Money Has No Meaning: OpenAI, AIWB, WWJD

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Hello, and welcome to the Money Stuff Podcast, your weekly podcast where we talk about stuff related to money.

I'm Matt Levian, and I write the Money Stuff column for Bloomberg Opinion.

And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

What are we talking about today, Katie?

We're going to talk about Open AI, all the drama.

We're going to talk about chat bots and stock picking, and then we're going to talk about Bibles.

I'm going to bail out right now.

Sam Altman, OpenAI.

You know how OpenAI is a non-profit?

I don't.

Well, explain it to me.

No,

we don't need to because...

It's not anymore.

It won't be.

According to people familiar with the matter, of course, they're discussing how to restructure to become a for-profit business officially and giving Sam Altman a 7% equity stake.

It's so good.

Yeah.

I wrote about this that if you just like didn't know that it was a non-profit and you just ignored all of that stuff, you would sort of have a better understanding of OpenAI than if you did think about its nonprofit governance structure.

Because, you know,

they had a nonprofit board whose job was to develop AI for the benefit of humanity.

And the nonprofit board decided that the CEO, Sam Altman, was apparently developing it not for the benefit of humanity.

And so they fired him.

And then everyone was like, never mind, there's no nonprofit board.

Well, that's the thing.

I feel like a lot of people didn't know that OpenAI was a nonprofit until they fired and then rehired Samuel.

Yeah.

Yeah.

There was like a five-day period where you could be like, wow, OpenAI is really a weird company and not just a hot tech startup.

And then they're like, nah, we're just kidding.

We're at a hot tech startup.

And so

now they're going to be a for-profit for real.

Yeah, taking the last step.

They're considering, according to people familiar with the matter, becoming a public benefit corporation tasked with turning a profit, but also helping society.

But Matt, are those those two things at odds?

Can you help society and still make money?

I don't know.

This podcast will try to find out.

Look, you know, you can be a public benefit corporation.

You know, you're trying to make a profit, but like you.

The distinction between a public benefit corporation and a regular corporation is pretty vague, right?

Because you can be just a regular old for-profit corporation and like also try to be good.

And the constraints on you as a public benefit corporation are not that constraining.

So you can be a public benefit corporation and be kind of bad.

But, you know,

if you're going from being a non-profit company to being a for-profit company, it probably does make sense to stop along the way at being a public benefit company because it like sounds better.

Yeah.

It sounds like less of a stark transition.

It still has benefit.

Yeah.

It's still for the benefit of the public.

You ask

somewhat sarcastically, can you do good while also making money?

And I think it's really interesting that like the Silicon Valley ethos is so strongly of the view that, you know, you always read VCs saying Elon Musk has done more for humanity in his for-profit companies than, you know, any philanthropist.

And,

you know, I think there's some truth to the idea that like for-profit development of technology can be really good for the world and also make the people who do it really rich.

And

it was always at odds with that ethos that Open AI was a nonprofit.

And always very awkward because, you know, it was like founded by Silicon Valley, you know, signed by literally Elon Musk and like some VC types.

You know, Sam Altman is, you know, kind of a, he's like a, you know, bicombinator, like VC guy.

And, you know, it's staffed by tech people.

And all of those people, I think, to some degree in their previous lives bought into like the Silicon Valley ethos of like the way to improve society is to do

scalable, low marginal cost technology products that make a lot of money for their developers.

And there was this little blip of like at OpenAI is like, no, we're going to do it a different way.

And then they changed their minds.

So clearly, a lot of people at OpenAI think that they can do good for humanity while also making a lot of money.

So the mission of OpenAI being

this technology in particular cannot be commercialized.

This technology in particular has to be done by a nonprofit, which was apparently the theory for a while.

It's always a little weird, right?

Because

the product they've rolled out is sort of this consumer chatbot, right?

It's on a continuum with a lot of

for-profit technology products.

I think there's like the overlay of OpenAI believing that AI could...

enslave humanity or render work obsolete or like usher in a new age of abundance where money has no meaning.

Yeah.

If you really believe that your product is going to create an age where money has no meaning, then I suppose it makes sense to operate it as a non-profit.

Yeah.

That was somewhat marketable.

Well, you made the point before, right?

