Morning Brew Daily - Execs Jump Ship as OpenAI Goes For-Profit & The $100K NIL Controversy

Episode Date: September 27, 2024

Episode 419: Neal and Toby discuss OpenAI’s restructuring into a for-profit company and why most of their executive team has decided to leave. Then, federal prosecutors charge NYC Mayor Eric Adams for allegedly accepting illegal bribes from foreign entities. Plus, a college football QB has decided to leave UNLV because he was promised $100K but the team it never happened. Meanwhile, long-time co-host of the ‘TODAY’ show Hoda Kotb announces her leaving after hitting a new milestone in her life. Lastly, another low-cost airline is reaching out to budget fliers looking to score a trip to Europe for under $100. Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. To learn more about how Wise could work for your business, visit https://wise.com/business/  Get your Morning Brew Daily T-Shirt HERE: https://shop.morningbrew.com/products/morning-brew-radio-t-shirt?_pos=1&_sid=6b0bc409d&_ss=r&variant=45353879044316  Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Hurricane Helene  02:00 - OpenAI Shakeup  07:00 - NYC Mayor Indictment  13:20 - $100K QB NIL Conflict 18:30 - Hoda Kotb Leaving 'Today' Show 22:50 - Fly to Europe for Under $99 Learn more about your ad choices. Visit megaphone.fm/adchoices

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And I'm Toby Howell? Today, how messy has college football become? A quarterback abruptly left his 3-0 team because they weren't paying him enough. Then OpenAI said, you know what, let's make some cash and is changing from a nonprofit to a for-profit. It's Friday, September 27th. Let's ride. We are, of course, following Helene, which made landfall in Florida last night as a category for hurricane. the strongest to ever hit the state's big bend region.

This was a massive storm with a wind field that stretched the equivalent distance between Washington, D.C. and Indianapolis, and it's already caused unprecedented flooding and record storm surges of up to 10 feet in some of Florida's coastal communities. As of 6 a.m. this morning, more than 2 million customers were without power across Florida, Georgia, and the Carolinas. Helene has now entered Georgia, and while it's weakened to a tropical storm, meteorologists say it's still extremely dangerous.

This is how you know this storm is and was bad. Waffle House closed all of its locations in Tallahassee. Remember, if Waffle Houses are operating or not, has actually been used by FEMA as an indicator of a storm's severity. So to see them all shut down says a lot, not only shut down, too, I've been seeing pictures of them boarded up as well, and that is not a site that you come across very often.

It does look like Haleen has reduced in intensity. It is a tropical storm now, but we definitely hope that everyone in the region is staying safe. Now let's take a moment to hear about our sponsor, Wise Business. Sometimes when you're a business owner, it can feel like you're constantly chasing your money down. It's like trying to ride a bucking Bronco, hard to stay in control. Well, with Wise Business, that is not a problem. You get full visibility over your money with real-time notifications for every transaction. You can also manage team accounts, set spending controls, and give multi-user

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Only at Yamava celebrating its 40th anniversary. You win? Details at Yamava.com must be 21-20. Please gamble responsibly. Monopoly is a trademark of Hasbro. Hasbro is not a sponsor of this promotion. Open AI's board meetings are starting to look a lot like my lunch table in eighth grade. Empty. Three more executives at the world's most notable AI startup stepped down from the company this week, including its CTO, Mira Murati. Murati was probably the second biggest name still left at the company as the technical lead behind OpenAI suite of chatbots, but she joined Chief Research Officer Bob McGrew and Vice President of Research Barrett Zof on their way out the door with Marotti citing no real reason for leaving other than The Moment Felt Right.

