• Thousands of LA County homeowners face a volatile home insurance market.
• In recent months, State Farm — California's largest home insurer — dropped thousands of policyholders.
• Some have turned to the state's insurer of last resort.

Thousands of California homeowners at risk due to the Los Angeles County fires find themselves exposed in a volatile home insurance market.

Last year, California's largest home insurer — State Farm — canceled thousands of policyholders' plans across LA County, including the Pacific Palisades and parts of Santa Monica and Calabasas, that are under evacuation orders and warnings as the fires rage. Nearly 70% of State Farm policyholders in the affluent Pacific Palisades neighborhood were dropped by the company beginning in July 2024.

The following table shows the ZIP codes that were under evacuation orders or warnings as of Wednesday afternoon that had the highest rate of nonrenewals from State Farm last year.

Several other major insurers have dramatically restricted their coverage across California in recent years, citing surging costs from more frequent and intense disasters coupled with rising home repair costs and inflation.

Thousands of LA County homeowners who haven't been able to obtain private insurance have joined the ranks of those covered by the state's insurer of last resort — the Fair Access to Insurance Requirements (FAIR) plan. The FAIR plan is regulated by the state government and backed by a slew of private insurance companies. But its premiums tend to be much higher than typical private insurers and its coverage is often more restricted.

This table shows how FAIR insurance coverage has changed in the above ZIP codes between 2023 and 2024.

As private insurers have stepped back in recent years, the number of residential FAIR plan holders across the state jumped 123% between September 2020 and September 2024. The FAIR plan's dollar-value residential exposure surged from $271 billion in September 2023 to $431 billion in September 2024.

It's not clear how many homeowners impacted by the LA County fires are uninsured. Most mortgage lenders require homeowners to purchase insurance, and some require additional insurance for specific disasters, including fires.

Some major home insurers, including Farmer's — the second-largest in California — have recently begun to expand their offerings in California after the state announced new regulations requiring insurers to cover a certain percentage of homes vulnerable to fire in exchange for allowing them to use future risk modeling to calculate premiums.

In 2023, California had the fourth-highest home insurance nonrenewal rate among states, according to a recently released Senate Budget Committee report. Six of the top 10 counties in the country with the highest rates of nonrenewals by large home insurers in 2023 were in California, the report found.

But rising home insurance costs and rates of dropped policies are nationwide problems. The National Bureau of Economic Research recently reported that average home insurance premiums spiked by 13%, adjusted for inflation, between 2020 and 2023. The share of home insurance policies from large insurers that weren't renewed increased last year in 46 states, the Senate report found. And more than 200 US counties saw their non-renewal rates spike threefold between 2018 and 2023.

Areas more vulnerable to disasters, including flooding, wildfires, and hurricanes, have seen the biggest spikes in premiums and dropped policies.

"Our number one priority right now is the safety of our customers, agents and employees impacted by the fires and assisting our customers in the midst of this tragedy," a representative for State Farm told BI.

A representative from the California FAIR Plan Association also told BI in a statement that the insurer is "prepared" to handle the wildfire impact, and "has payment mechanisms in place, including reinsurance, to ensure all covered claims are paid."

Representatives for Farmer's did not respond for comment.

Have you been dropped by your home insurance company or are you facing a steep premium increase? Email this reporter to share your story: [email protected].

• Polymarket lets people bet on a variety of things, like election outcomes and pop culture events.
• It's also taking bets on the Palisades fire in California — with at least nine different wagers.
• Polymarket says the wisdom of the crowd can lend "unbiased forecasts for the most important events impacting society."

As the Palisades fire is still tearing through parts of the Los Angeles area on Wednesday, Polymarket — the prediction market platform — is allowing people to place wagers on certain elements of the disaster.

There were at least nine different predictions you could place money on as of Wednesday afternoon that were related to the fire. The topic had its own trending module on the site.

One question asked: "Will the Palisades fire be contained by Friday?" Only 2% of bets said yes. (California officials said Wednesday morning that the fires raging through California are "zero percent" contained. Two people have been reported dead in the wake of the disaster.)

Each wager has its own page on the site — and on those pages with bets related to the fire was a disclaimer from Polymarket.

The disclaimer reads:

Note on Palisades Wildfire Markets: The promise of prediction markets is to harness the wisdom of the crowd to create accurate, unbiased forecasts for the most important events impacting society. The devastating Pacific Palisades fire is one such event, for which Polymarket can yield invaluable real-time answers to those directly impacted in ways traditional media cannot.