Where I mean, Altman saying publicly, like, I'm so scared of what we could be creating is a great pitch for why you should give me a lot of money.

Like, what we're working on is so incredible that I am scared.

Right.

It makes it seem very important.

And so it helps them raise a lot of money.

But eventually, you know, those people who give them all the money want their money back.

Yeah.

I don't think like all the investors pouring so much money into OpenAI, which is raising right now with a $150 billion valuation, are necessarily investing to help humanity.

They're investing with the goal of making a lot of money, I would imagine.

Yeah, and by the way, like even before this like supposed change, OpenAI has this for-profit subsidiary that was already able to give, to promise investors a big return on their money.

It was like a capped profit subsidiary, so you could only make 100 times your money.

Chump change.

So what is changing is, I think, two things.

One is like,

right now, the sort of notional corporate structure is that on top is a nonprofit, and then there's like the cat profit subsidiary under it.

And you can invest in the cat profit subsidiary and get profits, but ultimately everything answers to the nonprofit board.

And the nonprofit board has no fiduciary duties to investors.

Their duty is to humanity to develop AI in the best way.

And, you know, what happened is

the old nonprofit board thought that Sam Altman wasn't doing that in some unspecified way.

And so they fired him, and then they all got fired themselves.

And so now there's a new nonprofit board that is like a little bit more profit-oriented,

but it still

technically doesn't answer to the investors.

And I think the restructuring would mean that the board is now more directly responsible to investors.

And then the other thing that's happening in this change, besides the for-profit being the top company, is

Sam Altman is supposedly getting 7% of the company.

It's getting

a lot of money, theoretically.

I was thinking, if like

Harvard University became a for-profit company tomorrow, would they give the president $10 billion?

It's like a really interesting,

you know, like typically founders of hot tech companies get a lot of equity because they retain a lot of equity, right?

Like they start with 100% of the company and then they raise money by selling a portion of the company, but like they started with 100% and they end up with, you know, seven or 10 or 20 or 50%.

Sam Alban started with 0% because it was a non-profit.

And now they're retroactively being like, well, okay, fine.

It was a regular startup.

So you can't have 0% equity.

So we're going to give you 7%.

And so because he built this company from zero to, let's say, $150 billion valuation, even though he did that without any equity stake, they're retroactively saying, well, you did that.

So you're a founder.

So you get 10 billion of that value you created.

I'd like to

have a equation that went into how did they land at 7%?

Like, did they?

I'm very curious about the capital structure of this company generally, right?

Because this company is like, you know, if you, if you just think of the for-profit subsidiary, right, like Microsoft owns quite a chunk of it because they've put a lot of money in it, like lower valuations than the current one.

And, you know, there's some VC investors, and then there are a lot of employees, not Sam Altman, but a lot of employees have gotten, you know, chunky stock grants over the years.

They're not called stock grants.

They're called performance something units, but they're stock grants, right?

Public benefit grants.

Yeah, they're stock grants for caps or something.

And then the rest of the company is owned by humanity, right?

The rest of the company is owned by this nonprofit, right?

By you and me?

No.

No.

And so the nonprofit now is basically allocating money away from humanity to, say, Sam Altman.

And how did they come up with that number?

I don't know.

I think that like, it has to be a lot because, first of all, he's a billionaire from his other adventures.

But it has to be a lot because if you're just recasting Open AI as a regular startup, then

the founder or CEO has to own a lot of it because he has to be incentivized in the right way, right?

I mean, one thing that's happened in the Open AI story in the last year or two is that you're constantly reading about Sam Altman doing like other weird stuff.

You know, he's like getting involved in like data center deals and like power deals and like other startups that use OpenAI technology.

And they all feel like conflicts of interest.

And one explanation of that is, well, okay, he owns 0% of OpenAI.

If he can make a little money on the side by doing some sort of nuclear power deal, then he'll do that.

And so if you're an investor looking to put money into OpenAI at $150 billion valuation,

one thing you want is for the CEO to be mostly working for OpenAI.

And you can imagine a lot of ways to try to do that, but like the standard silicon value way is like he has most of his net worth in OpenAI stock.

So you have to give him enough stock that most of his network is in OpenAI stock.

And that's like, you know, are you getting like itchy with Elon Musk parallels?

Because you want the founder CEO to be engaged and passionate and working on the company.

