Sam Altman’s leap of faith

Earlier this year, founder-investor Sam Altman left his high-profile role as the president of Y Combinator to become the CEO of OpenAI, an AI research center at its outset that founded by some of the most prominent people in the tech industry in late 2015. The idea: to ensure that artificial intelligence is “developed in a way that is safe and is beneficial to humanity,” as one of those founders, Elon Musk, said back then to the New York Times.

The move is intriguing for many reasons, including that artificial general intelligence — or the ability for machines to be as smart as humans — does not yet exist, with even AI’s top researchers far from clear about when it might. Under the leadership Altman, OpenAI has also restructured as a for-profit company with some caveats, saying it will “need to invest billions of dollars in upcoming years into large-scale cloud compute, attracting and retaining talented people, and building AI supercomputers.”

Whether OpenAI is able to attract so much funding is an open question, but our guess is that it will, if for no reason other than Altman himself — a force of nature who easily charmed a crowd during an extended stage interview with this editor Thursday night, in a talk that covered everything from YC’s evolution to Altman’s current work at OpenAI.

On YC, for example, we discussed that “ramen profitable” was once the goal but that a newer goal seems to be to graduate from the popular accelerator program with millions of dollars in venture funding, if not tens of millions of dollars. (“If I could control the market — obviously the free market is going to do its thing — I would not have YC companies raise the amounts of money they raise or at the valuations they do,” Altman told attendees at the small industry event. “I do think it is, on net, bad for the startups.”)

Altman was also candid when asked personal and occasionally corny questions, even offering up a story about the strong relationship he has long enjoyed with mom, who happened to be in town for the event. Not only did he say that she remains one of a small handful of people who he “absolutely” trusts, but he acknowledged that it has become harder over time to get unvarnished feedback from people outside that small circle. “You get to some point in your career where people are afraid to offend you or say something you might not want to hear. I’m definitely aware that I get stuff filtered and planned out ahead of time at this point.”

Certainly, Altman is given more rope than most.  Not only was this evidenced in the way that Altman ran Y Combinator for five years — essentially supersizing it time and again — but it’s plain from the way he discusses OpenAI that his current thinking is no less audacious. Indeed, much of what Altman said Thursday night would be considered pure insanity coming from someone else. Coming from Altman, it merely drew raised brows.

Asked for example, how OpenAI plans to make money (we wondered if it might license some of its work), Altman answered that the “honest answer is we have no idea. We have never made any revenue. We have no current plans to make revenue. We have no idea how we may one day generate revenue.”

Continued Altman, “We’ve made a soft promise to investors that, ‘Once we build a generally intelligent system, that basically we will ask it to figure out a way to make an investment return for you.’” When the crowd erupted with laughter (it wasn’t immediately obvious that he was serious), Altman himself offered that it sounds like an episode of “Silicon Valley,” but he added, “You can laugh. It’s all right. But it really is what I actually believe.”

We also asked what it means that, under Altman’s leadership, OpenAI has become a “capped profit” company, with the promise of giving investors up to 100 times their return before giving away excess profit to the rest of the world. We noted that 100x is a very high bar — so high in fact that most investors investing in plain-old for-profit companies seldom get close to a 100x return. For example, Sequoia Capital, the only institutional investor in WhatsApp, reportedly saw 50 times the $60 million it had invested in the company when it sold to Facebook for $22 billion, a stunning return.

But Altman not only pushed back on the idea the idea that “capped profit” is a bit of marketing brilliance, he doubled down on why it makes sense. Specifically, he said that the opportunity with artificial general intelligence is so incomprehensibly enormous that if OpenAI manages to crack this particular nut, it could “maybe capture the light cone of all future value in the universe, and that’s for sure not okay for one group of investors to have.”

Before we parted ways, we also shared with Altman various criticisms by AI researchers who we’d interviewed ahead of our sit-down and who’d complained that, among other things, OpenAI seeks out attention for qualitative and not foundational leaps in already proven work, and that its very mission of discovering a path to “safe” artificial general intelligence needlessly raises alarms and makes their research harder.

Altman absorbed and responded to each point. He wasn’t entirely dismissive of them, either, saying of OpenAI’s alarmist bent, for example, that he does have “some sympathy for that argument.”

Still, Altman insisted there’s a better argument to be made for thinking about — and talking with the media about — the potential societal consequences of AI, no matter how aggravating some may find it. “The same people who say OpenAI is fear mongering or whatever are the same ones who are saying, ‘Shouldn’t Facebook have thought about this before they did it?’ This is us trying to think about it before we do it.”