Note: There are no fees on this market.

On its site, Polymarket says that users can submit suggestions for markets, but a new prediction market, like the ones about the fire, can only be created by Polymarket.

A spokesperson for Polymarket told Business Insider: "Polymarket charges no fees — and generates no revenue — from these markets and provides them as a service to those looking for unbiased and up-to-date information during fast-moving events."

Other wagers available as of Wednesday:

• "Palisades fire burns 10,000 acres by Friday?" (Bettors said this was 99% "yes.")
• "Will Palisades fire spread to Santa Monica by Sunday?" (Bettors gave this a 14% chance.)

So far, it appears the markets have drawn only small bets, with one question drawing a little more than $8,000 and another drawing more than $30,000, according to tallies on the site.

Polymarket, where bets are placed in crypto, became popular during the 2024 election. It showed the odds of Donald Trump winning far above what traditional polls were showing.

In addition to politics and sports, Polymarket offers bets on news and pop culture topics like Oscar nominations or the odds of Taylor Swift and Travis Kelce getting engaged this year.

• Hyundai CEO Jose Munoz isn't worried about Elon Musk's close relationship with Donald Trump.
• The boss of the Tesla rival told Bloomberg it may actually be good for the US auto industry.
• Musk has signaled support for cutting the EV tax credit, which he said would "devastate" Tesla's rivals.

With his close ties to President-elect Trump, Elon Musk is more influential than ever — but the boss of one of Tesla's biggest rivals isn't worried.

Hyundai CEO Jose Munoz said on Tuesday that he thinks the Tesla CEO's outsize influence over the Trump administration may actually be positive for the rest of the auto industry.

"I don't see that as a concern, honestly," Munoz said in an interview with Bloomberg.

The Hyundai CEO said he believed it was in Musk's own interests to ensure the US continued to promote EV investment and growth, and remained competitive with China's upstart electric vehicle industry.

"I think having someone who is very close to the US industry and the EV world (in that position) should be positive for the industry," Munoz added.

Musk's close relationship with Trump, which has seen the billionaire take on an advisory role to cut government spending at the so-called Department of Government Efficiency, has raised fears that the Tesla CEO could use his newfound influence to boost his own company and target rival automakers.

Musk has already signaled his support for cutting the $7,500 federal subsidy for new US-made electric cars, which applies to Hyundai, Ford, General Motors, and Tesla vehicles.

The SpaceX founder and analysts have both said cutting the subsidy will have a greater impact on Tesla's rivals, with Musk saying the move would "devastate" the company's competitors and benefit Tesla in the long term in a November earnings call.

Musk's DOGE cofounder Vivek Ramaswamy has also said the cost-cutting body will "carefully scrutinize" the $7.5 billion in federal loans granted by the Biden administration to Tesla rivals Rivian and Stellantis.

It comes as Hyundai and its sister company, Kia, continue to see strong electric vehicle sales in the US.

The two companies reported record EV sales in the US last year thanks to new models like the IONIQ 5 and Kia EV9. In June, their combined parent group beat out Ford and GM to briefly become the second-largest EV seller in the country behind Tesla.

Hyundai did not respond to a request for comment, sent outside normal working hours.

• BYD released a video of its $233,000 electric supercar leaping over potholes and road spikes.
• The Yangwang U9 comes with intelligent suspension that allows it to "jump" up to six meters forward.
• The U9 is part of BYD's efforts to diversify into luxury EVs as it looks to take on Tesla.

BYD's most expensive EV has a novel way of dealing with potholes.

The Chinese Tesla rival launched its first supercar, the $233,400 Yangwang U9, last year and has now shown off the luxury EV's ability to "jump" over potholes and road spikes in a new video.

In the video, released on BYD's Weibo account on Monday, an autonomously-driven U9 accelerates to 120 km/h before using its suspension to launch itself up to six meters forward over a pothole, a set of road spikes, and a chalk flag.

BYD is known for its ultra-cheap electric vehicles, such as the $10,000 Seagull, but like other Chinese automakers, it is now expanding into higher-end luxury vehicles.

The company began selling the U9, which has a top speed of 192 mph and can sprint from 0 to 62 km/h in just 2.36 seconds in February 2024.

The luxury EV can charge from 30-80% in just 10 minutes and is packed with futuristic features.

