(Preview) OpenAI Declares a ‘Code Red,’ Alan Dye Leaves Apple for Meta, Questions on Tranium 3, Substack, and F1

Thoughts on OpenAI as Sam Altman declares a “Code Red” in response to Gemini 3, including real concerns about ChatGPT’s market position, why the missed ads opportunity is becoming more acute, and ominous Google history. From there: Context on Alan Dye’s departure from Apple, Meta’s emphasis on a new design language, and the Meta fundamentals regardless of AR/VR and its AI efforts. At the end: Amazon’s tranium chips and its AI efforts, Substack and the challenge of customer acquisition, defending tech at Thanksgiving dinner, and various F1 takes before this weekend’s finale in Abu Dhabi.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Andrew Sharp?

  Hello and welcome to a free preview of Sharp Tech.

• 0:08Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing?

• 0:19Ben Thompson?

  Doing okay, Andrew. I've been very angsty. I've been angsty for like two weeks. I'm still angsty. We're going to explore the angst on this podcast, but that is the theme of the day.

• 0:27Andrew Sharp?

  Oh, wow. I can't wait to find out the source of the angst. Is it Yanis related or is it tech related?

• 0:33Ben Thompson?

  Oh, no, the Yanis thing, whatever. I mean, like, it's funny. You asked me just like, was it literally the last podcast? I'm like, oh, I hope he stays forever. But

• 0:43Andrew Sharp?

  Yeah, great timing on that take.

• 0:44Ben Thompson?

  Yeah, when the news, when the news breaks that, you know, he wants out, I think my heart was already ready. I'm not, I'm not too impacted. It is what it is. At least we won one. You know, that's, that's been my pinned post for a while. At least we won one with a picture of, of the court after 2021. So

• 1:02Andrew Sharp?

  Well, once again, it's not a feeling that I anticipate experiencing at least for another 10 or 20 years in Washington. So I'm happy

• 1:12Ben Thompson?

  Wow, you're an optimist.

• 1:14Andrew Sharp?

  Exactly. Look, I've just clear eyed about the possibilities for my Washington Wizards. I'm happy that you made it to the mountaintop. And as somebody who's watched a lot of the Bucks over the last two or three years, I too have made peace with Yanis moving on. It may be for the best, all things considered. And I also watched the Bucks lose to my Washington Wizards. The Wizards may have put the nail in the coffin of

• 1:38Ben Thompson?

  I mean, it was, it was pretty rough. I was supposed to be at this game. We got a foot of snow over the weekend, which impacted travel plans, to say the least. I will say, I enjoyed the snow. I enjoyed shoveling. It's like one degree out today. It's not too bad. I think, I think I could do this winter thing and I'm

• 1:58Andrew Sharp?

  Okay.

• 1:59Ben Thompson?

  myself.

• 1:59Andrew Sharp?

  Yeah, you know, reacquainting yourself with Milwaukee winters. Not bad.

• 2:04Ben Thompson?

  Madison, Madison.

• 2:06Andrew Sharp?

  Oh, excuse me. I purposely conflate the two to screw with you offline, but man, to make that mistake on the show. Yes, Madison, I'm happy that you have seasons again. That's one of the things that people say. I miss seasons.

• 2:23Ben Thompson?

  I know, and I always laugh at that. It sounds like a rationalization, but I have to say, having seasons has been pretty great. Now, again, ask me in like February when it's snowing more.

• 2:33Andrew Sharp?

  February, or like March and April out there in Wisconsin. That's when it does get pretty rough. In any event, speaking of things getting rough, as for the show today, you wrote about OpenAI on Monday this week, and mere hours after that story published, there was reporting from the information that Sam Altman on Monday told OpenAI employees he was declaring a code red to marshal more resources to improve ChatGPT as threats mount from Google and other AI competitors. As a result, OpenAI plans to delay other initiatives, including advertising,

• 3:11Andrew Sharp?

  according to Altman. We are at a critical time for ChatGPT, he said. So Ben, as OpenAI enters the code red era, it seemed like on Monday with your article, you wanted to come out and give a full-throated relax to all the OpenAI skeptics, but you couldn't quite get there in that article.

• 3:34Ben Thompson?

