ChatGPT just hit $3B in ARR—here’s why Sam Altman is a strategic genius.

Speaker 1 0:00 So the information just reported today that OpenAI, same Elements company is doing $3.4 billion in annual recurring revenue, which if you think about it, is just insane. It&#39;s double what they were doing just six months ago, which doubling when you&#39;re doing billions in revenue is absurd. It&#39;s also up from basically zero before Chad , GBT, I mean a couple hundred million dollars, but like 21, early 22. Realistically, they were doing like no revenue. So from nothing ish to three and a half billion dollars in revenue in two years, it&#39;s outta this world. It&#39;s completely outta this world. And you know, I was thinking about, I remember , uh, Paul Graham, who obviously worked super closely with Sam over at , uh, at yc, actually Sam Elliman was in ycs first batch ever with a different company. And then, you know, Sam goes on to become the CEO of yc. So anyways , he&#39;s worked closely with Paul Graham for many years. And Paul, what Paul said about Sam was that Sam was the best strategist he&#39;s ever worked with. Paul Graham, who&#39;s worked with some of the most exceptional founders on this planet, says that Sam Altman is the best strategist that he&#39;s ever worked with. So I got to thinking, and I just thought back like to the, to the history of opening ai and you , you actually look at how it all played out and you can really start to see now the strategic thinking that was behind some of the big moves that , uh, that Sam Altman made. And , and I&#39;m not saying by the way, like that Sam Altman had some, let&#39;s say, master plan that he like predicted the future knew was gonna happen. It&#39;s actually funny enough, like strategy is not about predicting the future. I mean, that&#39;s called having a crystal ball and no one&#39;s got that <laugh>. Truly no one&#39;s got that actually. Strategy is all about positioning. It&#39;s all about putting yourself in a place where regardless of the different things that might happen, you have as many opportunities as possible. The best decisions are the ones that regardless of what outcome happens in the future, put you in a place where your available set of choices are as good as they could have been. And that&#39;s really what strategy is all about. So 2015 Sam starts open AI and he starts it as like a nonprofit and he starts it with obviously some of the biggest names in the world with Elon Musk, with Peter Teo . All these guys at this point, like the Uniting mission, the thing that brings everyone together is this idea that a GI is coming, like it&#39;s all about safety concerns around what AI is gonna mean, especially what a GI is gonna mean. And that&#39;s why this non-for-profit structure makes so much sense. It galvanizes everyone, it helps Sam put the best people on this mission together instead of having to kind of come up with a business case, which at that point you couldn&#39;t really do because there was no clear business case. So instead of doing that, he just kinda gets the best minds around it, the best tech people, the best business Speaker 2 2:58 People together, the best AI experts obviously, and galvanizes them with this mission, this not-for-profit that is going to help protect humanity against the dangers that come from ai. And that&#39;s what he is working on. And at this point by the way, he&#39;s still full-time on yc. So you already see, okay, this is an interesting move because he doesn&#39;t give up the thing that he&#39;s been doing, the thing that he loves, but he starts kind of working closer with these incredible tech luminaries on perhaps one of the most interesting, most important technology developments that&#39;s upcoming in our time. And that&#39;s what happens, right? So he goes on this literally, he&#39;s just working on this kind of in the background. I mean, well known in a sense, but not, certainly not by the average person by any means in 2019, he releases GPT two. So obviously there&#39;s been a lot of development , um, by that point. And with GPT two, that&#39;s when things start to become a little bit clearer. It becomes clearer what the power of this new kind of AI technology could be. It also becomes clear what some of the use cases might be. At the beginning they , they really weren&#39;t. So now he takes the second kind of move when we talk about positioning the second strategic decision, number one, he goes all in, right? He says, okay, this is actually very important. It&#39;s much more important than what I&#39;m doing. It yc , I like it more. Whatever. He puts all these things together and he decides he&#39;s gonna go all in. So he quits, YC goes all in, becomes the CEO of this company, adds a for-profit component to it and leverages that for-profit component to get a billion dollar investment from Microsoft. So that&#39;s all in just one year, you already see. So now kind of how that positioning has evolved. And then from there, about a year later in 2020, he launches GPT-3 . So obviously the GPT uh , product just keeps getting better and better and companies are starting to build on top. But at this point, the way to access , uh, open AI&#39;s technology is effectively