Limitless Podcast - Did Sam Altman Steal this $6.5 Billion Dollar Idea?

Episode Date: June 27, 2025

In this episode, we dissect the fallout from the highly-anticipated AI hardware reveal by Sam Altman and Johnny Ive. Initially celebrated, the excitement vanished when the announcement and its website disappeared overnight...------💫 LIMITLESS | SUBSCRIBE & FOLLOWhttps://limitless.bankless.com/https://x.com/LimitlessFT------TIMESTAMPS00:00 Start07:27 The Human Soul Is Missing16:11 How To Properly Use AI20:32 Multi Agent Breakthrough28:58 Takeaways42:54 AirPods With Cameras48:02 Email Screenshots56:05 The OpenAI Files------RESOURCESDavid: https://x.com/trustlessstateJosh: https://x.com/Josh_KaleEjaaz:https://x.com/cryptopunk7213------Not financial or tax advice. See our investment disclosures here:https://www.bankless.com/disclosures⁠

So just another month ago, we recorded what was probably my favorite episode we ever did ever, which was this invention and the announcement of the AI software stack finally meeting hardware. And we'd get our first AI hardware device, and it was designed by Sam Altman and Johnny Ive, who is this amazing, brilliant designer. He built the iPods, the iPhones, all of the design work for Apple. This was a six and a half billion dollar acquisition. So it was a massive bet on replacing what some belief could be replacing the iPhone through this AI first device.

And they had this whole big reveal. feel and they released this beautiful video of basically them just kind of gassing each other up and saying, hey, you're great. No, you're great. Glazing each other. And yes. And it was this, it was this really beautiful thing where it's like, okay, we're actually going to try to build this new type of hardware for the 21st century, thinking about it AI first with the best designer we could possibly get our hands on. This was huge. We were super excited. It had a ton of views, people really loved the episode. And then I woke up a few days ago and the website was gone. And it was completely nuked. every trace of this announcement was gone, completely disappeared. The website was taken down,

the YouTube video that announced it was taken down, and I was just sitting there like, what is happening to my baby? I was so excited for this. What is happening? And David, I think you probably have the answer, and you could probably deliver this most eloquently, of what went wrong in the six and a half billion dollar deal. I think everyone was hoping for absolute disaster because what came next was a lawsuit coming from a company very similarly named to their new startup, I.O. So I.O is going to be the company that develops the AI hardware. And the company that is suing OpenAI for patent infringement, I believe, is also I.O spelled IYO or OIO. Io.

Yeah, yeah, like one letter off. And they are suing Open AI and Johnny I. for trying to bury their startup, bury their startup. And so this came right after all the marketing material that you just talked about, Josh, went out on the internet. As soon as that went out there, this startup was like, yo, they're stealing our stuff, let's sue them. Here's the founder, Jason Rugalow,

who did a TED talk about his piece of hardware, their earbuds, big earbuds with chips in them that do auto-visual compute. That also allows an AI agent to also talk to you. that he tweeted out, we're not going to let Sam and Johnny steal our name. Now, this was not what I thought was happening here. I thought we were getting a early release preview of what the hardware is, the very special piece of hardware.

I thought we were going to get the secret sauce. I wish, man. Turns out, it's just the name. They're just lost towing them over the name. I'm so disappointed. I wanted more, I wanted more drama. Also, their name is not even as cool. Like, I-I-O, I-Y-O is just not, I don't know, it's not interesting.

There's a lot more lore, though. There is more backstory to this. We have the files up here, right? Here's a tweet that I think rocketed around the world. Google X spins out I-Y-O, which makes smart earbuds from 2018, alleges Sam Altman in opening eye, heard their pitch, passed, got Johnny I have to try and bit copy it, and then bought his company for $6.5 billion, copying it, I,

oh. And so there's this big lawsuit filed by IYO towards OpenAI, which is why all this stuff had to come down. What would you say is like the big takeaway or the big reveal or the thing that listeners should know about this lawsuit? I think it's knowing that it's not going to be a pair of new headphones with AI in them, David. How does that make you feel? What was that? Was that a groan? Yeah, I was hoping for the earbuds. I'm like, I want the fancy device. We, we, we, In the episode that we did, it was a debate between are there going to be AirPods with like cameras and chips in them? Or are they, is it going to be this like puck thing that sits on your desk? And I consider the puck thing that sits on your desk to be the more lame version of what could be.