You can check out the full interview below. The first half of our chat is largely centered on his Altman’s career at YC, where he remains chairman. We begin discussing OpenAI in greater detail around the 26-minute mark.

Autopilot was active when a Tesla crashed into a truck, killing driver

Autopilot was active when a Tesla crashed into a truck, killing driver

A Tesla Model 3 had Autopilot active in the seconds before it crashed into a semi truck in March, killing the driver, the National Transportation Safety Board reported on Thursday.

Jeremy Banner was driving his Model 3 on a divided four-lane highway in Palm Beach County, Florida. As the car approached a driveway, a semi truck pulled out in front of the car, making a left-hand turn from the driveway to the opposite travel lanes.

The Tesla was moving at 68mph (110km/h) and slid under the truck’s trailer. The trailer sheared off the top of the car, killing Banner. The vehicle continued down the road for another 1,600 feet (500m) before coming to a rest in the median.

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China’s Tesla wannabe Xpeng starts ride-hailing service

There’re a lot of synergies between electric vehicles and ride-hailing. Drivers are able to save more steering an EV compared to a gas vehicle. Environmentally conscious consumers will choose to hire an electric car. And EVs are designed with better compatibility with autonomous driving, which is expected to hit the public road in the coming decades.

Indeed, Tesla is eyeing to launch its first robotaxis in 2020 as part of a broader ride-sharing scheme. Over in China where Tesla has a few disciples, EV startup Xpeng Motors, also known as Xiaopeng, just started offering a ride-hailing app powered by its own electric fleets.

Screenshot of Xpeng’s ride-hailing app ‘Youpeng Chuxing’

The company is the latest in a clutch of carmakers flocking to introduce their own ride-hailing platforms. Didi Chuxing’s massive loss has not deterred their ambitious plans. Rather, this may be a prime time to crack a market long dominated by Didi, which is prioritizing safety over growth following two high-profile incidents and a series of new government regulations.

Xpeng’s ride-hailing app is currently only available in a limited area within Guangzhou where it’s headquartered, shows a test conducted by TechCrunch’s on Thursday.

The company’s coffer is probably large enough to fund its newly minted venture. It’s one of the most-backed EV upstarts alongside rival Nio, which raised $1 billion from a New York initial public offering last year.

Xpeng has to date banked $1.3 billion from Alibaba, IDG Capital, Foxconn, UCAR and other big-name investors, according to disclosed funding data collected by Crunchbase. Founder He Xiaopeng, a serial entrepreneur who made a fortune selling his mobile browser company UCWeb to Alibaba, told CNBC in March that Xpeng may also try an IPO down the road but wants to focus on building the business first.

When it comes to sources of inspiration for the business, Xpeng told local media that it sees Tesla as its “benchmark”. The company has never been shy about its admiration for its American peer. In an interview with Quartz in 2018, He said one of the reasons he founded Xpeng “was because Elon Musk made Tesla’s patents available. It was so exciting.”

But the affection might have gone a little far. In March, Tesla sued an ex-employee for allegedly stealing Autopilot’s proprietary technology before taking a job at Xpeng.

Xpeng started shipping to its first owners in March and was founded five years ago against the backdrop of Beijing’s aggressive electric push in the transportation sector. The sprawling city Shenzhen, just north to Hong Kong, has turned all its public buses and almost all of its taxis electric.

XPRIZE names two grand prize winners in $15 million Global Learning Challenge

XPRIZE, the non-profit organization developing and managing competitions to find solutions to social challenges, has named two grand prize winners in the Elon Musk-backed Global Learning XPRIZE .

The companies, KitKit School out of South Korea and the U.S., and onebillion, operating in Kenya and the U.K., were announced at an awards ceremony hosted at the Google Spruce Goose Hangar in Playa Vista, Calif.

XPRIZE set each of the competing teams the task of developing scalable services that could enable children to teach themselves basic reading, writing, and arithmetic skills within 15 months.

Musk himself was on hand to award $5 million checks to each of the winning teams.

Five finalists including: New York-based CCI, which developed lesson plans and a development language so non-coders could create lessons; Chimple, a Bangalore-based, learning platform enabling children to learn reading, writing and math on a tablet; RobotTutor, a Pittsburgh-based company which used Carnegie Mellon research to develop an app for Android tablets that would teach lessons in reading and writing with speech recognition, machine learning, and human computer interactions, and the two grand prize winners all received $1 million to continue developing their projects.