One thing that made have made the moment right is that Open AI is ditching its more altruistic roots. According to reports, the company which was founded as a nonprofit with a mission to build artificial general intelligence for all, is transforming into a for-profit enterprise that could be valued at $150 billion. Altman is also reportedly in line to receive 7% equity, which would make for a nice $10 billion boost to his net worth. So, Neil, the string of exits, the shedding of the nonprofit label, what is going on at OpenAI? I mean, this was soap opera coming into this week, and then all of a sudden things got even more dramatic. I mean, Sam Altman himself said leadership changes are a natural part of companies,

but I obviously won't pretend it's natural for this one to be so abrupt. We are not a normal company, and that is absolutely true. I mean, 11 people founded OpenAI. Right now, there are just two left, including Sam Altman. He has tightened his control over this company as it's moved from a nonprofit when it was founded in 2015 towards the future where it's basically just looking like any other Silicon Valley giant, and with this $150 billion valuation, it's going to be one of the biggest tech companies in the entire world. Right. Altman is trying to paint this picture that all the decisions to leave were separate. They just so happened to coincide at the same time. But Marotti is a big name, though. Remember, last November, when that coup happened, that

ousted Sam Altman, Marotti was installed as the company's CEO briefly. She eventually actually pushed back and said she joined 500 other Open AI employees and said, we're going to leave the company if you don't bring Sam Altman back. But there has been this growing rift at Open AI. You have the people who are still on board with that original mission, that original nonprofit vision for the company. And then those who want to more aggressively commercialize the product, get the product into more people's hands. And it has led to repeated classes, if you believe, reports from reporters who cover the company in between these two groups. And so I think that even though Sam Allman is trying to say, no, everything's fine.

It's just a very high-stress work environment. It's natural for executives to leave. There could be more to the story here. Yeah. So why would OpenAI want to become a for-profit company? And the big reason why, for me, seems to be this big fundraise that they're trying to close. They're trying to raise $6.5 billion, which would be the biggest VC investment in history. $6.5 billion is absolutely insane.

and the problem is, under this previous non-profit structure, you had to cap investments or cap profits for investors. So if I'm trying to court the top VCs in Silicon Valley, and I'm saying, hey, invest in our company. But actually, you can only make 10% on your return. You can only make 20% on your return. That is not a very enticing pitch because this is a lot of money they're forking over.

Moving to a for-profit structure could allow these VCs to make a lot more money on their investment. When you're trying to raise $6.5 billion, you need to up the ceiling a little bit. And that seems to be like the main impetus here for moving to the new structure, which hasn't really been announced publicly by Open AI. It's just been reports. And anything would take years down the road to happen. But it does seem like they've been on that path for the past year or two, and it seems like they're going to get there in the future. Also, Open AI needs the money here. Because remember, the information released this big report a few months ago saying that,

They have spent approximately $7 billion on training its various models and $1.5 billion on staffing alone. It is really expensive to have the best minds and AI work at your company. And then remember, the early report, too, was ChatGBT, which is literally the first model they ever release. At one point, it was costing Open AI around $700,000 a day to run. So we know that this is a historically capital-intensive business. It burns through a lot of cash to kind of tune these models in the way that they want them.

too. So you need that $6.5 billion. And if the way to get it is to convince these investors that, yes, we are going to become a for-profit ending. Of course, Sam Altman is going to take that route. People in New York City were bumping into each other on the sidewalk, even more than typical yesterday, because everyone was staring at their phones reading the indictment of Mayor Eric Adams, the first time a sitting mayor in the modern history of New York has been criminally charged. Prosecutors unveiled five charges of corruption against the man running the country's biggest city, accusing Adams of accepting more than $100,000 in bribes from foreign officials going back a decade in exchange for preferable treatment.