Its DiSus-X intelligent suspension allows the U9 to leap over small holes, "dance" to music, and drive with only three wheels, as the company showed off at the vehicle's launch last year.

BYD's Yangwang brand offers its most high-end models. The Yangwang U8 hybrid SUV, which BYD began selling in April 2023, comes with an onboard drone and can even float on water for short periods.

While the Tesla rival's luxury offerings frequently turn heads, BYD's in-demand affordable EVs and hybrids have turned the company into arguably Elon Musk's most potent challenger.

The Chinese automaker announced record annual sales earlier this month and is expanding into a host of new markets. BYD announced on Tuesday that it was sending nearly 5,000 electric vehicles to Europe aboard its third purpose-built container ship.

The National Highway Traffic Safety Administration has opened an investigation into 2.56 million Tesla vehicles after several crashes involving the automaker’s “Actual Smart Summon” remote parking feature. Tesla released Actual Smart Summon, or ASS for short, via software update in September. It allows Tesla owners to use their app to command the vehicle drive itself […]

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• Multiple major fires are tearing through parts of the Los Angeles area.
• The Palisades fire has burned through over 15,000 acres as of Wednesday.
• A new fire broke out Wednesday evening in the Hollywood Hills.

Emergency personnel across the Los Angeles area are battling multiple major fires.

Officials have ordered over 100,000 people to evacuate, five people have been reported dead, and over a thousand structures have been burned.

Images of people escaping their homes, abandoning their cars, and searching for safe harbor spread across television and social media on Wednesday.

Planes dropped water on huge flames whipping through canyons and mountain passes.

And it's showing little sign of slowing down, officials said. Dry conditions combined with high wind gusts of more than 90 miles per hour have helped fuel the multiple fires burning around the metropolitan area.

A total of five separate fires are now sweeping through parts of the region in and around Los Angeles after a new fire — called the Sunset Fire — broke out in the Hollywood Hills, near the iconic Hollywood sign, on Wednesday evening, forcing the LA fire chief to leave in the middle of a press conference. It has so far burned 10 acres as flames could be seen rising from the hills against the night sky.

Los Angeles Mayor Karen Bass said during a press conference Wednesday evening that residents may receive more evacuation orders as wind conditions continue to be "strong and erratic."

In an X post in the early hours of Thursday morning, Bass said firefighters would be working through the night battling blazes in Los Angeles for the second night in a row.

Ride-hailing companies such as Uber and Lyft have offered free rides to evacuation centers for Los Angeles residents. SpaceX CEO Elon Musk said on Thursday that his company will be providing "free Starlink terminals to affected areas."

Los Angeles schools would be closed on Thursday, impacting more than half a million students, LA Unified School District Superintendent Alberto Carvalho announced Wednesday.

The longest-burning of the now five active fires in Los Angeles County, the Palisades Fire, has burned over 15,000 acres, official said.

"Our entire town appears to be gone," one Palisades resident told Business Insider.

The Eaton fire, impacting the Pasadena-Altadena region, has burned about 10,600 acres and continues to grow with zero percent containment, LA County Fire Chief Anthony Marrone said at a press conference. The Hurst fire, in the north of the region near San Fernando, covered over 700 acres.

The fourth fire, the Woodley fire in the Sepulveda Basin, has burned 30 acres. Chief of Los Angeles Fire Department Kristin Crowley said that fire was under control as of Wednesday evening.

Evacuation orders and warnings continue to be issued throughout Wednesday evening, including a notice for residents living near the Hollywood Hills.

Pasadena Fire Chief Chad Augustin said Wednesday afternoon that he hoped milder wind conditions overnight would allow for more aircraft and additional resources to be directed at the Eaton fire.

"That's what gives me confidence that we're going to get a handle on this fire," Augustin said.

By Wednesday afternoon, over 100,000 people living near the Eaton fire received evacuation orders, a representative for CalFire told BI.

Five people have died as a result of the Eaton fire, the spokesperson said. Two firefighters were reported to have minor injuries.

Some 377,000 Californians, meanwhile, were also out of power as of Wednesday afternoon, according to a tracking site.

California Gov. Gavin Newsom declared a state of emergency on Tuesday, and announced that the state had secured federal assistance from FEMA to support the fire response.

"There's no fire season. It's fire year," Newsom said at a press conference on Tuesday afternoon, noting other fires California has faced in recent months, including the Franklin and Mountain fires. "It's year-round."