Elon Musk, when it comes to Tesla, I mean, that was basically his argument that I want to focus on the thing where I have the most at stake here.

And that's why I should own more of Tesla.

Yeah, absolutely.

I don't know who is asking for what here.

Like, you could imagine, I'm not saying this is true.

I don't think this is true, but you could imagine Sam Altman being like, no, I'm good.

I have $2 billion.

I don't need more money from this company.

I'm in it for the benefit of humanity.

You could imagine the board or the investor saying, no,

you need to have aligned incentives.

You need to own 7% of the company.

Here, take $10 billion so that we know you're working for us.

You can't imagine that.

I mean, it's like, ah, twist my arm.

All right.

Right, right, right, right.

And like, by the way, Elon Musk will ask for the money, but he will also say, I don't want it for the money.

I just want it for my, you know, to make sure that I'm building it in the right place.

So yeah, it's totally like Elon.

It's a little different because

Elon has a lot of very different ideas that like have a lot of conflicts, but you understand why they're different companies.

Like Sam Altman, when he's like, raising money for ventures that build on top of OpenAI.

It's like, well, let's just do that at OpenAI.

It's a little bit more more like, it looked like he was using his position at OpenAI to make money on the side because he couldn't make money at OpenAI.

And now it's like, well, I can make a lot of money at OpenAI, so do that instead.

But yes, the parallels to Elon are interesting, right?

Because I said, you know, the notion that Elon Musk has done a lot for humanity by running for-profit companies like validates this move to being a for-profit company.

On the other hand, Elon Musk is also suing OpenAI for becoming a for-profit company.

That's so true.

This is true.

It's just one circumstance.

He does not believe you should be benefiting humanity and also making a profit.

Feels like a while since we've talked about Elon.

I wonder if the resolution to all of this is OpenAI is now a for-profit company.

Microsoft will own X percent of it.

Sam Altman will own 7% of it.

Humanity will own

some single-digit percentage of it.

Just give Elon an equity stake for his contributions.

Why not?

Chuck in a lot of time.

Get him on side.

Get him on side.

Then you get Elon aligned.

Yeah, it's good.

Although he's got his own AI company, so I guess you can't do that anymore.

That's true.

What is that XAI?

XAI.

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Chatbots?

Shall we?

Shall we talk about Bridget?

Another AI transition?

Bridget.

Bridget, Bridgewise.

So Bridgewise is this Israeli tech company, fintech company that is launching a chatbot that will be your broker.

Yeah.

Moving right on.

So it's this fascinating story because you read about it and you're like, okay, what does this chatbot do?

It gives you stock recommendations.

Yeah.

So, I mean, I think it's like you type in, oh, can you tell me like the top five stocks in like the industrial sector that I should buy today?

And it's like, oh, well, looking at the research report, but like, you can imagine just being like, what stocks should I buy?

And then Bridget says, you should buy these five stocks.

And you go buy those five stocks.

And then the next day you come back and you're like, Bridget, they went down.

What's going on?

Yeah.

Like, what information do you, what is the prompt?

Prompts matter so much with these chatbots.

Like, if I said, my name is Katie, I'm 31.

I love horses.

What would would it tell me to buy?

Versus if I said, I'm Katie,

I grew up in New Jersey.

That's it.

But like, those are bad prompts.

The prompt that you want is what stocks will go up the most.

Well, yeah.

Because you don't, like, you don't care.

But you're on the right track because, like, this thing is clearly a substitute for a broker, right?

This is like you call your broker and your broker gets to know you and learns about your risk tolerances and your preferences and the themes that you're interested in.

And then your broker is like, well, given your risk tolerance and you're interested in the theme of horses, you should buy the horse ETF or whatever, right?

But that's true because brokerage is a client service business where the product is making the client happy with the service.

But you can imagine a different model where the product is like buying stocks that go up.

Yeah.

Right.

I think that we all understand that when you call your broker and you say, what stock should I buy?

They'll be like, oh, what are your risk tolerances?

You should be in this ETF because there's a good balance of, you know, like they'll say something other than like, I know which stocks will go up and these are them and you should buy them because like if they knew which stocks would go up yeah they would be doing something else

why can't i just ask chat gpt what stocks to buy you can apparently i'll sometimes tell you like can't give you stock recommendations oh you can get around it so chat gpt

is like a general purpose chat bot and it can like read the internet and sort of say what people will say.