Much of the indictment focuses around Adams' cozy relationship with Turkish businessman and its government, specifically the country's national air carrier, Turkish Airlines. Prosecutors allege Adams was granted free or heavily discounted trips on Turkish Airlines, as well as comp stays at luxury resorts and free meals while overseas. Damien Williams, the U.S. attorney for Manhattan, said these freebies was, quote, a multi-year scheme to buy favor with a single New York politician on the rise, Eric Adams. As part of this quid pro quo, Adams allegedly pressured the New York Fire Department to permit a new Turkish consulate building in Manhattan, despite there being safety problems with the skyscraper. In a press conference following the indictment, Adam said he was innocent and said he asked New Yorkers to be patient and hear out his defense.

still, calls are growing for him to resign. Right. If you follow this indictment and you look at some of the names that Adams was connected with, it was a promoter of like a celebrity promoter, a university chairman, an airline manager, a luxury hotel owner, all related to the Turkish government. They provided Adams with free travel with these entertainment benefits, as well as some illegal campaign cash. If you follow the campaign donation money, it starts to get very, it looks very bad for Adams,

candidly, Adams and his staff worked to disguise this foreign money that was coming in. And then there's this program that you can, it's called the Matching Funds Program, where you can actually get public money to match some of the private donations you received. And so Adams was essentially taking this foreign money, disguising it that it was coming from locals, and then using that to increase the amount of money coming to this campaign via this matching funds program. So that's where some of the, like the allegations are surrounding this, if you, if you look at the campaign money that was flowing into his kind of coffers.

Right. So prosecutors are accusing him of basically bilking taxpayers out of $10 million. But really, the juicest stuff of this is related to this foreign travel and his relationship with Turkish Airlines in the indictment. One of the most quoted anecdotes was the fact that he traveled from New York to Paris with a stopover in Istanbul. And he texted his partner, who was wondering, why are we stopping in Istanbul on the way from New York to Paris? It's not exactly on the way. And he allegedly texted them. You know, we always stop in Istanbul.

It's always the first stop. You got to know that. And he had these stays at the St. Regis Istanbul a boat tour to Prince's Islands in the Sea of Marmara and a Turkish bath at a seaside hotel. So for anyone wanting to look at free trips, luxury trips, this is where you can find it. Yeah, and then so some other notable kind of screenshots that escaped from the indictment was the airline manager was asking an aide of Adams to say, like, how much should I charge you for this flight? And they put forth the number of $50, and the aide's like, no, he's being

watched right now. You have to charge more than that. So they charge them $1,000. But as soon as they did that, they also upgraded them to business class, which was worth like $16,000. So you see this, this extremely transparent relationship of like, we are giving you free stuff, we are giving you discounted flights in exchange for political favor. And that tit for tat really came to fruition when they wanted to get this Turkish consular building built in time for or open in time for Turkey's president to visit New York. And they pushed it through despite the fire department saying like, no, this failed a fire expense, fire inspection. So that's where you saw like the tit for tat action happen probably the most transparently. And it's really the denouement of what has been a

roller coaster ride of administration for Adams. We've talked about on the show how he has been a big promoter of getting rats out of the city. And it came to light that the city paid McKinsey $1.6 million to design a new trash can that would be a better receptacle. So there's a lot of eyebrow raising moments. He was also a big supporter of the city's nightlife industry. He said this is a city of nightlife. I must test the product. I have to be out. Another thing, he said to Stephen Colbert, if you're going to hang out with the boys at night, you have to get up with the men in the morning. So this has been just a wild ride for New Yorkers. Now that this indictment has been unsealed, the question is what happens next to Adams. He's

running the country's biggest city. The power is in Kathy Hockel, the governor's hand, to possibly force him out. She kind of punted on that yesterday, saying I'm looking forward to hearing his defense. So New Yorkers are just left in limbo here with this indictment, and Adams maintains his innocence, but right now it's not clear who is leading the city. Up next, $99 flights to Europe? It's a thing.