And so when I listened to the TED talk from this guy that is now suing open AI, he had these earbuds, ear pods that had like big discs on them. And so they had a lot of space. But of course, because you need a computer chip in them to run the AI model. But I was like, yes, AI in my ears, at all times, hyperrespondent. You can put a camera in there so it knows what's up. And I was hoping for the bigger version of what's going on. Turns out we're getting the smaller version. No, I want the smaller version.

I want the subtle thing that is, okay, number one, maybe this is me being selfish. I want a new device, something that I want to see the iPhone get or the cell phone get recreated into whatever it's going to be, right? number two, I think this device needs to be discreet. I'm kind of, and this might be revealing my boomer tendencies, but I absolutely hate how like most of the Gen Z people have conversations with AirPods in their ears. I think it's like, like, come on, like guys, like, can you even hear what I'm saying? And I think the same thing is going to happen.

And AI is very personal. So like, I feel like if you have like some earbuds with a camera in it, it's probably not going to function as well. My guess from this, and actually from the lawsuit, if you look into it, Sam explicitly states that it is not going to be headphones, but it's likely going to be something that kind of like sits in your pocket or sits on your desk, has some kind of like fish eye lens, so it sees everything you see,

hears everything you do, and kind of like subtly, I don't know, influence or connect to your cell phone or your open AI chat app. I'm pumped about this. It's a camera and a microphone with Bluetooth. Yeah, yeah.

Well, I mean, if you want to put it like that, but it's how it connects with everything else, right? Josh, I see you grinning, dude. My favorite part of this whole thing is like the, now I get to walk around and say, I told you so. You can't make 100 million AirPods that have cameras because the battery technology isn't there.

The chips aren't there. And if you look at this device, it's this huge, clunky, ugly thing that we later found out doesn't even really work that well. And the only way you can make 100 million of these things is to have it simple, is to have it near your kind of desk. And they actually referred to the exact things that we said where it will be thin enough to slip into your pocket. and it'll also be serving as a desk ornament. And yeah, so David's pulling up the video here I'll show where it's basically this giant like circular orb in your ear. So one inch circle that goes in your ears that has.

That looks like a hearing aid. As far as putting a computer around your head somewhere, it's not bad. And this was a year ago. And so I'm hoping with like Open AI and Johnny I've applied some work to it, they make it a little bit more sexy. This would have been a Google Glass fail. No way. It's like there are some things that.

like sure, I would love to design and create, but the technology just does not exist to do that yet. And you can't force something that's not ready and that very much feels like what this was. And I was looking at examples and demos. And it reminds me very much of the other companies that have tried this with Humane and Rabby. And we had the Humane pin and it had this crazy cool tech where it could project lasers onto your hand and that's how you interface with it. But again, the technology just isn't there. It was clunky. It did not function well. You could see in the pictures here. It looks awesome. It projects on your hand and it has like this cool laser thing and you could interface with it through finger gestures, but the tech isn't there.

And the same thing with the rabbi, which was this AI alternative device that just kind of sits on your desk, it's in your pocket. The tech just wasn't good enough and it wasn't designed very well. And I think that was, that's what we're seeing here again. And the sad thing is this guy got very upset about it. And he made this big deal and is suing open AI. And now there's this whole giant drama unfolding for, I mean, what seems like no real good reason. This guy just didn't have a good product. He got upset about it. Johnny Ivan OpenAI had heard about the product, but they just weren't interested and were building their own thing. And I mean, IO is more elegant name anyway than IYO. So I'm team Johnny. So when this tweet goes out, it's got 8,500 likes. It's got 16.5 million views. When the tweet goes out and there's a lawsuit about the acquisition and the naming of IO, people, including me, are thinking like, oh, they ripped off some sort of. startup's entire project, entire product. And so like, the fact that this has gone so viral and it's just the name, not that they are going after IYO's product, there feels like a disconnect there.

It's like it's like it's like, yeah, this one startup got upset about like they're stealing the name. Why did this get to be such a big deal? Why is it so big? This is like the increasing derangement syndromes around popular people. Like we see this with Elon a lot. You see this with Trump a lot. You see this with Sam Altman now. It is very easy to get a ton of clicks from creating these hyperbolic headlines that aren't actually super true. And Sam did a good job of addressing this. I think yesterday where he posted the actual emails, right? Of the emails of the actual interactions between them. So like I would just encourage everyone. When drama like this pops up, please just go to the source, find the closest source to truth as you can instead of reading the headlines because generally the actual truths are far different. But these emails were just. What's just in Rublo accusing Open AI of? Anything more than the name, or is it just the name? Just the name. Branding.