Historic windstorm is 'worst possible scenario'

Officials have not yet determined how the fires started, but they erupted during a high-risk major windstorm. Combined with low humidity and dry vegetation in the region, the winds created a perfect storm for fire ignition.

The high winds were "making it extremely challenging" for firefighters on the scene, Los Angeles City Fire Chief Kristin M. Crowley said, making them unable to air-drop water on the fires Wednesday morning. But by the afternoon, water-dropping aircraft had returned to the skies.

The National Weather Service called the windstorm "life-threatening and destructive" and warned that these could be the strongest north winds in 14 years.

Just the Palisades fire alone has already become the most destructive fire ever to hit Los Angeles County, CNN reported, citing CalFire data.

The weather service urged residents to be ready to evacuate, as such winds can rapidly spread any fire that breaks out.

"This is pretty much the worst possible scenario for a firefight," David Ortiz of the LAFD told local news station KTLA.

Tourist landmarks close as smoke chokes LA

The Los Angeles area is a huge tourist draw, attracting nearly 50 million visitors a year.

The fires forced some Los Angeles-area landmarks to close, including the Hollywood sign, the Los Angeles Zoo, Universal Studios Hollywood and Universal CityWalk, and the Griffith Observatory.

Even miles from the fires in South Los Angeles, smoke reduced visibility to just one block, officials said.

Airbnb told CNN that it would be allowing refunds for bookings in areas affected by the wildfires, following a viral social media post from a customer who said the company refused to offer her a refund.

A National Hockey League game between the Los Angeles Kings and the Calgary Flames, scheduled Wednesday night at Crypto.com arena, was postponed. The 30th Annual Critics Choice Awards, set for Sunday night, were also rescheduled, according to The Hollywood Reporter.

Disneyland, over 30 miles from the nearest fire, was still open on Wednesday.

Meanwhile, police also made some arrests for looting as some people tried to steal in the areas affected by the fires, Los Angeles County Sheriff Robert Luna said at Wednesday morning's press conference.

Evacuees abandoned cars as traffic stalled

Palisades Drive, the major road out of the Pacific Palisades neighborhood, was already packed with slow-moving lines of cars shortly after noon Tuesday, as people evacuated beneath a smoky haze and bright-orange flames licked the hillside in the distance, shown live on ABC7.

CalFire reported that the fire was on both sides of Palisades Drive.

ABC7 spoke to multiple people who were evacuating on foot, including some who had abandoned their cars on the road.

One resident told the news channel that "a whole bunch of neighbors" were stuck in their homes on Palisades Drive.

Jonathan Vigliotti, a CBS News correspondent who was on the ground as a neighborhood went up in flames, said on X that there was "mass panic in the streets."

Tesla is the target of yet another federal safety probe, the fourth currently open by the National Highway Traffic Safety Administration's Office of Defects Investigation. Today's trouble concerns the automaker's "Smart Summon" and "Actually Smart Summon" features, which allow Tesla drivers to remotely control their vehicles via a smartphone app.

At least in theory, that is. In practice, NHTSA says it's aware of multiple crash allegations "where the user had too little reaction time to avoid a crash, either with the available line of sight or releasing the phone app button, which stops the vehicle’s movement."

Worse yet, Tesla has failed to report any of these incidents to the safety regulator, which has a standing general order that requires any automaker or operator of autonomous or partially automated vehicles to report crashes involving such systems that occur on publicly accessible roads.

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The annual Consumer Electronics Show got underway in Las Vegas this week, but Winter Storm Blair unraveled my plan to be on the ground to check things out in person. That means I still haven't had an in-person look at the Sony Honda Mobility Afeela, a new electric sedan that goes on sale in California later this year.

Sony stunned everyone by first showing off an electric concept car at CES in 2020. Meant to showcase the Japanese technology company's wide range of products, from sensors to digital entertainment, the concept left many scratching their heads about Sony's true intention here—surely the company wasn't also about to start making cars?

But that turned out to be exactly the plan. Although Sony began developing its EV with the contract manufacturer (and tier 1 supplier) Magna Steyr, the car—now called the Afeela 1—will be built by Honda, which formed a strategic alliance with Sony to create the aforementioned Sony Honda Mobility, which will sell the new car.

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• A friend of Charlie Munger's says Munger doubled his money on a contrarian bet soon before his death.
• The friend, Li Lu, gave an interview in which he discussed Munger's careful approach to investing.
• Li also described dramatically different approaches to risk tolerance between Munger and Elon Musk.

