Inside The Downfall Of Stability AI Founder Emad Mostaque

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Good morning,

We’re one week away from a total solar eclipse in the U.S., and Niagara Falls is bracing for the “largest influx of visitors” the city has ever had.

Dozens of school districts across the region have already closed schools for the day, and Canadian officials have declared a state of emergency in anticipation of up to one million visitors on April 8—compared to the typical 14 million visitors who travel there over the course of the year just to see the famous waterfalls.

The eclipse will be visible throughout the entire U.S., but the path of totality follows a narrow band from Texas up to the Northeast. NASA is broadcasting the event live from several key areas along the path, including Niagara Falls.

BREAKING NEWS

Pope Francis again called for an “immediate cease-fire” between Israel and Hamas and a “prompt release” of the remaining hostages taken by the Palestinian militant group on October 7 while addressing the crowds at St. Peter’s Basilica during his Easter message on Sunday. The pope also called for a prisoner exchange between Russia and Ukraine, about three weeks after his controversial Swiss radio interview where many believed he had encouraged Ukrainians to surrender.

Microsoft will split up its workplace messaging and video calls app Teams from its Office platform globally, the company told Reuters Monday. Last year, Microsoft announced it would unbundle Teams from its Microsoft 365 subscription in the EU, as it attempts to avoid being penalized by the bloc’s antitrust regulators. It will now enact the change for all its customers worldwide “to ensure clarity.”

BUSINESS + FINANCE

The Igloo Company is home to the world’s hottest NFT collection, thanks to a contract with Walmart to sell plushy penguins that are toy versions of non-fungible tokens. Their digital counterparts are now selling on crypto marketplaces for as much as $500,000 each. They are a big reason why the upstart NFT brand Pudgy Penguins and The Igloo Company, which peddles them, are now thriving, while NFT stalwarts like Yuga Lab’s Bored Ape Yacht Club and Chiru Labs’ Azuki are languishing.

Tesla is the worst-performing company on the S&P 500 this year, with its stock down 29% year-to-date as investors and analysts alike readjusted growth expectations for the company. The EV maker has returned a full three percentage points less than the next biggest loser, embattled commercial airplane maker Boeing, according to FactSet data.

Annual PCE inflation, the measure of the year-over-year change in personal consumption expenditures, ticked up in February, the Bureau of Economic Analysis reported Friday, though inflation remains well on its way toward moderation. But Americans are still feeling the lingering pain of rising prices: They spent 19.6% more in February 2024 than in February 2021, on a seasonally adjusted basis.

WEALTH + ENTREPRENEURSHIP

General Electric’s CEO Larry Culp will take the final step Tuesday in a six-year process to break up the once-sprawling conglomerate that was in crisis when he was first offered the job. And he’s getting rewarded handsomely: After a 260% runup in GE’s stock price since the beginning of 2023, Culp has met the performance goals to get the maximum payout from a rich long-term incentive package that, along with the rest of his compensation from GE and the fortune he made previously as CEO of Danaher, will make Culp a billionaire, Forbes estimates.

TECH + INNOVATION ​​

When Stability AI founder Emad Mostaque stepped down as CEO of the startup behind text-to-image generator Stable Diffusion, he claimed on X that he’d voluntarily abdicated his role to decentralize “the concentration of power in AI.” But company documents and interviews with 32 current and former employees, investors, collaborators and industry observers suggest his abrupt exit was the result of poor business judgment and wild overspending that undermined confidence in his vision and leadership, and ultimately kneecapped the company.

Billionaire Elon Musk said his artificial intelligence company xAI’s chatbot Grok-1.5 “should be available” to the public this week, after it became open-source and entered the rapidly growing AI chatbot market. The latest model will be available to “early testers and existing Grok users,” according to a blog post from xAI, and has “improved reasoning capabilities and a context length of 128,000 tokens”—or the amount of text the chatbot can process and store information on.

MONEY + POLITICS

Conservative dark money is behind new ads that call TikTok “poison,” as a bill makes its way through Congress to force TikTok’s Chinese parent company, ByteDance, to divest its stake in TikTok or face a ban of the app in the U.S. The ad was created by a recently birthed political organization called the American Parents Coalition, which is linked to conservative benefactor Leonard Leo, who is known for his efforts to transform the courts.