  I'm glad that came across because I didn't want it to come across as a, that's why I've been hasty. I told you like before Thanksgiving, I'm like, oh hey, people need to relax here. I need to write an article. I think about it all over Thanksgiving break. I get to Sunday. I'm like, okay, I'm gonna write an, I need to write an article. It's time to write an article. I need to write about this. And the article did not publish until like 9:00 AM on Monday, and that was because I was up all night, like bleeding this one out. And the reason I was bleeding it out is

• 4:11Ben Thompson?

  A lack of conviction.

• 4:13Andrew Sharp?

  Mm hmm.

• 4:13Ben Thompson?

  Like, I, I am really concerned. And the reason I'm concerned is by all rights, they ought to have secured the consumer space.

• 4:25Andrew Sharp?

  Yeah.

• 4:25Ben Thompson?

  And I think it's a really, really fascinating story. I've been on two points with OpenAI again and again. Number one, they need to focus on the consumer space. I've been worried about the, the API being a distraction. And I kind of came around on that. I get it. Whatever it might be.

• 4:43Andrew Sharp?

  You've softened your stance as far as OpenAI's focus is concerned.

• 4:46Ben Thompson?

  Which maybe was a mistake. Don't back down.

• 4:49Andrew Sharp?

  Yeah.

• 4:50Ben Thompson?

  But, but, but then number two, the whole ad thing. I've been on and on about they need to launch ads. And the problem is, the, the issue in the long run is the, the power of being an aggregator. It's not just that you have consumers. It's that you have a flywheel that gives you increasing, expanding power in the marketplace that is impossible to compete with. If you're a Google in search, it's not just that you have everyone searching on Google. It's that you have ads that people are accustomed to and are fine with. You have a massive universe of advertisers that are used to going there, that, that they buy ads to show all those users. And what that does, it gives you the money to invest to make it better.

• 5:36Ben Thompson?

  And to make your, and the thing about ads is there's a real spectrum on ads. A lot of ads really suck.

• 5:41Andrew Sharp?

  Yeah.

• 5:42Ben Thompson?

  Ads that Google does, again, I think a little exploitive because they're just like stealing the top spot in many respects. The fact you have to bid on your own name on Google is like really annoying.

• 5:52Andrew Sharp?

  Pretty absurd, yep.

• 5:53Ben Thompson?

  But Facebook slash Meta is the better example where half the time I go on Instagram just to see what ads I'm going to get. So what new crap I can buy for, for, because it's all awesome. Like it's, it's great. And the, you don't get there overnight. You start bad and you get better. And what really gives me pause right now. Is OpenAI is facing this challenge from Google where Gemini probably better, but even if OpenAI comes out with a better model, which they probably will soon. Uh, and there's a whole another discussion there about choices Google made with TPUs versus maybe some challenges that are happening with Nvidia GPUs, things along those lines.

• 6:35Andrew Sharp?

  Mm hmm.

• 6:36Ben Thompson?

  But if you're, you're, the time to be crappy and to diminish the user experience was when you have a huge lead.

• 6:45Andrew Sharp?

  Yeah.

• 6:46Ben Thompson?

  Right? So you're facing this situation where suppose OpenAI decides they actually do need to monetize, which clearly they do, they can't just be taking, losing 15, 20 billion dollars or whatever it is forever.

• 7:00Andrew Sharp?

  Yeah.

• 7:00Ben Thompson?

  But you're going to do so in the context where you're going to risk losing your audience because Google doesn't need to monetize. They're monetizing on search just fine and they can let Gemini be for like, imagine a situation where it's not just that Gemini is arguably better, but Gemini is the nice ad free experience.

• 7:17Andrew Sharp?

  Yeah, totally.

• 7:18Ben Thompson?

  I mean, they're, so they're, and so I feel frustrated because on one hand, like, I strongly believe in the advantage they had with the customer base and it's hard to move people.

• 7:30Andrew Sharp?

  Mm hmm.

• 7:30Ben Thompson?

  But this is like Uber back in the day. I, I went to battle about Uber with, with, you know, with skeptics and, you know, was, was, there is this guy.

• 7:41Andrew Sharp?

