably should have just filed the lawsuit back then.
24:51
Josh: But I guess now the evidence that they've acquired is undisputable.
24:53
Josh: And now they have a pretty strong case. So yeah, if I'm apple i'm i'm a little worried about this.
24:57
Ejaaz: I think they're worried um but i also think a year from now this will be seen
25:03
Ejaaz: as like the kick up the butt that they needed i mean like listen the bar is
25:06
Ejaaz: so low at apple right now when it comes to ai stuff they haven't even
25:10
Ejaaz: launched their revamped siri ai right now that's going to be powered by a version
25:13
Ejaaz: of their apple foundation models and the google gemini model as well so we're
25:18
Ejaaz: going to see a lot of that start to release at the end of the uh apple will
25:22
Ejaaz: finally make their comeback and
25:25
Ejaaz: I honestly think that Apple hasn't even tried at this point.
25:28
Ejaaz: And so if the question that is being asked is, OpenAI versus Apple,
25:33
Ejaaz: is this a serious threat? My honest take is like, no.
25:37
Ejaaz: To the point that we mentioned earlier, OpenAI still has a ton of challenges
25:41
Ejaaz: to overcome aside from this lawsuit, which is like figuring out the supply chain,
25:46
Ejaaz: manufacturing relationships, scaling this thing.
25:49
Ejaaz: Remember, like they only announced an ambitious goal. This is from Sam's words, not mine.
25:54
Ejaaz: Of 100 million units. Apple has currently 3.5 billion live devices out there
26:00
Ejaaz: right now. To catch up to that is going to take a while.
26:04
Ejaaz: In a world where supply resources are super constrained, like we had an episode
26:08
Ejaaz: last week where we talked about the memory wars and the fact that prices have
26:11
Ejaaz: hiked up 500% in the last year and a half, that isn't gonna get satiated over
26:16
Ejaaz: the next couple of years.
26:17
Ejaaz: It's gonna take decades to do. So OpenAI still has a mountain to climb and this is just another one.
26:22
Ejaaz: And it comes literally like two weeks after they settled the Elon lawsuit.
26:26
Ejaaz: So Sam can't catch a break, but I wish them the best of luck and we'll see how
26:31
Ejaaz: this plays out. We will be the first and only AI podcast to cover this in meticulous detail.
26:37
Ejaaz: But I believe that takes us to the end of this episode. Josh, any final thoughts?
26:42
Josh: Um, no, I cannot wait to see this freaking device, man. We've been waiting since
26:46
Josh: the inception of this show.
26:49
Ejaaz: All I want to do is just see the device.
26:51
Josh: Just show me the damn thing. Show me how it works and tell me what I'm going
26:53
Josh: to get it in my hands and how much money it's going to cost. That's it.
26:55
Josh: That's all I want to know. Everything else is just like, whatever.
26:58
Josh: Listen, if they have to steal a couple of secrets to make it better,
27:00
Josh: like that's fine by me. I mean, sucks for Apple, but that's an Apple problem.
27:04
Ejaaz: That's not a consumer problem. We're winners at the end of the day.
27:06
Ejaaz: The listeners, the consumers are the winners. Like let these guys find it out.
27:09
Ejaaz: We just get a sick product sooner hopefully
27:12
Josh: Sooner hopefully but that's it that's the story so if you enjoyed as always
27:15
Josh: please do not forget to share with a friend subscribe to our newsletter leave
27:19
Josh: us a review on your favorite podcast player and with that we part ways we do
27:23
Josh: have to ask about sponsors too ejs you have a little message about this yes.
27:26
Ejaaz: I do i do so so josh myself and luke the producer have been keeping the lights
27:32
Ejaaz: on ourselves uh we've spun out we're officially independent and we are looking
27:36
Ejaaz: for the most amazing partners to work with.
27:39
Ejaaz: What that would look like is if you have a company, a product or a service that
27:44
Ejaaz: you would want to put in front of our audience, we reach up to like a million
27:47
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27:49
Ejaaz: We would love to hear from you. We use tools, features, new ones that we don't
27:53
Ejaaz: even talk about on the show every single day.
27:55
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27:58
Ejaaz: A few of you have already reached out, but we would love to hear from more of
28:01
Ejaaz: you. And remember, this doesn't need to necessarily be you or your company or
28:04
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28:06
Ejaaz: If you know someone, if you have a friend, please reach out to them and let them know.
28:09
Ejaaz: Our email is in the description. You can reach out to us on X wherever we are.
28:12
Ejaaz: We would love to hear from you.
28:14
Josh: But yeah, that's it. Thank you as always. And that's the episodes.
28:17
Josh: Thank you so much for watching as always. And we'll see you guys in the next one.
28:20
Ejaaz: See you guys.