Like it can make like the best guess at like what people would tell you if you asked what stocks will go up.

Bridget is trained a little bit more on like financial information.

And so it might have a better idea what stocks will go up.

Yeah.

Might be like a less good general purpose chat bot, but a good picker of stocks.

But I think the point is, like it's so interesting reading like, you know, there's a Bloomberg News story about it.

And like you read the story and it's like it's been tested a lot to make sure it gives accurate recommendations.

Well,

so it's been back tested?

I don't think it means it's been back tested.

I think it means it's like, if it says to you, oh, J.P.

Morgan research said that this stock is like an X price target, those quotes are accurate, right?

It's like accurately quoting information to you, but it's not, I don't think, backtested to pick stocks that will go up.

Because if it was backtested to pick stocks that could go up and it was successful, it would not be a chatbot for a brokerage firm.

That's true.

It would be Bridge.

It would be Renaissance.

Yeah.

Or, you know, it could just be the Bridget.

hedge fund.

Yeah.

And they could make a lot more money.

They should backtest it, though.

I want to backtest Bridget.

I'll ask Chat GBT to backtest it.

It's like in beta, but like we'll certainly be testing Bridget.

Yeah.

This did remind me of a thing that you wrote about already, but I was on vacation last week, so we didn't talk about it on the pod.

But there is that chatbot ETF that just launched that's supposed to mimic

Aaron Buffett, Stanley Druckenmiller, David Tepper.

And that's interesting.

I mean, it's so it's basically.

Yeah, by the way, I haven't seen their back tests.

I would love to see their back tests as well, but basically they have this investment committee that is built on training the chatbot around investment ideas.

It basically wants them to mimic these guys.

It wants them to learn their personalities and then emulate it.

And that's crazy.

But it's kind of similar to what we're talking about with Bridget.

I mean, she's just like general financial information, whereas this is like, this is what David Tepper would do.

You know, like when you like, you want to like change your airline flight, you like go to a chatbot and like the chatbot is like trying to replace the human customer service agent

sure sure me too but like someone must do it

and like that's supposed to be mimicking the human customer service agent right yeah and like this i think is is sort of the same thing right it's like mimicking the human broker who like has a relationship with you and can like give you stock tips but like

not with like 100% reliability that it will pick stocks that go up.

Just like, you know, serving the purpose of a broker.

The chat bot,

the like LLM ETF is a little different.

Like they're trying to pick stocks that go up.

Like you're not chatting with the chatbot, right?

Like the person who runs that ETF is chatting with the chatbot and asking what stocks will go up and hoping that the chatbot gives them the right answer.

That's so funny.

I don't know.

I'm just speaking.

Like the product with Bridget is the relationship with the customer, right?

Like you want the customer to feel better, to feel like they're getting the information they call for.

And that includes like stock recommendations.

The product for the ETF is just the return stream of the ETF, right?

Like the chatbot is all behind the scenes.

And that is putting a lot more emphasis on the ability of the chatbot to actually pick stocks.

Also, the goal of the ETF isn't to necessarily pick stocks that will go up because there's no guarantee that like

Warren Buffett or Stanley Druckenmiller will actually correctly identify those stocks.

Okay, but two things.

One, I think the ETF would much rather the chatbot pick stocks that go up that Warren Buffett would not have picked than that it accurately reflect Warren Buffett and pick stocks stocks that go down, right?

Like they don't actually care about Warren Buffett.

They don't care about their tracking error?

The tracking error is entirely theoretical, right?

Because you can't like find the port.

I mean, you can literally look at Berkshire Hathaway, but this is like the stocks that Warren Buffett would pick if you asked him.

There's no like visible tracking error.

Yeah.

But then the other thing is you're right that also their goal is not really to pick stocks that go up.

Their goal is really to attract investors, right?

And like it's a good shtick, right?

It's a good pitch.

Like, well, train a chat bot to be Warren Buffett and then ask it what slacks to buy.

Like, that's clever.

I like that.

I'd kick in money to that.

Whether or not the slacks go out.

I can't wait to, I mean, it already launched.

We're talking about the intelligent Livermore ETF, but it's only been a couple days.