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But NIL deals quickly devolved into the Wild West with no real oversight as to how donors in schools compensate top athletes. And a recent controversy with UNLV's starting quarterback, Matthew Sluka, has raised thorny questions about the system once again. Sluka, who has the team off to a 3-0 start, said he will no longer play for the rebels, choosing to sit out the rest of the year instead because he never received the money he was promised for transferring there. According to Sluka, he received a verbal promise from the team's offensive coordinator

that he would get paid $100,000 from the school's NIL collective if he committed. But he never saw the money, and because it was a verbal agreement, it makes legal action that much more difficult to pursue. Neil, another example of an NIL deal gone sideways and another example of how little oversight this new system operates under. Yeah, this is actually unprecedented. We know the NIL has been a bit of a Wild West, but the fact that a quarterback for a

three and O team after three games is saying, actually, you know, I don't feel like playing anymore. You're not paying me what we discussed under the table. is absolutely insane, and it followed by another UNLV player who left saying that more vaguely that expectations were not met. And this all stems from the fact that college athletics does not recognize that players are employees and won't directly compensate them. So instead of that, you have this very convoluted system where the team, the school

cannot sign a contract with a player, and instead they have to outsource it to these NIL booster collectives, which have sprung up, these third parties. So now you have this web of three different entities trying to arrange very secretive under the table deals with very little oversight, very little regulation, and there's no legal recourse to when those deals go wrong, which we've seen them go wrong. This is the first time a player is standing up and saying, you didn't agree to what you paid me. I don't care who promised it.

He's saying it was the assistant coach, but the assistant coach cannot pay him. So the assistant coach was relying on these boosters to pay him. So he's saying, you know what, I think I can get paid more somewhere else. So I'm just going to sit out this season. And it's absolutely insane. Yeah, the NCAA still prohibits that pay-to-play model that you described. So you can't say that we, UNLV as a school, will pay you $100,000 to come play here. But you can say, I'm rewarding you $100,000 through our NIL collective,

which is a separate entity to compensate you for your name, image, and likeness. Again, it's a little dumb, but it's the corner that the NCAA has backed themselves. into the key issue here too is whether this alleged promise not in writing is enforceable. You can have a handshake. You can have the clearest of memories of it, but unless it's in writing, it becomes very difficult to enforce, especially in the state of Nevada where oral contracts are not seen as enforceable, especially if they can't be performed in one year. So maybe that was another thing that Sluca was thinking about is that he's like,

if I can confine my services to a one year period, then I have a better chance of taking this to court under Nevada law. But again, look at how deeper going into the legal system right now. This should not be happening if you're just going to school and playing as a top college athlete, but this is kind of the reality that college athletes find themselves in right now. The worst kept secret in the NCAA is that this has been happening for decades, these handshake deals about, yeah, I'll get you, maybe your car that you want if you come play for me at Florida, Alabama, Georgia, or whatever.

But now it's just out in the open. You can talk about it because NIL has been. been in place since 2021. The question here is whether what this quarterback did will spark other college athletes who say they've been stiffed by their teams to also come forward and say, hey, before the redshirt season, you know, before the timeline is up that I could perhaps stay another year in college and play for another team, which is four games, I'll stop playing too. So I think people who watch college sports are wondering whether other college football players

are going to look at what this quarterback did and say, you know what? I think I increased my market value over the past three games. Maybe I'll just stop playing too and find and play elsewhere. So this is an absolutely insane Wild West system that can only be resolved, experts think, by having the fact that a team can directly pay players. And that might happen actually as soon as next year because there's this antitrust case working its way through the Supreme Court House v. NCAA. They agreed to a settlement.

They have to go back and work on a. another settlement because the judge rejected it. But if that comes to fruition, then by next year, schools will be able to play players directly. So this might be a one-season chaos thing, and it could be resolved next year, but we'll have to see how that plays out. Yeah, athlete employment. It could be coming to a school near you. Hoda Koppi can finally sleep in. The host of the Today Show for the past 17 years made the surprise announcement yesterday that she would be stepping down from the role.

