OpenA-IPhone? Legendary Designer Joins OpenAI
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Today on the AI Daily Brief, a design legend joins OpenAI. Before that in the headlines, checking in on the AI-first companies. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI. Thanks to today's sponsors, KPMG, Blitzy.com, and Super Intelligent. And to get an ad-free version of the show, go to patreon.com slash ai daily brief.

Welcome back to the AI Daily Brief Headlines Edition, all the daily AI news you need in around five minutes. Over the last couple of months, we have had a number of companies declaring themselves to be AI first. We've had Duolingo, Shopify, Fiverr CEO wrote a note about how AI was coming for every job. Maybe the earliest to this trend, however, over the last couple of years was Klarna, a buy now pay later company that's been one of the early guinea pigs for pushing AI adoption.

Given that they've been in the midst of this AI overhaul the longest, they give us in some ways the best chance to see what's working and what's not. You might remember that last year they announced that they had used AI to develop their own internal systems that allowed them to cut out Salesforce and Workday. CEO Sebastian Samankowski later acknowledged that the cost savings from ripping out 1,200 SaaS services hadn't been great.

The value, he said, had been in developing their own tech stack that fueled productivity and wouldn't have been possible without AI. We also heard that the company had stopped all hiring in 2023 with plans to enlist AI to replace the human workforce, largely focused on customer service roles. And this has been a key hallmark of some of these AI first announcements that we've seen recently. Basically a soft freeze on new hiring until you could prove that AI couldn't do the job. However, earlier this month, Klarna did tweak their strategy.

While most news had reported it as reversing course, it wasn't exactly that. Instead, what Klarna figured out is that there was always going to be a demand among some number of their customers to have access to a human customer service agent. And so while they were still very keen on using AI to increase efficiency in customer service, they also wanted to respond to customer demand and have this available as an option. Now, in my mind, this has always been the way that this was going to shake out. And in fact, I think the opportunity was

is to take human-level customer service and actually make it a prestige position in the same way that it is in luxury industries, for example.

The latest that we've gotten from Klarna is not announcements, but actual financials. The company is now on track to reach $1 million in revenue per employee. That's almost double their pace from a year ago. Klarna says that most functions have become more efficient because of their AI efforts. Looking strictly at the numbers, the largest impact has been from a significant cost reduction in customer service. Overall, the company says that they've seen a 40% reduction in workforce since they began their AI overhaul in 2022.

The trade-off has been a big jump in one-time costs related to downsizing. The company made a $92 million loss last quarter due to severance-related restructuring costs. Klarna is currently looking to go public, although those plans are now on hold. So there are a lot of expenses related to paying out stock awards.

More troubling for Klarna, not from the standpoint of AI, but just from the standpoint of the industry they're operating in, the company also reported a 17% rise in losses from defaulted consumer loans in the first quarter compared to the previous year.

These bad debts are now running at $136 million per quarter. A spokesperson noted that the default rate has risen from 0.51% to 0.54%, so quote, a very slight increase but still very low. These challenges are not due to AI, but due to broader economic conditions, but they are a good reminder that efficiency isn't everything, and companies won't be able to use AI as a magic bullet that somehow shields them from broader market forces.

Still, they continue to put AI front and center. The earnings call this week was conducted by an AI avatar of their CEO. TechCrunch writes, Other than AI Seamitkowski's admission, it wasn't obvious that this was AI. There were only a few subtle signs. The AI CEO didn't blink as much as most humans do. The voice sync was good but not perfect. And the AI was also wearing a brown jacket that looked a lot like one from a widely circulated corporate photo of his human self. So troubling economic conditions or not, Klarna is still very much on the AI train.

Shopify, meanwhile, have launched a slew of new AI tools to help users design their shopping experience. There's an end-to-end store builder, allowing users to generate an entire storefront from a single prompt. There's an AI generator for creating elements like banners without knowing how to code.

There's also a big upgrade to Sidekick, the platform's commerce assistant, with added voice and screen sharing capabilities. There's also the ability to draw real-time product data from the millions of Shopify stores. As another bonus, Shopify have set up their own MCP server to make integration with external agents seamless, which will for some be a footnote in the news, but I think actually could be the most significant part of this whole announcement.

Given how much we've talked about the productization of AI over the past week, all of this news from Shopify is a really good example. The platform was always designed as a no-code tool to empower everyday people to dive into e-commerce. But until now, that was through the customization of templates. We're now starting to see vibe coding concepts integrated into no-code platforms, making them much more open-ended. The suite is also a good example of taking a broad concept like AI coding assistance and

and narrowing them down into a user-friendly package. I am 100% sure that this will not be the last example of this this year, but it is a really good demonstration of how AI is on the cusp of changing everything in the consumer software industry.

Speaking of coding agents, Mistral have launched their first open-source coding agent model. Called DevStroll, the product is a small 24 billion parameter model optimized to drive a software engineering agent. Baptiste Rosiere, a research scientist at Mistral said, We wanted to release something open for the developer and enthusiast community. Something they can run locally, privately, and modify as they want.