Okay. And so why did Sam Altman had to, what did he have to address? What did he have to repost? Well, he had to address the fact that people thought he was stealing the device. And he was just like, not only is the legal case against them absolutely mute, but he exposed the founder for basically trying to get or force Sam Altman to acquire him in the first place. And Sam respectfully, that's what it is. It's not the name. It's this guy who's trying to get acquired and he got butt hurt that Sam Alman bought Johnny Ives company for $6.5 billion and not

his company. That's what's going on. And he only wanted $200 million. So come on. Would have been a deal. What would have been a deal. Wait, why didn't they acquire this company, though? Okay. So actually, I would love for you to click in the emails and we could walk through them because these are super fascinating. One of them, this, so this was the initial outreach. So first he reached out to Sam and he was like, hey, I'm working on this cool thing. It's called I.O. He wants to pitch Sam on investing $10 million to invest in his company. And Sam actually got back to him. And he said, thanks, but I'm working on something competitive, so we'll respectfully pass. And then he said, Rut Row, want to work together? I don't want to go up

against you, man. And he just kind of describes the company. And he's like, he's very submissive at this point where he's like, man, you guys are so cool. But we have a really world class team. And I have a TED Talk and my Instagram clip went viral. And we should work together. And And then Sam replied, he's like, let me chat with Johnny I if he's the one driving this. So then we have a follow-up email here where it's like, hey, he got sick, the founder got sick, and Sam forwarded it to one of the team members. And they basically revealed that through this email, he says, how embarrassing, Peters fail and Tangs fail. And there were two times in which they made a demo to the Open AI team.

And the features that they were pitching them actually just didn't even work. So through this email, we learned that not only was the product like kind of ugly, I mean subjectively, but kind of ugly. it also just didn't function. So during that demo, there was two embarrassing fails. The thing just didn't work. And Sam, or Peter, again, who runs, I think, Plink product at Open AI, just like, hey, thanks for stopping by. Thanks for leaving the headphones. Hope you're feeling better. And we'll figure out next steps. And it was just kind of like throughout this whole email exchange, you're kind of seeing a kind of submissive founder who really looks up to Sam Altman, who really just wants to get acquired and work together with him. And the reality is that they just don't have a good product. And I think from that

perspective, it makes a lot of sense if I say I'm just kind of said like, hey, I don't think this is going to work out. They offered to see the IP. The open AI team turned that down because they said it wasn't going to be a new match. And I think that's mostly the story. It's like, hey, this one founder just like kind of had a crappy product. He pitched it to the open AI team and it just didn't go well. And they just so have to be working on a company that was named similarly. So in the YouTube video, the TED talking question, which was a great, great TED talk, he gives a demo of his product and it is seamless it is great and you know it's a ted talk so he knows it's coming he knows how he knows what to do and so you could totally imagine that there is some like

back and magic going on but for all intents and purposes like you walk away from this ted talk about this you know chip in your AirPods that could talk to you in real time and it's an AI and they can assist you and all that kind of stuff and then he also does some like audio geometry stuff as well It's a TED Talk, so it's pretty impressive. If you go to the lawsuit, the lawsuit has screenshots of images of saying that OpenAI went so far as requesting like blueprints and design schematics of their device. And so there was definitely the implication that OpenAI went after IYOs like IP and then just went and got Johnny Iive to build it. That was the charge at the end of the day. or what the branding of the charge was.

And then I guess if you go into the lawsuit, it's just the name. I guess we won't know until Open AI comes up with the device, right? Yeah. That'll be the true tell, which hopefully by that time this case will be absolutely close. I don't know. This all just seems like a massive nothing burger. It sounds like the founder, Ruggalo was just salty that he had been rejected. He saw the headline a month ago.

It's not a good luck. He thought, that could have been me. And now Open AI is coming to kill me. me, what I find particularly hilarious is that they made zero effort to iterate on the name. They literally called it I-O or the company called it I-O and didn't try to delineate anyway from that company itself. I don't know if that's like a major coincidence, but my guess is it isn't and it was a personal hit against them, but hilarious nonetheless.