Charlie Munger was still sniffing out bargains and scoring big gains at age 99, says a close friend of the late investing icon.

Munger, Warren Buffett's business partner and Berkshire Hathaway's vice chairman for more than four decades, died in late November 2023, about a month shy of his 100th birthday.

In a rare interview marking the first anniversary of Munger's death, Li Lu told the Chinese social network Zhenge Island that one of Munger's last moves was a contrarian bet.

"There was a stock that everyone disliked, and it might not be particularly politically correct," Li said. But that didn't stop Munger from studying the company and buying its shares, continued the Himalaya Capital Management founder, whom Munger once described as the "Chinese Warren Buffett."

"The week before he died, this stock had doubled from the time he started investing to that time," Li said. It's unclear which stock he was referring to. Li didn't immediately respond to a request for comment from Business Insider.

Li said the wager showed Munger retained his passion for investing until the end and "could still go against the market consensus and live to see this stock double." He said the stock remained "in the Munger family portfolio" and was "still performing very well."

Li was the only person apart from Buffett who Munger trusted to invest his family's money. He introduced Munger to BYD, the Chinese EV maker that's been one of Berkshire's best investments over the past decade.

Describing Munger's careful approach toward investing, in his interview with Zhenge Island he also seemed to allude to a story Munger had discussed at Daily Journal's annual meeting in 2017, saying Munger "read Barron's magazine every week for 50 years and only made one investment."

"In 50 years I found one investment opportunity in Barron's, out of which I made about $80 million with almost no risk," Munger said in 2017. "I took the $80 million and gave it to Li Lu, who turned it into $400 to $500 million. So I have made $400 to 500 million out of reading Barron's for 50 years and following one idea."

Munger added further details, indicating that the stock was an auto supply company named Tenneco that Apollo Global Management acquired in late 2022. He said that he made 15 times his money on the stock in about two years and that it took him only 90 minutes of research to pull the trigger after reading about it.

Lunch with Elon Musk

Li recalled a lunch with Munger and Elon Musk in which he said the Tesla and SpaceX CEO tried to win Munger's investment. He said the discussion showed their similar thinking on subjects such as batteries and science but also their stark differences in risk appetite. While Musk was willing to do things with only a 5% chance of success, he said, Munger "may need more than 80% chance of success before he will do it."

Musk has previously discussed meeting Munger. Early in 2023 he posted on X that "Munger could've invested in Tesla at ~$200M valuation when I had lunch with him in late 2008." Musk's automaker went on to become one of the world's largest companies and is now worth about $1.3 trillion.

"I was at a lunch with Munger in 2009 where he told the whole table all the ways Tesla would fail," Musk wrote in another post. "Made me quite sad, but I told him I agreed with all those reasons & that we would probably die, but it was worth trying anyway."

Correction: January 7, 2025 — This story was updated to reflect that it wasn't clear from Li Lu's interview where Charlie Munger got the idea for the contrarian bet that Li said Munger made at age 99. The story also misstated when Elon Musk posted one of his comments about Munger. It was in early 2023, not early last year.

Microsoft plans to invest $3 billion to expand its artificial intelligence and cloud services in India. The firm, which has been operating in India for more than two decades, will also train an additional 10 million people in the country with AI, Microsoft CEO Satya Nadella said at an event in Bengaluru on Tuesday. “The […]

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Sony has been trickling out details of the Afeela brand it launched with Honda, ever since it unveiled the EV in 2023. But it’s held back one big detail — until today. Sony CEO Kenichiro Yoshida announced Monday at CES 2025 that the four-door Afeela EV would have a starting price of $89,900. The Sony-Honda […]

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Japanese automaker Toyota is “exploring rockets,” chairman Akio Toyoda announced on stage at CES 2025 on Monday, while hinting at the idea of moving people through space. The rocketry mention on the CES 2025 stage came while Toyoda was in the middle of explaining how he views his company’s myriad technologies as “invention by kakezan,” […]

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• Hertz is asking some people renting Teslas and other EVs if they want to buy their vehicles.
• The rental company said last year that it would sell 30,000 EVs amid a slowdown in demand.
• Hertz is offering used Teslas for as little as about $18,000.

Hertz is continuing to reduce the number of EVs in its fleet by offering customers renting an electric car the opportunity to buy it at a bargain.