This model is small enough to run on consumer-grade hardware and is licensed under Apache 2.0, so devs can pretty much use it however they want. It benchmarks well compared to other small models. With Sophie Yang, the company's head of developer relations, writing, And the idea isn't just to provide a high-performance model.

but to pair it with a common open source agentic framework like OpenHand, SWE Agent, and OpenDevon. Rogier said, We're releasing it with OpenDevon, which is a scaffolding for code agents. We built the model and they built the scaffolding, a set of prompts and tools that the model can use, like a backend for the developer model. The company continues to experiment in filling in market gaps. Rogier said, There will always be a gap between smaller and larger models, but we've gone a long way in bridging that.

Lastly today, benchmarking platform LM Arena has raised $100 million in a seed round that values the company at $600 million. What started off as an academic project is now a commercial startup with backing from Andreessen Horowitz and the University of California Investment Fund. Lightspeed, Felicis, and Kleiner Perkins are also participating. Until now, the platform had been funded by a combination of grants and donations, and

from sources like Google, Together AI, and A16Z. The platform has also faced a lot of scrutiny over this past year. They were central to allegations that Meta had gamed their benchmarks when releasing Lama 4 Maverick, which revealed that the platform allows AI labs to submit multiple different versions of their models that are specifically fine-tuned to perform well in the head-to-head testing. It seems as though this fundraising marks a good time for a fresh start, however, with LM Arena writing, we're focused on building a neutral, open, community-driven platform that helps the world understand and improve the performance of AI models

on real queries from real users. Also, big news is coming next week. We're relaunching LM Arena with a whole new look built directly with community feedback from the ground up. I kind of think we're at the point where there's enough criticism of benchmarks that we're actually likely to see some more innovation in that space. So that is something I will be keeping a close eye on.

For now, that is going to do it for today's AI Daily Brief Headlines Edition. Next up, the main episode. Today's episode is brought to you by KPMG. In today's fiercely competitive market, unlocking AI's potential could help give you a competitive edge, foster growth, and drive new value. But here's the key. You don't need an AI strategy. You need to embed AI into your overall business strategy to truly power it up.

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Today's episode is brought to you by Super Intelligent and more specifically, Super's Agent Readiness Audits. If you've been listening for a while, you have probably heard me talk about this, but basically the idea of the Agent Readiness Audit is that this is a system that we've created to help you benchmark and map opportunities for your business.

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So if you are looking for a way to jumpstart your agent strategy, send us an email at agent at besuper.ai and let's get you plugged into the agentic era. Welcome back to the AI Daily Brief. Some big, if not totally unexpected news. In a deal that has been telegraphed for some time, OpenAI is buying an AI device studio from legendary Apple designer Johnny Ive, who will be taking over design and creative control at OpenAI.

Now, they have been nibbling towards this for a while. We've covered it before. And really, for people, the big question is what they're going to build. But before we get into all the details of the deal and speculation around what's going to come from it, let's set the context, which is that, frankly, so far, AI devices have wildly underwhelmed.

Although it's early days, there has already been lots of interest in devices for the AI era. And I think at core, the idea is that AI represents a fundamentally different type of interaction with computers.

The relationship that we've had with computers where we have to strictly control them and tell them exactly what to do, where we have to use our finger clicking on things as a way to control the system, all of that has been changing and it's changing extra rapidly in an era when plausibly we can just talk to a device and have it understand.

The two most high-profile attempts so far at an AI device are the Rabbit R1, which was a collaboration with Teenage Engineering to try to do something really cool in the real world, have it feel a little bit retro even as it was able to take actions on the user's behalf, and the Humane AI Pin. The Humane Pin went even farther than the Rabbit in terms of changing the form factor of devices. The Pin was entirely screenless and was this big hunky thing you were supposed to wear on your clothes. These attempts have not gone well.

Humane has been completely absorbed into a printer company at this point. The Rabbit is still a going concern, although it hasn't made any waves. In fact, at this point, Humane might best be known for Marques Brownlee's review where he called it the worst product he's ever reviewed. And while Rabbit and Humane had lots of talent from other companies that had built great products, neither of them had Johnny Ive.

Johnny Ive has been prolific throughout the design world, but he is of course best known for his work with Apple. It started with the late 90s colorful iMac, which was of course the comeback product when Steve Jobs took over the company again. The fun, vibrant personality set the tone for Apple to distinguish itself and start to become the behemoth that it is today.

From there it was the iPod, but then of course that was just a stepping stone on the way to the big one, which was the iPhone. The form factor is so ubiquitous now that it is hard to remember how absolutely transformative it was. An iPod, a phone, and an internet communicator. An iPod, a phone. Are you getting it? These are not three separate devices. This is one device, and we are calling it iPhone. Today,

Today, Apple is going to reinvent the phone. And of course, it just went on from there. The Apple Watch, the iPad, etc., etc. But it's now been more than five years since Johnny Ive left Apple. In September of last year, the New York Times ran a profile on him and what he's been doing.

