$6.5 Billion for a Demo and a Dream

OpenAI goes into hardware in a big way

Today’s founders are the most ludicrously ambitious and audacious we have ever seen. No person embodies that better than Sam Altman. With the acquisition of Jony Ive’s consumer hardware startup “io” for $6.5 billion, Altman is going for it all. He wants to own the most important consumer application with ChatGPT, the most important coding application with their rumored $3 billion acquisition of Windsurf, the most important models with OpenAI’s research lab launching modalities across video, browser operation, and voice, the most integral AI infrastructure with the $500 billion Project Stargate, the totality of the enterprise market with their API, and the future of the web with their own web browser. (Don’t forget that he is also attempting to create AGI as the cherry on top.)

OpenAI is not a regular company. Altman and co are swinging for a multi-trillion dollar outcome, something bigger than even Apple is targeting. This isn’t just a trite comparison—Jony Ive is the designer who made Apple king with his contributions to the iPhone. Teaming up with Altman is a snub to Tim Apple and the rest of the Cupertino crew.

It is also an enormously expensive bet. Io just has a demo and zero revenue. With its 55 staff members, this works out to OpenAI paying $118,181,818 per employee. Again, no product. Just design, taste, and a dream. To be fair, according to reporting from Axios, this deal was done in equity, and if you use OpenAI’s reported $340 billion market cap, this works out to roughly 2% of OpenAI’s equity for a team staffed with some of the most storied designers ever. That’s much more reasonable.

Still, it is worth pointing out that this is all happening in the backdrop of a company that expects to lose $14 billion next year! Unlike Google, Apple, or Meta, there is no cash cow to tap into (besides investors like Masa).

I’m genuinely all about the hype. But I do want to point out one thing that confuses me that might bring this whole thing crashing to the ground.