  And that was a case where you did have conviction 10 years ago with Uber, when there were armies of people saying Uber's losing money, Uber's gonna fail, blah, blah, blah. You were on the other side of all those arguments.

• 7:53Ben Thompson?

  Right. And, and it was really frustrating when 2017 and all those scandals happen because it's like, and then what happened was Lyft was about to go out of business and Uber was going to take the market. And then suddenly Uber faces all these scandals, all these things that go down, and Lyft gets massive infusions of money and it just basically, and so I'm like, I think I was right, but like, can you act, can I actually know if I was right? And that's how I feel right now. I think I was right about OpenAI.

• 8:24Ben Thompson?

  Being positioned to own the consumer market.

• 8:27Andrew Sharp?

  Mm hmm.

• 8:27Ben Thompson?

  But because they didn't act quickly enough and they didn't secure their position and the position isn't just about acquiring users. It's not just about having good products. It's about having a sustainable flywheel of revenue generation that actually locks you in more.

• 8:42Andrew Sharp?

  Yeah.

• 8:43Ben Thompson?

  They might lose. And if they lose, does that mean the theory was wrong? Does that mean they were too slow? I don't know. So I'm very angsty. That's like I said, that's the theme.

• 8:53Andrew Sharp?

  Yeah.

• 8:53Ben Thompson?

  Still angsty. I don't feel great about my article. I'm glad the angst came through because I'm not like, that's the best I could say. I don't know.

• 9:02Andrew Sharp?

  Well, exactly. And I would say I don't know is an acceptable answer at this point. And frankly, kind of an exciting answer as we wait to see how some of this plays out.

• 9:12Ben Thompson?

  That's funny. You totally, you totally, that is, I'm already thinking out, you know, what I'm gonna write, write next. I sort of want to, you know, I came back the next day like laying out the bear case very explicitly in the daily update. But like, I'm wanting to write about this more. And there was an angle, like a meta angle, which is like, this is very exciting. This is very thrilling. It's great for me. It's great for us. I mean, it sucks if I'm wrong, but also I always say that being wrong is actually one of the most exciting times because you have to step back and you have to look at and examine what are these assumptions that you had about the world and how it works? And what went wrong? And that's a chance, it's a chance to understand the world better.

• 9:53Ben Thompson?

  It does entail a little bit of sort of embarrassment along the way, but it is what it is.

• 9:58Andrew Sharp?

  Yeah, well, and additionally, it goes without saying, but I really appreciate OpenAI for continuing to keep us entertained.

• 10:06Ben Thompson?

  Yes, number one on the take, number one on the take index.

• 10:09Andrew Sharp?

  Number one with a bullet, the takeability rankings.

• 10:12Ben Thompson?

  I know, Andrew came out with the takeability rankings, uh, which was very long, very enjoyable. And when you read it, it's all a long preamble to, for Andrew to express his appreciation for OpenAI.

• 10:25Andrew Sharp?

  As far as takeability, OpenAI is in a universe of its own in 2025. I mean, in October, we had Sora. And 1.2 trillion dollars in spending commitments and then November, they're talking about partnering with the government on loans, this, that, and the other thing. Now we have code red. I can't wait for 2026's agenda. It's gonna be great. But in terms of what you're talking about, I mean, one of the things I come back to as a normie, and it's a point that you raised in your article on Monday, for all the hand wringing over competition with Google or Anthropic or anyone else, ChatGPT is the

• 11:06Andrew Sharp?

  one AI product that everyone I know uses and likes. Like, there are all kinds of opportunities for everyone else in AI, but ChatGPT, it's the one that's like, obviously succeeding right now. And on the other hand, I do think that the code red impulse is probably healthy. I mean, it's a hilarious way to frame this moment for a CEO.

• 11:30Ben Thompson?

  I've been begging them for years to focus on ChatGPT. Like, stop wasting your time on all this other stuff.

• 11:36Andrew Sharp?

  Well, that's the thing. It's like, they're trying to be an infrastructure and API business. They're building hardware. They're doing e-commerce deals. They're talking about designing chips. All of that is great and reasonable, but ChatGPT is the linchpin for everything else they want to do. So, to the extent that this does delay the ad initiative, do you think that's healthy at this moment in time, given the competition from Google?

• 12:02Ben Thompson?