I don't know for coincidence. I feel like I-O is very, it was very Johnny-Coded. It's kind of like love from in the same cadence where I'm not sure it was intentional. And I think I'd love to get the timelines because I'd love to know when I.O was conceived versus when this other company was conceived doing the earbuds. And I don't want to discount the I.O company, the IYO company. Because like this is a very respectable guy. It was spun out from Google X and Google X for people who don't know is kind of like

their moonshot division. So Google has a lot of money that they put towards just building moonshot ideas and they kind of find interesting people to work on them. and this was one of those that got spun out from the product like that program it's a really cool form factor this is the ideal form factor i'd love to see like i'd love just air pods on steroids that do really cool stuff it's just i think the reality of it is just not practical at this time so it was like a very admirable attempt it's very important design to try at least to prove that it's not possible and like okay good good for you you tried the thing it's it like didn't work that well

it's not working that well sorry but the professionals are going to take this now the guy who's designed all this amazing stuff is going to take it from here. So I just looked it up and Iyo. So the the Ruggalo company came first, founded in 2021. Yeah. So now we have to see when Johnny Ives came up

with his company's name, I.O. And whether that was soon after they had these meetings with Ruggalo. Well, why would you name your company IYO to start? I feel like IO is the better one. We were running out of names these days. I guess so. man.

Yeah. Yeah. Well, my big takeaway is like, Sam Altman just has a really big target on his back. Tobin'I has a really big target on his back. And I think people can like get a rabble out of people. I think this Jason Rugalow character is truly going for the money.

He's going for the money. Like you didn't acquire me, therefore I'm going to sue you. Maybe, I don't know, like, if his startup is not doing great or what or what the strategy is with that. I don't know if he comes out looking better than he,

went in with this, but I guess it also comes out of the lawsuit. But overall, like, Sam Altman's got like 99 problems, man, like coming from left and right. Yeah, and this is just one of them. And it seems like at the end of the day, this only became a big deal because there was a lawsuit and they, they were forced to take things down. If they didn't actually have to take it down, it just would have been another day in Paradise. They would have been sued by someone else who they're competing with, and that would have been the end of that. Well, actually, speaking of Target on his back, there's one story that's been following Sam for a while now, actually since the company was founded. So for those of you who don't know, Open AI was called Open AI because the original mission and still technically the founding

mission of the company was to create AI that was in alignment with humans. So as a specific part of that, Open AI was structured as a non-profit. So it would never let profit basically get in the way of designing this amazing AI model that's going to benefit the entirety of humanity. Now, at some point along that line, Sam disagreed with this notion and decided to kind of evolve Open AI into a kind of for-profit company, but he's been taking it through stages. It's what's called, it's what has caused a bit of a ruckus amongst other AI CEOs like Elon Musk, who was originally part of Open AI and broke away. This week, this website popped up and was delivered that went viral on X called the Open AI files, which is basically a deep dive revealing that Sam or Open AI itself is restructuring very much into a for profit. And if we just scroll down here, there's actually a really neat diagram that summarizes everything that's going on here, David. So the takeaway here is Open AI is moving into a public benefit corporation. And the major benefits from the public benefit corporation is listed here,

which is it is a for-profit company without a fiduciary duty to humanitarian. without limits on investor returns and without granting the non-profit rights to control AGI technology. So it's basically reverting everything that its original structure stood for. Now, this isn't new news, but it really sets in notion

what Open AI is gunning for, which is it is the leading AI model provider. I'm curious whether you guys disagree with that at all. And it has the lead right now. And to your point of it, it has the biggest target on its back. In my opinion, this is a natural way for things to go.

I don't think this is anything surprising entirely. I kind of expected Sam to take this in a for-profit direction. Heck, every other single AI model producer is a for-profit anyway. But I think people are a little bit salty that their original founding mission was to align AI. So I just think this is business tactics at play, and this is just another hit piece. But I don't know. What's your take? I think this topic is going to be endlessly talked about until the end of Open AI.

Like this is just whether this was intentional as in like Sam Allman thought that maybe, you know, kind of like how not to invoke a nefarious character, but like Sam Begman-Fried was all about altruism and he leveraged that as a brand to help promote FTX. And so like you can carry that forward into Open AI and be like, yeah, Sam Altman, we're going to make AI the profits of AI go back to humanity. We're going to do universal basic income and we're going to be super mission driven. and I don't know what he was like defending against. I don't know what the strategy was with that. I don't think anyone truly knows. Or maybe alternatively that it as was actually what that was supposed to be. It was just, we're going to do this as a nonprofit.