The tests required each product to be field tested in Swahili, reaching nearly 3,000 children in 170 villages across Tanzania.

All of the final solutions from each of the five teams that made it to the final round of competition have been open-sourced so anyone can improve on and develop local solutions using the toolkits developed by each team in competition.

Kitkit School, with a team from Berkeley, Calif. and Seoul, developed a program with a game-based core and flexible learning architecture to help kids learn independently, while onebillion, merged numeracy content with literacy material to provide directed learning and activities alongside monitoring to personalize responses to children’s needs.

Both teams are going home with $5 million to continue their work.

The problem of access to basic education affects more than 250 million children around the world, who can’t read or write and one-in-five children around the world aren’t in school, according to data from UNESCO.

The problem of access is compounded by a shortage of teachers at the primary ad secondary school level. Some research, cited by XPRIZE, indicates that the world needs to recruit another 68.8 million teachers to provide every child with a primary and secondary education by 2040.

Before the Global Learning XPRIZE field test, 74% of the children who participated were reported as never having attended school; 80% were never read to at home; and 90% couldn’t read a single word of Swahili.

After the 15 month program working on donated Google Pixel C tablets and pre-loaded with software, the number was cut in half.

“Education is a fundamental human right, and we are so proud of all the teams and their dedication and hard work to ensure every single child has the opportunity to take learning into their own hands,” said Anousheh Ansari, CEO of XPRIZE, in a statement. “Learning how to read, write and demonstrate basic math are essential building blocks for those who want to live free from poverty and its limitations, and we believe that this competition clearly demonstrated the accelerated learning made possible through the educational applications developed by our teams, and ultimately hope that this movement spurs a revolution in education, worldwide.”

After the grand prize announcement, XPRIZE said it will work to secure and load the software onto tablets; localize the software; and deliver preloaded hardware and charging stations to remote locations so all finalist teams can scale their learning software across the world.

Tesla’s communications chief is leaving the automaker

Dave Arnold, Tesla’s senior director of communications, is leaving the company after two-and-half years years, according to sources familiar with the move.

Tesla confirmed to TechCrunch that Arnold was leaving in June.

“We’d like to thank Dave for his work in support of Tesla’s mission, and we wish him well,” a Tesla spokesperson said in a company-issued statement. “Dave will remain with the company for the next month to help transition his responsibilities to Keely Sulprizio, Tesla’s Director of Global Communications.”

Arnold became senior director of communications Tesla in July after the departure of Sarah O’Brien. O’Brien, who was previously at Apple, held the position at Tesla for two years. She later took a position at Facebook.

The top communications job at Tesla is a high-profile and critical role for the company, which unlike other automakers, doesn’t have a traditional advertising strategy. And thanks to the near-frenetic amount of attention that Tesla and CEO Elon Musk receives from investors and the press, it can also be a challenging and exhausting one. 

The typical stint for the role has been about two years.

Musk reaches his fervent fan base — and critics — via Twitter. His account now has some 26.5 million followers. Musk’s tweets, along with other announcements and controversies, translate to constant news coverage of the company.

That coverage has been largely responsible for driving sales. Tesla’s relationship with the media might be rocky at times. However, the attention by the press has also helped drive sales. The company has said in previous regulatory filings that “media coverage and word of mouth have been the primary drivers of our sales leads and have helped us achieve sales without traditional advertising and at relatively low marketing costs.”

Judge rejects Musk’s arguments to dismiss “pedo guy” defamation suit

Elon Musk

A federal judge in California has rejected Elon Musk’s request to dismiss a defamation lawsuit filed by Vern Unsworth, a British caver who aided with the rescue of a dozen boys in Thailand last year.

Musk’s lawyers had argued that his remarks describing Unsworth as a “pedo guy” were mere statements of opinion that cannot be defamatory under US law. Judge Stephen Wilson rejected these arguments and scheduled a jury trial to start on October 22.

“Sorry pedo guy, you really did ask for it”

Musk’s feud with Unsworth began last summer, when Musk had a team of SpaceX engineers build a miniature submarine to help extract the Thai boys. The device turned out to be unnecessary, as divers had already rescued the boys before it arrived.

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Elon Musk’s “pedo guy” defamation case is going to trial

A defamation case filed last year against Tesla and SpaceX CEO Elon Musk after he repeatedly called a British cave diver “pedo guy” will go to trial on October 22, a U.S. district judge determined Friday.