All of his projects were under the banner of a design firm called Love From, and the projects have been fairly diverse. He's done a bunch in real estate. He worked with Airbnb and Ferrari. The Ferrari work, by the way, was an interesting shift where he actually insisted on returning to physical buttons rather than simply adding as many touchscreens as possible. But then from one of those clients, specifically Airbnb CEO Brian Chesky, I've met Sam Altman.

Altman and Ive started talking about products and devices in the era of AI, and apparently found a real kinship very quickly. About a year ago, the collaboration between Altman and Ive got meaningful enough that Ive spun out a new startup from LoveFrom called IO Products that was going to be focused solely on developing hardware. OpenAI took a 23% stake in that company, and that's the company that they've now agreed to acquire in an all-equity deal valuing IO at $6.5 billion.

They released a video about the announcement, hinting at what might be coming. And so IO is merging with OpenAI. Formed with the mission of figuring out how to create a family of devices that would let people use AI to create all sorts of wonderful things. The first one we've been working on, I think, has just completely captured...

our imagination. You know, Johnny called one day and said, this is the best work our team has ever done. I mean, Johnny did the iPhone. Johnny did the MacBook Pro. I mean, these are like the defining ways people use technology. It's hard to beat those things. Those are really wonderful. Johnny recently gave me one of the prototypes of the device for the first time to take home, and I've been able to live with it. And I think it is the coolest piece of technology that the world will have ever seen.

And yes, that is the type of enigmatic information that they are giving at this stage about what they're trying to build.

The announcement itself gives no more info, other than to perhaps provide a bit of a mission statement about what they're trying to achieve. They write, In one of the pull quotes from the announcement, I've said,

I have a growing sense that everything I have learned over the past 30 years has led me to this moment. While I am both anxious and excited about the responsibility of this substantial work ahead, I'm so grateful for the opportunity to be part of such an important collaboration. Again, no details, but I will say, these folks are not under-hyping this thing at all. Now, in terms of the deal structure, LoveFrom will continue to operate as an independent design house, but OpenAI will absorb the 55-member staff from I.O.,

which includes engineers, scientists, product developers. OpenAI will also become a customer of LoveFrom, with LoveFrom receiving a stake in OpenAI. But the big detail is that Ive and his team will now lead product design at OpenAI. That means more than just a headline device, whatever it ends up being, their influence will also presumably extend to future versions of ChatGPT, audio features, other software products. And yet still, it's very clear that this family of hardware devices is the real focus.

At another part of that announcement video, Altman said, I think we have the opportunity here to completely reimagine what it means to use a computer.

Of course, the vast majority of the discussion online has been around what are they going to make. The New York Times described some of the early efforts last year as an effort to create a, quote, computing experience that is less socially disruptive than the iPhone. In their video, Altman gave the example of the current ChatGPT experience, saying that if he wanted to check something, he would need to put down his espresso, stop the conversation, pull out a laptop or a phone, and use a keyboard to consult AI.

Adding, "I think this technology deserves something much better." The Verge staff compiled their predictions, which range from "her-style earbuds plus puck controller" to a "robot dog" to a "levitating orb that follows you around" to a "smooth bracelet that you can talk to with no screen." Now what's interesting is how much the form factor actually matters at all. Or more specifically, whether it's the form factor that's the core part of the device or the interactive modality.

It feels almost certain that instead of pointing and clicking at a thing and looking at it, you're going to be talking to the thing. And so is the idea, and is why they're hinting at the notion of a family of devices, that it could be glasses, bracelets, necklaces, pendants, basically anything that you can wear, as long as it has the ability to listen to what you're saying.

Now, aside from the obvious fact that this announcement is even visually and referentially positioning Sam Altman as the new Steve Jobs and OpenAI as the new Apple, it is interesting to come back to our discussions from throughout the week about the nature of AI competition. Tang Tan, the former lead designer of iPhone and Apple Watch who departed Apple last year, made the observation that his team at IO isn't tied to a legacy and has an opportunity to rethink the space.

Compare that to Microsoft and Google, who we heard from earlier this week. As much as those companies are innovating, as much as they are being creative, their AI products are ultimately tied intrinsically to their legacy products. Wall Street is judging them on how, at least initially, AI contributes to their existing revenue lines. Yes, at some point, maybe they do something new that creates a new growth business, but for now, it's all about cloud revenue.

smartphones are the great cash cow for a company like Apple, and we've seen how risky a new form factor can be. The lesson of the Apple Vision Pro, for example, might be taken that if a new product line isn't an immediate smash hit, markets will punish the company and the product will be deprecated. None of these limits apply to OpenAI. They have a completely blank slate, except for the fact that obviously they are resource constrained in the sense that even they don't have unlimited time and money, although fairly close to it at this point.

When push comes to shove, I think pretty much everyone believes that there is something that will come after the iPhone. And for many, the odds on betting is that the guy who made the original iPhone might be the one to figure it out. For now, that's going to do it for today's AI Daily Brief. Appreciate you listening or watching as always. And until next time, peace.