And then he realized that there was going to be this AI space race and you need to be for profit in order to be competitive at all. That's another. It's like one of those two things. Maybe the truth is somewhere in the middle. I don't really know. But I think people are going to like to be debating about like what was the original intent, and strategy of the nonprofit inception of Open AI.

And also, was that in any violation of anything? Like, was that nefarious? Was that a good move? Was that illegal? I don't ever need. People are just going to debate this forever. Yeah, this feels like this is just another extension of the conversation of everything that's gone wrong about Open AI.

And that's this, like, technical that they will never be able to escape from. They had the issue with all the founders when they all left and they tried to push Sam allman out of the company. So there's all of this lore that keeps getting resurfaced in different form factors. But I think we kind of know this. This is nothing net new. This isn't anything breaking that we're not aware of. So I think now, like, I'm just kind of judging open AI and like just merit-based.

Just like, hey, if your models are great and you are delivering like high quality software, that's fine. Like I know all of your problems. I know all the skeletons in your closet. I'm aware of this. This is like I know who we're dealing with. Just make good software now. I'm not really interested in the drama anymore.

Now you're just right there with everyone else. Yeah. I think also kind of seeing it from Sam's perspective, he is facing a lot of pressure from investors, right? So he needs to raise capital to train new breakthrough models. It's a very expensive art form to get involved in. And these investors, rightly so, are saying, listen, I want more than 100x, which is crazy to someone that comes from a crypto background where that would be like the dream. But they want more than this. And it's likely the most powerful technology that humanity has ever seen before is going to lead to.

way, way more than that, right? Especially if it's the leading model provider. The second thing that this open AI files revealed that I found was interesting is Sam likes to herald a lot online that he owns almost no equity in OpenAI and he's not really benefiting from it financially. But what was revealed is one of the biggest equity owners of OpenAI, according to this OpenAI files release, is Sam. But it's just through different corporations that he's set up that has bought the public,

the public stock, but the private stock. So they own equity stake in it. So he's kind of like self-funded it through the billions that he raised through either his Airbnb investments or his YC comb combinator investments. And he now indirectly owns a heck of a lot of Open AI. So it's in his financial interest actually to move this into a public benefit corporation and a full profit. So when Sam Altman has said, I own no equity in Open AI. Oh, he does. That was a lie? So he lied? Yeah. Yeah. He just lied through. According to the Open AI files, yes. According to the opening of house.

Well, it's kind of like a white lie because he technically doesn't do it. That's a lie. That's a lie by omission. Exactly. If he thought in the back of his head, like, well, I'm not going to talk about the equity that I own through these private entities. That's a lot. Because like the spirit of the question is, do you have financial upside to the growth of your company? That was the spirit of the question.

Yeah. And again, this is like claims that are made by this website and they have a bunch of sources and company jobs. Who made this website is an interesting question. I'm trying to find that out. The tech oversight project and the Midas project. Not exactly sure what these things are. One of them is holding the hyperscalers' accountable. But man, if I was Sam Altman's direct competition,

I would be very interested in this website getting publicized even further. And that's pretty much it. So Open AI, getting sued by some disgruntled guy who created a pretty mid-tier product, and we're still back to business. So do not fret. We are still building our little puck-shaped pocket thing that'll sit on your desk, go on your pocket.

We're still, the mission continues. We are building the AI-first hardware device. It is still coming. $6.5 billion did not go to waste, although it did stir up quite a bit of drama. And that's where we stand today. So I'm hopeful we kind of part of me selfishly wants more lawsuits so we can learn more about the device as we go.

So kind of forced to push out these publications from behind the scenes. Yeah, so I mean, to be fair, I'm not a shareholder of Open AI, so if you want to go sue them and get more information, like, we'd love to cover it. That'd be great. Please consider. But yeah, that's mostly the story.

It's just there's not a whole lot of new things. It's just a continuation of the old. And a lot of people just kind of being upset with Open AI and Sam Altman as a whole. And just kind of the company navigating through that. The drama between the Open AI Labs continues to be the most game of thronesy thing that I think has ever happened in my lifetime. And I look forward to covering it with you. guys on future episodes of Limitless.

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