OpenAI – A Consultant’s Dream

The most expensive consultant in history.

• OpenAI will acquire Jony Ive’s hardware start-up at an eye-watering valuation, but it has filed to acquire the man himself full-time, making him the most expensive consultant of all time.
• OpenAI is paying $6.4bn for a company with no product, no revenues and will not even secure the full-time services of Jony Ive, which is the only reason why this company is worth anything at all.
• The company is called io (presumably for input and output) and is focused on the device that comes after the smartphone, which presumably will use AI as its man-machine interface.
• OpenAI already owns a 23% stake and will pay a further $5bn to acquire the remaining 77% that it does not own.
• The company has 55 employees, all of whom will now join OpenAI, with Jony Ive as a consultant to the company, making it much easier for him to disappear should the relationship sour.
• Mr Ive will assume “deep creative and design responsibilities across OpenAI and io”, which in practice means very little, and it looks to me like Sam Altman was determined to buy this company at any price.
• Consequently, OpenAI is paying $116.3m per employee for a company with no product but just might come up with the winning hardware form factor that renders the smartphone obsolete.
• The problem here is that everyone already has a pretty good idea of what is most likely to render the smartphone obsolete, which is some form of augmented reality glasses.
• Augmented Reality and the regular smart glasses that are proving to be quite popular today are an ideal form factor to use AI as the man-machine interface, as there is no keyboard, no mouse and no touch screen pretty much all of the time.
• Hence, I remain fairly sceptical that OpenAI is going to come up with something that no one else has already thought of.
• Apple was not the first to come up with the idea of a touch-based icon grid for a smartphone (see here), but it was the first to make it work well.
• This is where OpenAI might get an edge on everyone else, but given its expertise is in trying to develop super-intelligent AI, I remain sceptical.
• Jony Ive’s expertise is in creating beautiful-looking devices that are both very useful and very easy to use, and I have little idea how this is going to help OpenAI.
• This is because the user experience has already been decided, which is to use a voice-powered LLM to interact with the user.
• Furthermore, it looks like the hardware form factor has also largely been decided with Meta’s success with its smart glasses (no display) being an early sign.
• Hence, unless OpenAI is going to come up with something like the Humane AI pin, which failed dismally, I can’t really see where the innovation and market disruption is going to come from.
• Finally, every software company that gets into hardware should be extremely cautious about making this move.
• This is because while hardware works, life is great, but the minute one loses one’s mojo, life becomes a death spiral of falling revenues and cost cuts from which one almost never recovers.
• BlackBerry is the prime example of this, as when every businessman had a BlackBerry, the shares peaked at around $148 in mid-2008.
• However, BlackBerry’s failure to succeed in the smartphone area led it to give up on hardware, from which almost all of its revenues were derived and to switch to software only.
• The shares are currently at $3.82, down 97% from their all-time high and have been trading in this range for nearly 13 years.
• Consequently, I think that the hardware route for OpenAI will yield nothing but pain, and the $6.4bn valuation will rapidly be amortised to zero once Jony Ive gets bored and moves on to something else.
• This, combined with OpenAI’s perilous governance structure, is just another reason to steer clear of this company and under no circumstances should anyone be dependent on its technology.
• This was the one mistake that Satya Nadella made, but one I think he has realised and is rapidly moving to address.
• The implosion of OpenAI will be spectacular when it comes.