leaving NBC execs with a huge decision of who will replace her as the face of one of their most lucrative programs. Cotpy said her decision was sparked by her recent 60th birthday when she realized she wanted to spend more time with her two children. I have a time pie in front of me, she said, and I think my kids deserve a bigger slice of that pie. Cotpy was working a lot. Not only did she host the flagship 7 a.m. to 9 a.m. slot of the Today Show with Savannah Guthrie. she also came back for the more lighthearted 10am hour. As one of the brightest stars for NBC, Coppe's exit is one of the most significant changes

to the morning TV landscape in at least a decade, according to the New York Times. And that landscape has shifted monumentally. The morning shows on broadcast networks like NBC, CBS, and ABC have all shed viewership over the past several years, as more Americans have turned to cable, Twitter, email newsletters, and maybe even podcasts for their Morning Cup of News.

Still, these shows are extremely profitable for their parent companies and also serve as key promotional vehicles for other areas of their businesses. So NBC will be considering her replacement with the deliberateness of hiring a new CEO. Right. Morning News is falling in viewership, but it is still big business for the networks themselves. If you go through America's Sixthmost watch morning programs, Good Morning America. Today, CBS, Fox and Friends, Morning Joe, and New Day. they bring in over a billion dollars in millions of viewers every single year. So even though you can say that morning shows are losing maybe their cultural relevance a little bit, they are still extremely important for the bottom line of these networks.

And just because they're losing their relevance doesn't mean you don't have to compete just as hard. You have to compete even harder with your other kind of competitors out there. And Good Morning America usually beats Today's show in total viewership, but Today's show wins out in the advertisers' more important demographics of that 25 to 54-year-old age group. So this is still just an extremely high-value property that you do want to nail Hoda's kind of replacement. Yeah, and it's been interesting to see viewers migrate to more of those cable channels that do morning shows, which offer maybe more partisan, hard-hitting news and interviews rather than the more lighthearted Today Show or Good Morning America. So between 2014 and 2019 TV seasons, the 25 to 54 audience, that target audience, has jumped 25% for Fox and Friends, 28% for CNN's New Day, and 113% for MSNBC's morning, MSNBC's morning Joe.

And when you hear interviews with executives and anchors at all of these networks and cable channels, they say that people are more interested these days. Maybe it's a part of the Trump revolution after he became president 2016 of more hard-hitting interviews. You know, today's show is usually ease into your day. Let's talk about some light stuff. Maybe we'll cook some things. Maybe we'll show off some products. Maybe we'll interview some celebrities. Just very nice and light-hearted.

And now people want really hard-hitting news in their morning. And they want to wake up and just be rammed in the face with like, here's what's going, here's everything that's going wrong in the world. So it's been an interesting change in viewers. behavior. One thing that does point to morning shows still having a lot of cultural relevance, though, is that think about Apple's show, the morning show, which was kind of this detailed look, a dramatic look at kind of the inner workings of morning TV. And that is a very popular franchise for Apple TV. So people, and just asking around the office, too, because I didn't

grow up watching morning shows, but people around me did. And like, you guys have extremely strong feelings about it. Like, you have memories of growing up maybe with your parents watching this. It was usually passed down through generations. Now it seems like it's a little different because people are competing tooth and nail for viewers. So you clearly are, are, grew up with kind of like the morning. It was always on in the morning. You know, maybe put on Arthur and then you'd go back to the Today's show. But as you're, it's just as you're getting ready for school in the morning, making your breakfast or eating your breakfast, it was just always on in the background. So people develop a relationship with the people that give them the news in the morning. And, you know,

we're trying to cultivate that relationship too. But I'm just, happy for her to sleep in. Oh my God. We know how early she gets up. We empathize with you, Hoda. A $99 flight to Europe sounds too good to be true, but as long as you aren't expecting a first class experience or to carry a bag on board or to drink water

for free, it can be a reality. The budget airline play just announced a sub-100 flight from the U.S.'s east coast to Amsterdam, Berlin, Copenhagen, Dublin, Liverpool, Paris, and Reykjavik. Now, there is a catch because, of course, there is, these bargain bin prices will only be available during a very specific sales window