Last year Hertz said it would sell 30,000 EVs, including cars from Tesla, Polestar, and Volvo, because of the cost of repairs and maintenance.

The fire sale means Teslas are being listed at discounted prices on Hertz's website, and now the company is asking some renters if they'd like to buy their EV.

One person on Reddit recently said they were offered a 2023 Tesla Model 3 — which sells new for about $35,000 after federal incentives — for $17,913. The post included a screenshot of an email describing the offer as an opportunity "to think of this rental as a test drive!"

Other people said they'd been offered similar deals for Polestar and Chevy electric cars.

A Hertz spokesperson told Business Insider the emails were part of an effort to give all customers the chance to buy an EV or combustion-engine car that the company would soon put up for sale. Rental companies usually sell their cars after they have been driven a certain number of miles.

Hertz's decision to buy 100,000 Teslas in 2021 was hailed as a turning point for the EV industry, but the rental company's electric shift hasn't gone to plan.

Its EV fleet, which also includes cars from General Motors and Polestar, has had higher-than-expected repair costs and low resale values as demand for EVs has slowed over the past year.

Hertz's EV fire sale means buyers can pick up a used Tesla Model 3 for as little as $17,900 or a Model Y for $27,700.

• The AI industry has hit "peak data," OpenAI cofounder Ilya Sutskever said recently.
• DeepMind researchers see outputs from new "reasoning" models as a source of fresh AI training data.
• A new AI technique, known as test-time compute, will be put to the test in 2025.

OpenAI cofounder Ilya Sutskever announced something at a recent conference that should have had the AI industry trembling with fear.

"We've achieved peak data and there'll be no more," he intoned during a speech at the annual Neurips event in December.

All the useful data on the internet has already been used to train AI models. This process, known as pre-training, produced many recent generative AI gains, including ChatGPT. Improvements have slowed, though, and Sutskever said this era "will unquestionably end."

That's a frightening prospect because trillions of dollars in stock market value and AI investment are riding on models continuing to get better.

Yet, most AI experts don't seem that worried. Why?

Inference-time compute

There may be a way to get around this data wall. It's related to a relatively new technique that helps AI models "think" through challenging tasks for longer.

The approach, called test-time or inference-time compute, slices queries into smaller tasks, turning each into a new prompt that the model tackles. Each step requires running a new request, which is known as the inference stage in AI.

This produces a chain of reasoning in which each part of the problem is tackled. The model doesn't move on to the next stage until it gets each part right and ultimately comes up with a better final response.

OpenAI released a model called o1 in September that uses inference-time compute. That was followed swiftly by Google and Chinese AI lab DeepSeek, which rolled out similar "reasoning" models. 

"An iterative self-improvement loop"

Benchmark-based testing of these new models has shown that they often generate better outputs than the previous top AI crop, especially on math questions and similar tasks with clear final answers.

This is where things get interesting. What if these higher-quality outputs were used for new training data? This mountain of new information could be fed back into other AI model training runs to produce even better results.

Google DeepMind researchers published research on test-time compute in August and proposed this technique as a potential way to keep large language models improving through the peak-data wall.

"In the future, we envision that the outputs of applying additional test-time compute can be distilled back into the base LLM, enabling an iterative self-improvement loop," the researchers wrote. "To this end, future work should extend our findings and study how the outputs of applying test-time compute can be used to improve the base LLM itself."

A chat with a test-time researcher

The authors were Charlie Snell, Jaehoon Lee, Kelvin Xu, and Aviral Kumar. Xu is still at Google, and Kumar spends some of his time at DeepMind, while Lee left to join OpenAI rival Anthropic.

Snell co-wrote the paper while interning at Google DeepMind. He's back at UC Berkeley now, so I called him up to ask what inspired the research.

"I was motivated by some of the things that have been preventing pre-training from continuing to scale, notably the finite supply of data," he told me in a recent interview. 

"If you can get an AI model to use extra inference-time compute and improve its outputs, that's a way for it to generate better synthetic data," he added. "That's a useful new source of training data. This seems to be a promising way to get around these pre-training data bottlenecks."

Satya satisfied

On a recent video podcast, Microsoft CEO Satya Nadella seemed unperturbed and even buoyant when asked about the slowdown in AI model improvement and the lack of new quality training data. 

He described inference-time compute as "another scaling law."