  Well, that's fine. I mean, they have a real problem here, again, where they, the initial introduction of ads in particular is going to diminish the user experience. That's the last thing that they need to have happen right now. By the way, as long as we're complaining, very excited about the shared chat thing, does not work on desktop. Like, the chats are just like, gone, or they're like...

• 12:25Andrew Sharp?

  So, what's the point, really, if you're trying to improve workflows?

• 12:29Ben Thompson?

  No, it speaks, they're getting sloppy. Like, one of the things they delivered on again and again is just how their apps were always better, and they had native apps on the platform. Like, this is actually the reason why people don't do native apps, because it's harder to keep them up to date. And all these bits and pieces, but I always like, I thought set them apart. They seemed to care about the user experience of chat GPT in a way that was tangibly different than anybody else. And the, the whole shared chat thing, which I think is number one, super useful. Number two, has the promises of a network effect. Like you start getting people used to using it with other people.

• 13:08Ben Thompson?

  Now it's not just, oh, I try Gemini. It's, oh, I have to get my friends to blah, blah, blah. You're like, there's a real barrier. And they deliver, they, they half ass it. Like they have thousands of employees at this point. What are people working on? And they're working on a lot of stuff that, that they're losing sight of the main thing. The main thing needs to be the main thing. And I was, I gave them grace for it for a while because I think this transition from being a research lab to being a consumer tech company was a difficult one. It was a painful one. People were going to leave. There was going to be drama because that's not what people, people didn't sign up to be Facebook. But you are presented with a Facebook opportunity. You need to take it.

• 13:49Ben Thompson?

  And they kind of seemed to take it for like two months and then they're like, oh, actually we're going to be the, We're going to be Apple. Company of the universe. Yeah. No, that's a, that's actually, that's another great example. Let's go in on that. The whole Johnny I thing. OpenAI was Apple's partner. They should be Apple's partner. They, they, they, they are a horizontal services company that needs to have the best experience everywhere. That's what you need to be if you're going to be an aggregator. And they basically signaled that, oh, in three years, Apple, we're coming for you. All you're doing is pushing Apple into the arms of Google and rationally so. And, and this is a mistake that Google made with Android back in the day where

• 14:32Ben Thompson?

  this VP for Microsoft, Vik, Vik Guntatra or something like, like they got in this very, we're taking on Apple and they opened like their, their Google I O keynotes with like all this talk about we're open and Apple's closing. And Great impression. Love it. Well, it was, it was also a very exciting time. Uh, you know, that's really when Stricker got started when everyone. Everyone was saying that Apple is doomed and I'm like, eh, I think they're gonna be okay. Um, I felt a lot better about that one, eh, they're gonna be okay than I do about this one right now, uh, to say the least.

• 15:04Andrew Sharp?

  Yeah, well, I mean, related to the ads question, we got this note from Paul. He says, it's been interesting hearing Ben's enthusiasm about the urgency to place ads on ChatGPT. While I understand and agree with the long-term necessity of ads in the product, I think he may be overlooking the timing and positioning of ChatGPT compared to his examples of YouTube and Facebook. By the time YouTube and Facebook started really leaning into ads, they already had dominant positioning in their market. There was nowhere for users to turn to as YouTube started the initification dial. And people's lives had already been entrenched in the meta products by the time ads started taking up most of the feed. Meanwhile, if ChatGPT were to start layering in ads at the cost of a clean user experience,

• 15:47Andrew Sharp?

  there's no real barriers to a user who wants to hop to a cleaner, ad-free alternative such as Gemini or Anthropic. Instead, it seems like there's a standoff across all the AI companies. Even though I'm sure they would all love to begin adding ads, nobody wants to be the first and risk the PR drama and potential loss of users. I'll hang up and listen from here, but I'm not sure it's as simple as ads now for ChatGPT. And related, Aaron says, Google can, in theory, delay an ad-integrated Gemini almost indefinitely. If there's a strong negative reaction to OpenAI's ad rollout, is that Google's opportunity to make a power play for OpenAI's enormous consumer user base?

• 16:31Andrew Sharp?

  So that's where we are this week.

• 16:33Ben Thompson?

