OpenAI has entered what insiders are calling Code Red!In this episode, we unpack why Sam Altman is suddenly sounding the alarm.Is this a genuine internal crisis, or a calculated move to set expectations ahead of a major product cycle next year?We explore:-What “Code Red” actually means inside OpenAI-Whether the urgency is operational, political, or performative-How leadership is using public pressure to reshape the company’s narrative-Why this dramatic messaging may signal a huge release in 2025-The possibility that Sam is intentionally creating a “we turned the ship around” story-How OpenAI’s competitors (Anthropic, Google DeepMind, xAI) are interpreting this momentOpenAI is still the most important company in AI, but the cracks, pressure points, and power moves have never been more visible. If this is really Code Red, the stakes are enormous.
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They're like declaring a code red.
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We're we're not winning on the product and now we're going to
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make the Welcome back to the Newcomer
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Podcast, Tom here, Eric and Madeline.
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We're going to talk now about Open AI and the state of affairs
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in the AI race because it's been a very chaotic seeming couple of
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days. Alert danger It's.
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Yeah, yeah, there are flashing lights happening over in the
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Mission St. Yeah, yeah, they're just running
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through the corridor screaming and throwing papers in the air
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at Opening the Eye. Because door, yeah, door locks
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are coming down. You know, there's smoke going
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through the opening eye offices, it looks like.
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Alien when they're locking down for the creature.
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And the, yeah, I know there are people that's like, you're in or
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out right now, Like, the water is filling into the rooms and
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people's hands pressed up against the glass.
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Yeah. So Sam Ultiman recently declared
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a code Red did. You order the code red.
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I did the job. Did you order the code red?
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God damn right I did. Inside I don't know why it's so
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funny to me he he sent out a memo to to employees saying that
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they they needed a code red alert on on Chachi PT that
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there's a lot of competitive threats in the app is not
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working as well as they wanted to right now.
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And this came a couple weeks after he also kind of warned
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employees that there was about to be a very bad news cycle
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around open AI, as Gemini and Google in particular, you know,
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was breathing down their necks. And they released a new model
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that was really good. And everyone now is down on open
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AI. Tom's literal first story in
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Newcomer said yeah, Gemini, Google, they're in a better
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place than you might think. Just yeah.
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Yeah, yeah. Read the newsletter.
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You could have made a bunch of money.
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I'd love to take more credit for it, but I was just talking to,
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you know, sources at Google who were like, yeah, we have a
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really good model here. I don't know why everyone
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decided that we were fucked. Like, you know, Google literally
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invented key parts of the transformer technology.
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Well, on the David Sachs, all the all in guys are like Google.
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The culture is gonna ruin the whole thing.
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It didn't make any sense. And all the hedge run guys have
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been super like standoffish about Google.
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I I don't understand it. Yeah, Yeah.
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Keep going. Yeah.
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So what was the threat? Obviously, Obviously.
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And they make money either way. That's the beauty beautiful
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thing with Google. They have Google Cloud, you
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know, and they have a search so they can drive the cost like
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they do with, you know, their workspaces stuff.
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You know they can screw over everybody else by offering
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things that some people want to build money, right?
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They're a monopoly, is what you're trying to say.
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Yeah, you're. Saying they own title.
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No. Is that improving the core line?
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I can't say say anything about that, but.
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Yeah, it's like they have the full stack.
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And I think what's been like clear in the last couple of
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weeks is that like they're competitive at every part of it.
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Like Google Cloud is a major player in cloud, which we all
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knew. The Tpus, which people kind of
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all forgot about, are like the only legitimate competitor to
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Nvidia's chips. And now they have one of.
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Capture how much Tpus we're going to be a credible
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competitor, I don't think. Yeah, well, they've been working
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on it for a long time. Like you compare that to like
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open AI, which is very Johnny come lately with all of these
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things. They're basically like building
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a airplane in the sky or whatever that metaphor is.
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Whereas like Google is literally the airplane and like, you know,
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they they certainly were slow when it came to embracing it and
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like had a lot of concerns ethically, which is interesting
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even though of. Course, I hope people listening
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this podcast already know this fact, but attention is all you
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need. The Seminole AI paper was
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written by Google employees, like, so they were, they were
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there, they knew it. They gave it away for free.