that started yesterday and finishes on Thursday, October 3rd. Plus, I hope you like Reykivik, because flights will all have a layover in Iceland's capital, which acts as plays home base. But still, Neil, sub-$100 flights to Europe, how are they able to pull this off? They haven't in the past, because some other carriers have tried. There was Wow airlines, which also operated out of Iceland. There was Norwegian. There was a upsurge in these really low-cost seats in the back half of the 2010s. And I went back looking to see what happened to these companies. Are they still flying these really low prices across the Atlantic where it's really no frills, bare bones. Basically, you just get a C and then you get back and then you get into Europe

into Europe seven hours later. Well, they don't exist anymore. So Wow has ceased operations in 2019. A lot of Wow Air executives are now working for Play. Norwegian stopped its transatlantic routes. So this has been a very busy route. It is the eighth busiest in the international route in the world, New York to London, that a lot of airlines have tried to crack with this really low, fair business model. It hasn't worked in the past, but Play thinks it can work with these flash deals like it's doing now with the stopovers in Reykivik and by flying from not exactly airports where people live. So the one from New York is at Stewart International Airport, which is up in the Hudson Valley by Newburgh. So if you're in New York City, you have to drive

maybe an hour and a half or take a train up there to fly. So by doing that and by flying only this Airbus model, it hopes that it has finally cracked this business model that has not worked in the past. Yeah, I think you just hit to its exact strategy here is that as long as we don't fly to the core airports, they land in Stansid, which is 40 miles away from Heathrow. the main hub that you go to London, and then, yeah, flying out of Stewart International Airport, which I did not know existed instead of, like, JFK or LaGuardia. They think they can keep fares down.

You're right, too, about the size of the plane. They are not flying these big jumbo jets that you expect on international carriers. They're only three-by-three seat formations. They are this very specific air bus model. Part of this, too, is just marketing because, again, these fairs are only available for a one-week period.

and we're talking about it right now, like sub-100 flights, is extremely buzzy. So potentially this is just more of a marketing stunt right now. I do think it's very funny, though, that they will not let you bring anything other than a small personal item on board. And if you do, you start getting another, like, $50 upcharge.

Also, if you want water, nope, got to pay for that as well. But that's what you're expecting when you take these budget airlines. And I'll be totally honest, as soon as we were covering the story, I logged on and started looking at some dates. they do have $99 flights over there,

but the flights back are not $99. So it's literally just for that first leg. So maybe stop over in Reykjavik. Check out the Northern Lights a little bit, but good luck getting back for under $100. All right. That is a wrap on the week's shows. Thanks so much for starting your morning with us.

Have an incredible Friday and an even better weekend. For any feedback, questions, or comments, send an email to Morning Brew Daily at Morning Brew. And we don't ask many things of you, but we'd love if you shared Morning Brewed Daily with your friends, family, and coworkers. If you're drawing a blank on who to send a link to, Toby has some inspo. I want you to share today's show with someone you'd like to spend some time in Reykjavik with. The way that I've heard, the best way to do it is you rent a camper van and you just drive around the island. It's very intimate. So again, choose wisely who you're

sharing the show with, but that could be a fun person. And while you're driving, you can obviously binge every MBD episode from the past month. Let's roll the credits. Emily Milliron is our executive producer. Raymond Loo is our producer. Olivia Graham is our associate producer. Yuchena Wa Ogu is our technical director. Billy Minino is on audio. Hair and makeup is also leaving OpenAI.

Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. I wish you all well. Relax and let Ralph's delivery handle your grocery shopping this week. We start with only. the freshest items. Then review your list and carefully choose each one. Then we pack it all up and deliver it in as little as 30 minutes so you can feel confident it's what you ordered. Fresh groceries, your way with Ralph's delivery and pickup. Get free delivery during online deal days, plus $30 off your first online order. Ralph's, fresh for everyone.