Vernon Unsworth, the British cave diver, filed a defamation lawsuit in September 2018  in the U.S. District Court for the Central District of California after Musk called him a “pedo guy” and made other statements insinuating he was a pedophile in a public attack on Twitter.

The Verge was the first to report the court decision.

A Tesla spokesperson could not be immediately reached for comment

U.S. District Judge Stephen V. Wilson denied a motion to dismiss the case and instead scheduled a date for trial. The decision means that Unsworth’s case is strong enough to go to trial.

Musk’s lawyers argued that statements on the internet, and more specifically on unmoderated forums like Twitter are presumptively opinion, not objective fact. Defamation law doesn’t apply to opinions or insults. But Wilson rejected Musk’s argument, in part because of an email interaction he had with Buzzfeed reporter and ex-TechCrunch journalist Drew Olanoff .

“Considering the totality of the circumstances—including the general context of Defendant’s statements, the specific context of the statements, and the statements’ susceptibility of being proved true or false—a reasonable factfinder could easily conclude that Defendant’s statements, as pleaded in the complaint, implied assertions of objective fact,” Wilson wrote in the decision.

The lawsuit alleges that between July 15 and August 30, Musk periodically used Twitter and emails to the media to publish false and defamatory accusations against Unsworth, including accusations of pedophilia and child rape.

The initial “pedo guy” attack came after Unsworth gave a critical interview to the media saying Musk’s mini sub “had absolutely no chance of working.” The diving expert ended an interview segment by suggesting Musk should “stick his submarine where it hurts.”

Musk lashed out on Twitter and insinuated that Unsworth was a pedophile. He later deleted the offending tweet and tried to backpedal — even offering an apology of sorts on Twitter. And it could have all ended there. But then Musk dug it all up again during a debate with Olanoff — once again on Twitter. Olanoff had brought up the “pedo guy” attack as an example of Musk telling untruths.

 

Trump’s tariffs could knock Tesla’s Autopilot off course

The White House has refused to exempt the “brain” of Tesla’s Autopilot technology from punitive import tariffs, a decision that could delay or disrupt the company’s self-driving ambitions, TechCrunch has learned.

At a special “autonomy day” event last week, Tesla CEO Elon Musk unveiled advanced Autopilot 3.0 hardware, including a new custom chip intended to enable full self-driving (FSD) operation for all of its new vehicles. This hardware is now standard in all new Model 3, S and X vehicles. Customers pay an additional $6,000 for the software upgrade called FSD.

The self-driving hardware lives within the Autopilot ECU (or engine control unit), a module that Tesla describes as the “brain of the vehicle.” This module is assembled in Shanghai, China, by a company called Quanta Computer.

Tesla’s plans could be affected by a previously unreported decision last month by the White House not to grant the automaker an exemption from 25% tariffs. President Trump imposed these tariffs last year on a range of imports, including electronics, in an effort to reduce the U.S. trade deficit with China.

Tesla has suggested that the tariffs could force it to cease making its self-driving computers in China, thus delaying their introduction and even reducing vehicle safety.

“The imposed tariffs are forcing us to either source a new supplier, pass the cost increase to the end customer, or reduce operational costs within our internal operations, all having a reverse impact for what [we believe] to be the intention of the tariff,” the company wrote in an application to the United States Trade Representative (USTR) on November 16, requesting relief from the tariffs.

But on March 15, the USTR’s general counsel informed Tesla that it was denying the company’s request because it “concerns a product strategically important or related to ‘Made in China 2025’ or other Chinese industrial programs.” The USTR also rejected a retroactive exemption request for legacy Autopilot 2.5 hardware, for the same reason.

Made in China

Made In China 2025 is China’s strategic plan to move away from manufacturing to produce higher value goods, particularly in the areas of AI, electric vehicles and robotics. The White House sees the effort as a direct threat to U.S. domestic technology and automotive companies.

However, U.S. firms have long been among the largest beneficiaries of Chinese manufacturing expertise. Tesla’s Autopilot manufacturing partner in Shanghai, Quanta, has also worked with Apple, Amazon and Verizon.

“Tesla was unable to find a [U.S.] manufacturer with the requisite expertise to produce the Autopilot ECU 3.0 with the required specifications, at the volume requested and under the timelines necessary for Tesla’s continued growth,” the company wrote.