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They created this whole problem themselves.
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And so, yeah, it was frustrating that they weren't like, leading
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from the whole time, like you invented this category.
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But you know, yeah, not surprising that they would
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figure it out and and catch up. Right.
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And So what I guess is more interesting to me now is like
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the state of affairs going forward because the idea that
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open AI is fucked, it's it's literally just AAI mean open AI
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and Sam Altman assisted, but it's a creation of media.
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Nothing has fundamentally changed about the business like
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their model maybe isn't ranking as highly.
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On. Traffic.
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Also I think there are some traffic numbers.
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Right. Traffic is a little down, yeah,
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to HPT. But I will say also, Sam Altman
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is such a savvy media player. He knows that if he sends an
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e-mail to the entire company that says Code Red in a memo,
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that that's going to get leaked to a reporter like.
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And it's very possible Open AI leaked it itself.
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Like a lot of these company memos, they know they're going
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to come out and some of them the companies leak.
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You know, I I don't have proof either way on this one, but just
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as a reporter, these company memos, especially in the
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Facebook era, were coming out so often, but I think companies
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were definitely handing them out to reporters because it's like
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we're blasting them to all our employees.
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This is the message we want out there.
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And it gives it gives the statements some sincerity that
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you wouldn't get if you put it, if you put out a press release
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saying, oh, we're we're in trouble.
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Like people be like, what? But if you're like, it's to
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employees, it's like, well, that's what they're saying
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authentically inside. Then we metabolize it in the
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culture. They wrote this for public
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consumption, whether they leaked it or not, right?
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Yeah, it was for the public. I my, my belief is that they
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didn't leak it on purpose. And I think the reason you can I
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can say that confidently is that there actually weren't that many
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outlets that reported it with their own reporting.
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It's actually only been a small handful of them.
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So if everybody says we have a source, then the company is
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like, all right, yeah, yeah, that was true.
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Here's the here's the memo. Yeah.
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Yeah, but that said, like, Sam is a smart guy who knows how the
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media works, and when you do send something out, you know
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it's going to happen. So the level of intentionality
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is sort of irrelevant at that point.
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But I think like Google also had a code red exactly 3 years ago
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to this time where they were worried about the state of
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Google search and, and, and ChatGPT was, was taking off like
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a rocket. And here's where we are now.
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So, and I think Facebook in the past is, you know, Mark has
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declared various code Reds over, over different things.
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And I think actually over Google Plus, when that first came out,
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there was a lot of concern over there.
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So it's stupid to take from this like the beginning of the end.
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And and I saw some people tweeting that out.
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It's like when you've declared a code red, it's already over.
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You've already lost, you know, your men are already dead.
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And and it's like, we're so early in this.
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And I hate using metaphor, but it literally is true.
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Like if you can go from like an also ran like Google was a
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couple of months ago, like when I wrote that piece, like
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everyone thought Google was done and here we are months later and
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they have the best model everything.
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So it's like a lot is going to change.
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The thing that does sort of start to worry me about open AI
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is like I do think they have too many plates spinning right now.
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I think they are literally trying to become Google at a
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time that Google already exists. And I don't know like where
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their focus is going to end up being.
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Like you've got the Chachi PT stuff, you've got the Stargate
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stuff, you've got the Johnny I've stuff, you've got the
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browser stuff. Like I'm probably missing 5 or 6
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other things. They're trying to get an
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advertising right now. The meme is they're trying to
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get an ads. They're like declaring a code
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red. We're we're not winning on the
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product and now we're going to make the product worse with
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advertising. Right, right.
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Which man? The whole advertising thing too.
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You know, we had Alex Heath on while you were out, Eric.
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And you know, I, I like Alex a lot.
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He's an amazing, amazingly well sourced.
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Supporter. You can go read his newsletter.
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Yeah, go read sources and his podcast is called Access.
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But he was, you know, very, I, I thought a little bit too, I
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think a little, a little too credulous on the fact that ads
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is going to be a big business for, for open.