  I completely agree. I completely agree. So my real angst is the fact they, like, you could have put the world's crappiest ads in ChatGPT. No, more than that. I would say, like, I was writing about this, you know, in early 2023, like, the- And you, if they started then with crappy ads, the ads would be a lot better now. And there is, by the way, there is a bit where Google's not going for the kill. Like, there is free Gemini, the better Gemini, you do have to pay. The, the new Nano Banana Pro is amazing, but it's only on sort of the, the pro levels. They're like, they're a public company that's worried about their margins. Like, they, they raised prices for the Gemini API, uh, for Gemini three API.

• 17:17Ben Thompson?

  Probably because it's much more expensive to serve. But the point is they're acting with a certain degree of rationality here that suggests like they, they have their own constraints uh, in, in this regard, which as you would expect, and you know, we're still sort of waiting to see to what extent they sort of, sort of work, work through that over, over time. But that's why, but yeah, but now it's like, this is hard to write about because it's not very productive to say, you should have listened to me two years ago. Um, but that's really how I feel right now, and it's very annoying.

• 17:53Andrew Sharp?

  But reading the information piece, your reaction on Tuesday was not, okay.

• 17:58Ben Thompson?

  No, it's positive. It's positive. Yeah. No, you have to secure the position of ChatGPT. My reaction was, hmm, maybe I shouldn't have softened on the API stuff. Like, like the, if you're consistently saying we're not giving the best possible experience because we're resource constrained. Why are your resources going to other things?

• 18:15Andrew Sharp?

  Spread too thin. Yeah. Well, and the other reason to implement ads two years ago is that you're training users to experience the product with ads in it so that there's not this whiplash effect that would.

• 18:27Ben Thompson?

  Right. And the ads are, the ads will get better. Like, like, like, I think that, um, you know, I, I'm really annoyed by the insinuation aspect. Because the reality is, is ads, number one, they make a product much more widely accessible. And, and I think it's really easy to sit here, you, me, anyone who's paying $15 a month to listen to us talk is extraordinarily privileged. Okay?

• 18:53Andrew Sharp?

  Yeah.

• 18:53Ben Thompson?

  Uh, number two, most people are not rational about this. Like, how long did it take you to subscribe? Like, I have a friend that I was talking, like, just ages, right? Like, people don't, they, they don't pay for this stuff, even if it is sort of a huge benefit for them. I just skipped over you. I didn't let you answer.

• 19:08Andrew Sharp?

  I, I know. It's funny. I'm thinking back.

• 19:12Andrew Sharp?

  I was relying on you while I was in law school, but I think it took me two or three years before I actually subscribed and you were like a close friend at that point. So yeah, it takes people a little while to come around.

• 19:24Ben Thompson?

  Did you ever subscribe to YouTube Premium yet?

• 19:27Andrew Sharp?

  I still have not subscribed to YouTube Premium.

• 19:30Ben Thompson?

  This is one of the.

• 19:31Andrew Sharp?

  I do that just to spite you because it makes you so upset and it really doesn't make that much of a difference in my life.

• 19:38Ben Thompson?

  Personally, it upsets me on your behalf. I feel bad for you that you're living this life. This is another thing, by the way, I like, I think with the YouTube example, I think that came up on Sharp Tech and I, I referenced it this week in sort of the bear case update that I did, which is you have this real marginal cost problem, which is, you know, by and large, web services, it's gotten so cheap that anything users do, no one really worries about it. Yes, like serving Google costs a lot of money, but Google is not concerned about people doing one more search. We're still in an era of AI where that is a tangible concern you have to be concerned with. You have things like rate limits, which by the way, is a, that's an insidification of the user experience.

• 20:23Ben Thompson?

  If you get into ChatGPT and you're using it and you hit a rate limit, that sucks.

• 20:28Andrew Sharp?

  That is a good point.

• 20:29Ben Thompson?

  If you could use it without hitting a rate limit and there's some ads there, that's actually better.

• 20:34Andrew Sharp?

  It would insidify the YouTube experience if there was buffering half the time you tried to watch YouTube videos.

• 20:40Ben Thompson?