The ticker, I believe, is L-I-V-R.

I'm so excited to see the uptake of this.

I want to call David Tepper and ask how he feels about it.

You know, like, again, reading the description of this, the firm is going to instruct the LLMs to emulate the investors' personalities.

That makes my skills.

David Tepper is not in the prospectus.

The Bloomberg article is like,

David Tepper is on the list, but like

I don't think you can really advertise formally in writing.

We're going to train an AI to be David Tepper.

David Tepper is out there running his own funds.

That's true.

I mean,

he'd sue.

Well, that's another

good point against investing in the CTF.

You could just invest with David Tepper if you meet the criteria.

Yeah, or you can just buy Berkshire Hathaway stuff.

Yeah, exactly.

It's like, this is a clever stitch.

It's not really meant to be David Tepper.

By the way, the ticker is L-I-V-R or whatever.

Like, they've filed for several of them, and one of them is the ticker is A-I-W-B.

And again, they can't put Warren Buffett's name

as far as I know in the perspectives.

They can say AIWB.

Wink.

I love it.

Man.

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Let's get to the good stuff.

Let's talk about Bible washing.

So

I feel for the U.S.

Securities and Exchange Commission.

You know, you're a sympathizer.

I know.

They have a hard job.

And like one reason they have a hard job is like they're there to protect investors from like bad ideas.

Kind of, right?

Like, you know, that's what they wanted to do.

But that's not actually their mandate, right?

Their mandate is essentially to enforce good disclosure so like if you disclose a really bad idea then you can do that even if it's a bad idea even if the sec doesn't like it as long as you're super upfront yeah and like there are limits on that many of them discovered in crypto where you like a lot of people in crypto like this is a bonzo scam it's just like come on man but it's like one thing that happens is that the SEC is very interested in climate change, right?

In environmental investing.

There's a lot of focus on ESG investing, environmental, social, and governance governance investing.

And there are a lot of people who think that firms that do that kind of investing are somehow

not

doing it well.

There's concerns about greenwashing, where you say you are an environmental investing firm, but then you own some coal stocks.

And like, people get mad about that.

And the SEC gets mad about it, too.

The SEC can't say things like, if you say you're an ESG firm, you can't own coal stocks.

Because like, who's to say what is ESG?

Not the SEC.

Also, maybe that coal company has really great governance.

No, but it's true.

Like these are fuzzy criteria, right?

And so you could truly be like the best ESG investor in the world and own a coal stock.

Tesla is a good example.

Everywhere.

Like, you know, oil companies, good governance, oil companies that are improving their emissions, so they're better than, you know, like there's all sorts of ways to be an ESG investor.

And a lot of people have like genuine disagreements about what to prioritize and how to choose between like owning the best oil company to encourage oil companies to be better environmental citizens or owning no oil companies because they're all too, you know, there's all sorts of ways to do it.

And the SEC doesn't really substantively get to pick between them.

But what it does get to do is read your disclosures and make sure they're accurate.

And so it has brought cases against like, I think Boney Mellon had a ESG fund where they were like, you know, we have these ESG screening criteria and we apply these criteria to each company before we make an investment.

And they like went through their internal records and found that sometimes they made an investment without without getting a memo about the criteria.

And they said, aha, you're not actually doing your ESG investing.

And so they fined them and they got in trouble.

And that's the level of enforcement that the SEC can do.

And it's, I think, frustrating for them because they probably have some substantive ideas about who's doing a good job or not.

Anyway, this week, a company called Inspire Investing paid a fine to the SEC because they advertised that they were applying biblical principles to their investing and they were like doing a rigorous screening to root out companies that had practices they didn't like.

And the SEC discovered that they weren't doing as rigorous a screening as they wanted.

And so they find them some money.

$300,000, to be exact.

I love the story.

You called it Bible washing.

And I think that's the

greenwashing, but for biblical investing.

Yeah.

I like the story.

And I like all the, I don't know, the ESG parallels.

It's completely the same thing, right?

I mean, it's this sort of broad category of like people who are investing for things other than financial returns, right?

They're telling investors, we're doing your investing in some social way that you like.

A big chunk of that is ESG investing where people care about climate change or whatever, but another chunk of it is, you know, conservative biblical principles investing where people care about other things.