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AII think actually ads is going to be very difficult for them
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because ads rely on proof of concept and proof of success and
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also linking out and clicking out.
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And it's sort of proved that this stuff does not link out
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very well. So why would you want?
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I'm shopping for all my Christmas gifts in Shia GBT.
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I don't agree. Well, anyway, this is a
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different discussion. I just think it's going to be
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complicated for them. I don't think it's a done deal
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and I, I worry for them if I were an investor, which is
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increasingly everyone basically, you know, VCs on upwards that
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like they are going to lose focus and what they're trying to
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win on is like increasingly competitive.
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And, and that to me is more like the red alert than like Chachi
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BT is losing customers or something like that.
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It's just like what matters and what doesn't matter and should
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be doing should we be doing everything?
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And I would be, I know we'll get to predictions in a later
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episode, but I wouldn't be surprised if in the next year or
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two you start seeing open AI dropping some of these ambitions
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that something like the browser just sort of goes away.
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It's not that necessary or I don't know.
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I really don't have a lot of bullishness on the Johnny Eye of
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hardware project. I think that is going to be
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expensive and and difficult, but that's that's where I would be
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worried about them. If you're selling Tam, you need
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to be able to do everything. I mean, there's some valued
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opening eye and just being ready if a category appears promising
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that they can lean in. It's like, oh, coding is big,
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we'll lean into that. So you have projects sort of
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spinning. Yeah, I don't know.
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The piece that stuck out to me with all of this too, is that
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each iteration of the startup boom, whether we should be
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looking at applications or foundation models and how do we
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build out products and how do the large labs also build out
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products? Every time a new model comes
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out, like this junior Gemini model, the race is totally
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reset. So all of the people that I
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think have talked about, you know, will foundation models
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ever be the Moat? The answer seems to be no again,
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as it just keeps climbing and chasing back and forth.
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And every few months we get a new model that tops the
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leaderboard and then opening eyes back at the top and then
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Google's back at the top. So it's not that I don't think I
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would count them out at all. Obviously I think it's still too
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early, but it just becomes a lot trickier to see, you know, can
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you be the everything company when the everything company
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already exists? Like you need to figure out
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applications beyond ChatGPT that work because you will not get
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the Moat with foundation models like this.
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Race seems like it's nowhere near done.
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Which is why I think ads feels like heart before the horse in
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that, yeah, opening eye, ChatGPT needs more more clear designed
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applications before just, I don't know, going into
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monetization. I want to say 1.
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I guess my last word on this is I do think it's it speaks to the
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power of truth that open AI is saying code red.
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I do think there's value in shaping your company's narrative
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and just saying, yeah, we're we're in a hard place because it
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undercuts the media and the commentary.
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And just like Twitter and regular people would all be
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like, oh, open AI is in trouble because of Gemini.
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But when you say, oh, it's a code red, we're in big trouble,
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then you lower the bar for yourself.
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So maybe it hurts your reputation, but instead of
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having to fend off like, oh, Google, are they better than
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you, you say, yeah, we're we're really needing to work hard.
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And so then everything you do to sort of be slightly better than
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a Code Red is now a positive again.
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And so I think there's a lot of value in just, you know,
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communication strategy and lowering expectations for
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yourself so that you can much more easily slip over them.
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If you think entirely through narratives, then you're setting
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yourself up for your comeback. You're setting yourself up for
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like, we, we, we girded down and now everything is great.
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And we, we, we the same way Google sort of did when they had
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their code red and and now everyone's, you know,
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celebrating them. So genius move by Sam Altman,
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where we we applaud you tip of the cap for your great decision
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to call yourself a cap. I don't.
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Think Google's as savvy about the PRI.
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Think they're just just building and trying.
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I think Sam is very aware of, you know, how the narrative is,
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is consumed. Yeah, cool.
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Yeah. Well, fun to talk about this
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more next week or whatever when we do our prediction.
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Yeah. We're gonna do predictions.
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We're gonna have superlatives. I think it's gonna be a fun end
00:12:00
of the year for the newcomer podcast where it's trying to
00:12:03
split up segments so that you can listen to the things you're
00:12:07
interested in. We're super.
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