"So you have pre-training, and then you have effectively this test-time sampling that then creates the tokens that can go back into pre-training, creating even more powerful models that then are running on your inference," he explained.

"That's I think a fantastic way to increase model capability," Nadella added, with a smile. 

Sutskever also mentioned test-time compute as one possible solution to the peak-data problem, during his Neurips talk in early December.

Test time for test-time compute

2025 will see this approach put to the test. It's not a slam-dunk, although Snell is optimistic. 

"Over the last three years or so, it seemed more clear," he said of AI progress. "Now we're in this exploratory mode."

One open question: How well does this test-time compute technique generalize? Snell said it performs well with questions where the answer is knowable and you can check it, such as a math challenge.

"But a lot of things that need reasoning aren't easy to check. For instance, writing an essay. There's often no straight answer on how good this is," he explained. 

Still, there are early signs of success and Snell suspects outputs from these types of reasoning AI models are already being used to train new models. 

"There's a good chance that this synthetic data is better than what's out on the internet," he said.

If outputs from OpenAI's o1 model are better than GPT-4, the startup's previous top model, then these new outputs can in theory be reused for future AI model training, Snell explained. 

He shared a theoretical example: Say o1 gets a 90% score on a particular AI benchmark, you could take those answers and feed them to GPT-4 and get that model up to 90%, too. 

"If you have a large set of prompts, you could get a bunch of data from o1 and create a large set of training examples and pre-train a new model on them, or continue training GPT-4 to be better," Snell said. 

A TechCrunch report from late December suggested that DeepSeek may have used outputs from OpenAI's o1 to train its own AI model. Its latest offering, called DeepSeek V3, performs well on industry benchmarks. 

"They were probably the first ones to reproduce o1," Snell said. "I've asked people at OpenAI what they think of it. They say it looks like the same thing, but they don't how DeepSeek did this so fast."

OpenAI and DeepSeek didn't respond to requests for comment. 

• Nvidia's Jensen Huang admitted he gets stage fright despite his cool persona in tech.
• Huang's nerves are shared by other tech leaders like Elon Musk and Mark Zuckerberg.
• Many have worked meticulously to lessen the pressure of public speaking.

Nvidia CEO Jensen Huang is considered a "cool guy" in the tech industry, but he revealed in a recent interview that being onstage still makes him nervous.

Huang's "60 Minutes" interview aired on December 29. The Nvidia co-founder said walking out to a big crowd at last year's GTC AI Conference was a scary experience.

"I'm an engineer, not a performer. When I walked out there, and all of the people going crazy, it took the breath out of me," Huang said after giving his keynote. "I'm still scared."

He's at the helm of a company valued at over $3 trillion, and Huang's style (like his signature black leather jacket) and his meteoric success in the booming AI field have earned him a cool guy reputation in Silicon Valley. Still, Huang acknowledged his nerves around delivering a speech — something he will have to confront again when he presents a keynote speech at CES in Las Vegas on Monday.

He's not the only tech founder to struggle with public speaking. Steve Jobs, the Apple cofounder known for leading iconic launch events, might've appeared like a natural at public speaking but reportedly planned them out months in advance.

His effortlessness was envied by Microsoft founder Bill Gates, who said Jobs had a talent for looking unrehearsed while on stage. Brent Schlender and Rick Tetzeli wrote in their 2015 book "Becoming Steve Jobs" that he actually spent entire days going over a presentation.

"I'll never achieve that level," Gates said on an episode of the Armchair Expert podcast.

Other leaders have been open about their nerves when addressing large crowds onstage. Meta CEO Mark Zuckerberg turned 40 in 2024, and he said he "didn't know anything about running a company, communicating publicly, etc" when he founded Facebook as a teen.

However, age and experience have made him more comfortable being himself in public, Zuck said on Threads.

Elon Musk was one of the most outspoken voices in 2024. As the owner of X, formerly Twitter, Musk uses his account to post almost daily. Before he owned the platform, he was still an active tweeter but admitted his lack of skills in public speaking in 2019.

Warren Buffett, billionaire investor and Berkshire Hathaway CEO, once said his fear of public speaking would've been detrimental to his career.

"I had been terrified of public speaking. I couldn't do it," Buffett said in the 2017 documentary "Becoming Warren Buffett."

Instead of letting his anxiety get in the way of his career, Buffett said he enrolled in a public speaking course after graduating from business school in 1951. Decades later, he still credits the course with changing his life.