  No, exactly. Like so regular people all over the world can just use YouTube and because the beautiful thing about ads is the more YouTube videos they watch, the more it costs Google to serve. But the more YouTube videos you watch, the more ads you see and the more money they make off of you, right? It's the same thing with AI. If you had a, a productive ad experience, longer usage, more usage is more inventory. You, you, this is like, this is why I'm passionate about advertising being an essential business model. It aligns incentives in so many different ways and, and people, yes, I'm not saying it's perfect. It can go wrong with sensationalism and all. All those sorts of things, but by and large, there is a very healthy alignment.

• 21:25Ben Thompson?

  And the problem with charging for things is is price elasticity. Like to when you to make more money to cover your costs, you're going to reduce the number of people that are willing to pay like economics 101. The amazing thing about the advertising model is who bears the increase in price? Advertisers do. Why do they pay more? Because it's working. They're sort of getting results. And and the so you're sort of shielding, you're cutting that off from the user experience. This is why you can grow to cover the whole world. This is why Facebook and Google are so powerful. Because it's not just that they aggregate the users, they've also aggregated the advertisers.

• 22:05Ben Thompson?

  And they've offloaded all of the price rises, raises, whatever it is, to the advertisers. And by the way, they don't explicitly raise prices. One of the things your people in the anti monopoly movement can't seem to understand. The prices go up and down as a function of supply and demand. It's a pure market. The reason prices go up on Facebook is because the the ad product works so well. More and more people want to buy ads there. Like, it's a beautiful business. It's the most powerful business possible. And it was sitting there. It was sitting there for OpenAI. And they're just fucking around doing all this other shit.

• 22:43Andrew Sharp?

  Yeah, well, lest we cry over spilled milk, the game's not over yet. And OpenAI pausing the ad integration is probably healthy for the short term prospects.

• 22:55Ben Thompson?

  But it speaks to you. They need to stop doing what they had to do to get back in a position to do what they need to do.

• 23:03Andrew Sharp?

  You've convinced me. They should have incorporated ads two years ago.

• 23:06Ben Thompson?

  No, if anything, I regret not being more forceful about it. And I like to think I was pretty forceful about it.

• 23:12Andrew Sharp?

  Well, at as far. Going forward, I gotta say, I'm pretty haunted by the digression that you had on Dithering, where you mentioned that Google was not first in search, not first in smartphones, not first in browsers or email, and came to dominate in each of those sectors.

• 23:30Ben Thompson?

  Yep.

• 23:31Andrew Sharp?

  It does feel kind of ominous when you look at the history here.

• 23:34Ben Thompson?

  Yeah, so there's been this great series of ads that Canal, the French broadcaster, has put out for the last couple of F1 races. Yeah, so they have like, they did one with the Jaws theme, they did one, was it Terminator? They did a Star Wars one. The implication being of, should be this easy, cute little McLaren or Lando, you know, winning the title, and then here comes Max. Like, Google is Max in these commercials. And it's just like, no, and so I'm sitting here as someone who believed that they were going to win, that OpenAI was gonna win the market, and I just hear Google, and Google has always been my nemesis. Like, I consistently underrated them. And so, and I'm like, well, looks like I'm, maybe I did it again.

• 24:20Ben Thompson?

  Keeps me humble, I guess. There you go.

• 24:22Andrew Sharp?

  Indeed. Well, Efficient Market Hype on Twitter tweeted this week, Gemini winning the AI race is super bearish for the market, if you think about it. I read that and thought to myself, it probably is bad news for everybody else.

• 24:37Ben Thompson?

  Yep.

• 24:38Andrew Sharp?

  I mean, I mentioned this on Sharp China like a month ago, but if Google wins, they could effectively play the role of China in the AI race, where Google Search is like the CCP subsidizing the AI business and allowing Gemini to just run at a loss, destroying everybody's ability to make a profit, and driving all competition out of business. Is that a reasonable concern to harbor?

• 25:01Ben Thompson?

  Yeah. Yes, it is.

• 25:03Andrew Sharp?

  Okay, great. Well, we'll see. We'll see whether OpenAI, because like, you weren't completely bearish on OpenAI either.

• 25:13Andrew Sharp?

  All right, and that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes, or you can also go to sharptech.fm. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Stratechery and the Stratechery Plus bundle. Check it out, and if you've got feedback, please email us at [email protected].