And the SEC says, no matter what you're doing, you have to disclose it accurately and follow the procedures you say you're following.

Yeah.

Let's just read from this excerpt from Money Stuff.

So INSPIRE had the INSPIRE impact score, which, quote, reflects a rules-based, scientifically rigorous methodology of faith-based ESG analysis, which is interesting.

There's some tension between science and religion, but in any case, this creates a level of consistency and reliability of results necessary for making well-informed, quantitatively sound, biblically responsible investment decisions.

And then the SEC checked the donor lists.

Caught a bit of a contradiction as you lay out that certain companies that were excluded from INSPIRE's investment universe for donating to certain advocacy organizations or sponsoring certain events that Inspire consider to be prohibited activities.

At the same time, multiple companies held within the Inspire ETF portfolios donated to organizations or sponsored events that were the same or similar.

So a $300,000 fine.

These ETFs are still out there.

We could buy and sell them today.

And in fact, Inspire put out a press release about this saying, we are grateful to receive guidance from the SEC on what it considers important regarding modern faith-based investment screening.

And the SEC order takes no issue with the conservative biblical values Inspire applies to screening categories.

Like, they're going to keep doing this.

They're just going to

like what they advertise is like all of our investments have no involvement in

gay rights organizations or abortion rights.

And the SEC found that some of them did.

And so they're going to clean up their act and be more accurate about screening out companies that don't meet their criteria.

But the SEC, as they say, took no issue with their criteria, right?

If you say you're going to exclude companies that contribute to Gare Ed's charities, then you just have to do that.

And then the SEC will bless it.

I almost said, hell yeah, they're going to keep doing it.

Do you get it?

So one of these ETFs, B-I-B-L, is the ticker.

It's this Inspire 100 ETF.

This ETF still exists.

I took a look at the performance.

It's doing okay.

It's up 16% year-to-date on a total return basis.

SPY, for comparison purposes, is up 21%.

Its top holdings are Caterpillar, Intuitive Surgical, Progressive, et cetera.

Its top industry groups are REITs, software, and healthcare, all, you know, holy stuff.

My point here is that neither the SEC nor I can make any comment on whether this is holy stuff or not.

So

I do think the idea of principle-based investing is really interesting.

And that's what this is.

That's what ESG is.

But why people do it is really interesting to me.

Like if you're investing along your values because you don't want to invest in stuff that goes against your values, sure.

Or are you investing because you think that your values will produce better returns?

That's a really interesting school of thought.

Like if you believe that a company is environmentally conscious and sound and will weather climate change better than other companies, that could be a reason that you invest.

Do you invest in this fund because you believe that these biblically responsible companies are going to do better than the ones that aren't?

I haven't read enough of the marketing literature to know, but I think

in ESG, I think asset managers benefit a lot by kind of blurring that and sort of hinting that you're getting both, right?

Like you're getting to live your values and you're also getting a higher return.

And I think like

there's not really a contradiction between them because like you could easily believe that like you have these values, your values are right.

Over time, other people will come around to your values.

And when other people come around to your values, that will increase the stock prices of companies that share those values, right?

Like that's a fairly consistent thing to believe.

And you could believe that about, you know, environmental or biblical things.

I don't think you have to analyze it rigorously to say like the companies that I believe in are also the companies that'll go up because you could believe that you know without either ESG or biblical principles.

You could be like, I really like Taco Bell, so I think Taco Bell stock will go up.

So we're talking about BIBL.

They have some amazing other tickers as well.

WWJD, What Would John Do?

They also have the ticker.

G-L-R-Y.

Walking away from the microphone.

Larry, I assume.

So sorry.

But yeah, no, the ticker game is strong.

And that was the Money Stuff Podcast.

I'm Matt Living.

And I'm Katie Greyfeld.

You can find my work by subscribing to the Money Stuff newsletter on Bloomberg.com.

And you can find me on Bloomberg TV every day on Open Interest between 9 to 11 a.m.

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We'd love to hear from you.

You can send an email to moneypod at bloomberg.net.

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The Money Stuff Podcast is produced by Anna Mazarakis and Moses Andam.

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And Sage Bauman is Bloomberg's head of podcasts.

Thanks for listening to the Money Stuff Podcast.

We'll be back next week with more stuff.

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