Reed’s view
OpenAI CFO Sarah Friar inadvertently caused a news cycle Wednesday when she suggested OpenAI wants a government “backstop.” Friar walked back what she said was a clumsily worded remark — but many took her to be suggesting a government role in propping up tech the way it intervened to prop up the financial system.
But there’s no parallel between the banks and the tech giants. There is no “too big to fail” in the tech industry. In fact, failure is one of the key characteristics of Silicon Valley.
It’s unlikely OpenAI will need a bailout, so long as customers keep paying for its services. But if it can’t keep going on its own, it will go away like countless other once-great startups. As you may recall, this almost happened: Sam Altman got fired, and almost every OpenAI employee said they were going to leave and join Microsoft. Tech companies are really just groups of talented people working toward a common goal, and a company’s failure usefully scatters them.
When government is doing its job by funding basic research and incentivizing crucial infrastructure, it actually puts more pressure on the tech industry to innovate. And the industry doesn’t need a backstop to stop companies from falling off a cliff. It should be giving the bad ones a gentle nudge to make room for the next ones.
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Room for Disagreement
Deep compute and AI infrastructure are very capital-intensive, with long lead times and uncertain returns. In this scenario, and because of the geopolitical importance of the technology in the race with China, a government backstop “is not as insane as it sounds,” Substacker and tech journalist, Shakeel Hashim writes. “If winning the AI race against China is existential … then public money/backstops/bailouts seem like the natural endpoint of how AI is discussed at these levels.”
Notable
- If the government steps in to support OpenAI, taxpayers will be footing the bill, scientist and AI expert Gary Marcus argues in his Substack.
- The Trump administration’s AI czar David Sacks denied there would be any bailout for the AI industry on Thursday: “The U.S. has at least 5 major frontier model companies. If one fails, others will take its place,” he wrote on X.