all through APIs, right? Like he doesn&#39;t really have any direct to consumer , uh, offerings. So he&#39;s just kind of working with startups, working with different companies that are building on top of his technology. And then this starts to really change, right? Like in 2022, as they continue to develop the, the , the technology, this is when they come out with GPT-3 0.5. And this is when things change a little bit because what Sam realizes with GPT-3 0.5 is this, is, this is like, let&#39;s say orders of magnitude. If you wanna use text feed better than what we had before, better than GPT-3 and the sort of experiences you can power with this just kind of took a huge step function up. And frankly, Sam is not going to let everybody else have his case . Being an API being behind the scenes is just not good enough when what you&#39;ve enabled is so compelling. So what does he do with GPT-3 0.5? He launches Chad GPT. So this is end of 2022. And look, did Sam know that Chad GPT was gonna be as big as it became? Of course not. Like who can, who can have the expectations that you&#39;re gonna launch a product and it&#39;s gonna go from zero to a hundred million users in two months, faster than anything, faster than Instagram, faster than Facebook, faster than TikTok . Like it was the fastest product to ever go from zero to a hundred million in uh , users except for threads, which threads obviously leveraged the entire meta infras , um, the entire meta ecosystem. So it&#39;s not really a fair comparison. But anyways, that&#39;s what happens. It&#39;s, it&#39;s not about predicting the future, it&#39;s specifically about positioning. So that if that technology is as powerful as he thought, as compelling as he thought, at least opening AI would capture just about all of the value from it. And guess what? That&#39;s exactly what happened because obviously, as we all know, Chad GPT blew up and then he does the next thing, which is he continues to go all in, right? So he launches a paid version exceptionally quickly that same year. This is 2023, all within the span , 12 months. He launches a paid version of 20 bucks a month. He launches GPT for the next evolution of GPT. He launches an iOS app, and then he makes the next kind of truly strategic move that&#39;s more just kind of product lawsuit and , and making sure that the team is aligned and launching quickly and leveraging everything that that they have right in front of them. The next strategic play is the partnership with Microsoft. So Microsoft already invested a billion dollars, but in 2023 they announced a $10 billion investment, which is massive, monumental, and on top of that brings them closer. Think about it from Sam&#39;s perspective, like at the end of the day, like a technology is gonna have value in enterprise and or it&#39;s gonna have value in consumer. Those are the two places. So, okay, so let&#39;s start with Enterprise. What is the biggest enterprise company in the world? Microsoft. Okay, cool. Basically what he does is he says to himself, listen, if Microsoft&#39;s gonna plan ai, which I&#39;m sure they&#39;re gonna plan in ai, well let&#39;s make sure we&#39;re their chosen partner. And so that&#39;s what he does, 2023. And he partners with , uh, with Microsoft that year. So by the end of 2023, just a year after he launched chat , GPT , he&#39;s doing $2 billion in a RR . Like it&#39;s just absurd. Up from $200 million at the end of 2022, up from effectively nothing the year before. Just an incredible scale of revenue, just never seen before. So he continues to go all in. He launches a Mac app, you know, a couple months ago, getting closer and closer to that user. Now the next big steps , I said before, I mean, technology&#39;s either gonna work in enterprise or it&#39;s gonna work in consumer or it&#39;s gonna work in both. Well, who is the biggest consumer company in the world? It&#39;s Apple. So if Apple is gonna start doing things with ai, Sam is making sure that their number one preferred and chosen partner is not Google, is not meta, it&#39;s open ai . And with that which was just announced at W-W-W-D-C , uh, this week, over time, he&#39;s gonna get access to 1.5 billion Apple users, which of course are the people that tend to have the more disposable incomes and so more likely to kind of sign up for that $20 a month. So again, like I&#39;m not saying that Sam Almond Speaker 3 8:55 Foresaw all this, I&#39;m not saying Sam Alman had a master plan and frankly you can hate him or love him, but my point is he&#39;s a master at strategy. He&#39;s a master at decision making , he&#39;s a master at positioning and that&#39;s why now they have over 10 million paying subscribers, year and a half after launch. A brand name this I think is so compelling, like their brand name Chad , GPT is known by my parents. It&#39;s known by 60 year olds, by 70 year olds. It was a completely unknown brand just a year and a half ago. And of course now they got $3.4 billion in a RR . That&#39;s how far strategy can take you . So anyways, Sam is killing it and I think there&#39;s tons to learn about how he makes choices and how he positions himself to get the most, to capture the most value regardless of where things might go.