A registered sex offender who was convicted of sexual assault on a child in 2006 has sued at least 17 right-leaning political groups for a total of $100,000 over the past two years, alleging their robocalls and texts to him were illegal because his phone number is in the National Do Not Call Registry. Political committees are likely aware that they occasionally contact numbers listed in the National Do Not Call Registry and have decided that whatever risk there is is worth it: In 2023, political groups made more than 83.4 million robocalls, according to Alex Quilici, the CEO of YouMail, a service that blocks spam calls.

SPORTS + ENTERTAINMENT

In an exclusive excerpt from his book the Rainmaker, former sports superagent Hughes Norton writes about how the idea for a breakaway golf tour, like the Saudi-backed LIV Golf, almost happened in the 1970s. But Arnold Palmer foiled the idea, Norton writes.

SCIENCE + HEALTHCARE

Pelago, cofounded by two Forbes 2018 Under 30 Social Entrepreneur listers, aims to reimagine the traditional rehab experience: Instead of traveling to a physical location, patients can access treatment for opioid, alcohol and tobacco use from their homes via a mobile app. On Friday, the company announced it had raised $58 million, bringing its total funding to $151 million and, according to analysts, making it the highest-funded startup in the substance use disorder treatment space.

DAILY COVER STORY

Shoe Designer Christian Louboutin Is Now A Billionaire

After four decades of keeping his well-heeled clients in his iconic red-soled heels, shoe designer Christian Louboutin is now a billionaire.

While still best-known for its towering stilettos and perilous platforms, the Louboutin brand has expanded into sneakers, bags and beauty products, as well as lines for men and children.

The company was valued at $3.2 billion last year by Exor, the investment company of Italy’s Agnelli family, which bought a 24% stake in 2021 for about $650 million. Louboutin still owns 35%—which Forbes values at $1.1 billion. That stake makes up most of an estimated $1.2 billion fortune that includes other investments such as the Vermelho Hotel, a luxury resort he opened in southern Portugal last year.

“I started the company with my two best friends,” Louboutin said in a 2021 interview with The Business Of Fashion. “I never thought of selling a part of the company. I never thought of anything else other than designing pretty shoes.”

Those pretty shoes—which start at about $800 a pair and can quickly reach into the mid-thousands— have become a fixture on the red carpet. And today, Louboutin has more than 160 boutiques in 32 countries across 4 continents, including 35 in the United States, 23 in Japan and 20 in China.

The company produces more than 1 million pairs of shoes a year and as with many luxury fashion brands, the high prices are key to its staying power. But after posting record profits during the pandemic, the luxury goods industry saw slower growth in 2023.

Shoes were the slowest-growing luxury category last year, expanding by only 2% to 3%, according to Bain & Company. That’s impacted Louboutin, too. The firm recorded net profits of $37 million in the first half of 2023, down 51% from the same period in 2022, amid raw material shortages and slow growth in China.

But Louboutin is not ready to put his feet up just yet.

WHY IT MATTERS Even as he’s moved beyond heels into sneakers and makeup, Louboutin himself remains essential to the brand’s success. He designs the autumn and winter collections at his French château or in Portugal, and works on the spring and summer collections in Egypt or Brazil. The sketches are then manufactured into shoes at factories in Italy and Spain. “I first draw. I start sketching with a pen. I isolate myself for at least two weeks and draw,” Louboutin told Forbes in 2016.

FACTS AND COMMENTS

A long-sleeved pink gown with crystal tassel detailing once worn by Marilyn Monroe sold at auction last week, the latest in a long line of memorabilia worn by the late star that has fetched top dollar on the open market. She reportedly wore the dress for a Vogue photoshoot with photographer Bert Stern:

$325,000: The sale price for the Emilio Pucci gown, eight times what it was estimated to be worth

$40,000 and $60,000: The price the dress was expected to sell for

$4.8 million: The amount the most expensive piece of Marilyn Monroe memorabilia has ever sold for

STRATEGY AND SUCCESS

We’ve all had one too many meetings that could’ve been an email. Ineffective meetings have been shown to cost companies approximately $25,000 per employee per year in lost time and resources. The first step leaders should take is audit the meetings they are responsible for: Can you define a clear goal for the time? Make sure the purpose of the meeting is also communicated to participants, and that there’s an outcomes-oriented agenda.

QUIZ

Republicans are vying to hang on to their slim House majority in the election this November. By how many seats has the GOP’s majority shrunk since the 2022 midterm election?

A. Three

B. Two

C. Five

D. Seven

Check your answer.