Tesla claimed that using Quanta would not help China reach a goal for 80 percent of domestic EV sales to come from Chinese companies by 2025. “To the contrary, if granted, the exclusion request would ensure that Tesla is able to maintain its technological and competitive advantage gained by manufacturing EVs and finished lithium-ion batteries in the United States,” it wrote.

Tesla also pointed out that more than 75 percent of the value of the new computer’s printed circuit board actually originates from outside of China. For instance, Tesla’s new cutting-edge neural network chips, which are a critical piece of Autopilot 3.0, are being made by Samsung in Austin, Texas.

The Tariff Effect

But the White House wasn’t buying it, and the USTR’s rejection is likely to hit Tesla hard. The company has already told investors that it could not guarantee hitting its gross margin targets now that it has begun selling the lowest-priced Model 3 variant.

“These tariffs detract from our continuous growth and sustainability in a very difficult industry,” wrote Tesla.

Last week, the automaker posted a $702 million loss in the first quarter of 2019, on the back of lower than expected deliveries, and it just announced its intention to raise about $2.7 billion by selling a mix of debt and equity. The company originally said it intended to raise $2.3 billion in convertible notes and equity, then upped the total offering just a day later, according to regulatory filings.

Tesla is selling 3.1 million shares at a price of $243 per share through underwriters Goldman Sachs and Citigroup and boosted its convertible notes offering to $1.6 billion, according to filings. Musk is also doubling down on his own investment and now intends to buy up to 102,880 shares in stock worth $25 million.

With limited ability to increase prices or reduce costs, Tesla’s other option would be to relocate manufacturing to the United States. But that comes with its own difficulties, according to the company.

“Tesla’s decision to begin production [of the new Autopilot computer took] six months from development to production,” it wrote in its application. “With condensed timelines such as this, there is no leeway to test out a supplier that does not already have considerable experience … Choosing any other supplier would have delayed the program by 18 months with clean room setup, line validation, and staff training.”

Safety concerns

Even more critically, given that Tesla’s existing Autopilot technology has been linked with multiple crashes and several deaths, the company believes that such a move would also have safety implications: “Sourcing a new supplier increases the risk of poor part quality leading to possible quality issues that would impact the safety of our vehicles and the final product… We cannot risk our customers’ lives due to a defect from a supplier.”

The tariffs could even disrupt Tesla’s ongoing research into artificial intelligence, machine learning and computer vision, it fears.

“Tesla’s leadership position is contingent on our ability to deploy these advancements and components at volume, which we would be unable to do under the current tariff structure,” stated its application. Musk told investors yesterday that autonomy would eventually make Tesla a $500 billion company, a more than ten-fold increase to its valuation today.   

Despite its strong wording to the USTR, Tesla has only mentioned the tariffs in investor filings in passing, where it focused on their impact on its bottom line: “Recently increased import duties on certain components used in our products that are sourced from China may increase our costs and negatively impact our operating results.”

Tesla declined to comment on this story.

Greg Linden is an economist at the University of California, Berkeley, specializing in the global supply chain for electronics. “For speed and high-volume, China is the place,” he told TechCrunch in a recent interview. “U.S. companies headed down the China road for board assembly about 25 years ago and never looked back. Component suppliers followed, and now China has a heft for high-volume electronics that no country can match.”

Linden has calculated that a U.S.-assembled Apple iPhone could add up to $40 per unit in cost, and estimates that building Autopilot 3.0 hardware in the U.S. would result in an increase of the same order of magnitude.

Lingering exemption requests

Tesla has several more tariff exemption requests outstanding with the U.S. government. A request to exempt the Model 3’s car computer, including its media control unit, connectivity board and advanced driver assistance system (ADAS) hardware, was filed at the end of December. Most recently, Tesla last week asked to be excluded from tariffs for specialized aluminum sheets from Japan, needed for lithium-ion battery cell manufacture at its Gigafactory in Sparks, Nevada.

But it is not all bad news for Musk on the trade front. Last July, The Boring Company requested relief from tariffs on Chinese-made tunneling machinery. It claimed that an inability to source tunnel boring machine parts from China would cost jobs and delay its proposed underground Loop transit system between Baltimore and Washington DC by up to two years.

On March 19, the USTR granted a retroactive exemption for imports of tunneling machinery.

Ironically, the autonomous electric vehicles intended for the Baltimore to DC Loop are based on Tesla cars that will likely rely on new Autopilot systems being built, at least for the moment, in China.