OpenAI’s Code Red Explained

All right, so by now you've probably heard about OpenAI's code red internal memo thing. OpenAI declaring code red, code red, code red. OpenAI has declared a code red over chat GPT.

If you're anything like my producer Dave, then you're probably too lazy to dig into it and see what's actually going on. Hey, you know I watch these, right? So in this video, I'm going to give you the full TLDR of why OpenAI went into panic mode, what it means for the industry and what we can expect in the coming weeks and months ahead. I'm going to break it all down for you right now.

Starting with what actually just happened. In a memo to staff this week, Sam Altman announced a Code Red, which is apparently like their highest internal urgency level. The company wants to shift all of their resources around and focus on improving Chat GPT because, like, the competition has gotten really crazy lately. In order to do this, they're deprioritizing almost everything that's not Chat GPT, like their agent features and their Pulse feature and the fact that they were planning on baking ads into ChatGPT. Apparently all of that stuff's going on the back burner in favor of just making ChatGPT better. So apparently the new focus is shifting back to better speed and reliability, handling a wider variety of questions, improving personalization and usability, enhancing things like their image generation model and editing model, and reducing over refusals. Or like basically anytime ChatGPT says something like, I can't answer that, even though it was like a very harmless prompt. So in a nutshell, the code red is OpenAI going into triage mode. They're putting all of their energy into the core product that everyone actually knows them for. But that's probably like the headline that you've already heard. I want to dive a little bit into how, how did we actually get here? Like, why is the most recognizable name in all of AI freaking out right now? I could have been dead. I could have died. Keep it together, man. They're basically the Band Aid or Kleenex of AI. Like people use the term AI and ChatGPT interchangeably. Like if I was to ask my non techie neighbor if they've heard of Gemini, they probably haven't. But if I ask them about ChatGPT, they definitely have. So again, why is this happening? Why now? To break that down for you, I actually need to share a real quick history lesson.

A little over three years ago, before the launch of Chat GPT, Google and DeepMind were pretty much considered the global AI standard. They invented the Transformer, which is what all of the large language models are built on top of today. They had the most cutting edge models at the time and they had massive compute at their disposal to actually run these AI models. Google was the leader in AI, but then ChatGPT came along and launched in November of 2022 and it completely changed everything. Like overnight, generative AI stopped being research lab only and became a mainstream utility. Like anybody could now write emails or code or write really good essays or generate ideas, or even ask complicated questions with no PhD necessary. And when it came to AI, this dramatically widened the user base. Like overnight. It also set the expectations of what AI could be and it put a lot of pressure on companies like Google. But back then, right when it happened In December of 2022, right after the launch, Google responded, reportedly issuing their own code red. They needed to scramble to catch up and integrate AI across search and products and infrastructure. In fact, Larry and Sergey, the original founders of Google, they even came back to put their brain power into catching up with OpenAI. And at the time, the narrative was that Google had everything they needed to be the AI powerhouse, the absolute leader in AI. They invented the technology that all LLMs use today. They had the smartest minds in AI working for them. They had all of the infrastructure, and yet somehow they managed to fumble the lead in AI. You blew it.

However, slowly but surely, Google started chipping away at improving their AI offerings. They also seemingly stopped playing. So scared, they actually released models that weren't quite ready for the public yet, which was very un Google. Like they just put stuff out there and then got feedback of where it was broken and then went and fixed it. Previously, Google had been really, really cautious about putting this kind of stuff out there. And as Google was starting to gain a little bit of momentum, we started to see some cracks in OpenAI. In fact, most people have been paying attention to tech for the last just few years. Probably remember that in 2023, the nonprofit board of OpenAI actually pushed the CEO Sam Altman out, which created like a ton of chaos and a ton of investor uncertainty, but probably most importantly, planted a ton of seeds in people's minds about like, who this Sam Altman guy was and his character and his ability to lead a company with such huge implications on the future of the world. So I've been talking a lot about how AI is reshaping entrepreneurship. The barrier to entry for new businesses is so much lower now with AI, and that can be amazing, but it can also be a bit overwhelming.

One of the biggest questions I get all the time is what tools should I actually use and how can I use them effectively in my business? That's why I teamed up with HubSpot to put together a resource that answers all those questions. HubSpot just released my very own AI playbook and it's completely free to download. It's basically the roadmap for entrepreneurs who want to use AI to streamline their business, level up their content and actually grow faster instead of just testing random tools and hoping something works for them. So inside this playbook you'll find a full breakdown of the AI tools I put personally use for content creation, research and automation. Step by step workflows you can copy into your business today, prompts you can plug directly into ChatGPT or your favorite model, a framework for integrating AI without overwhelming yourself or your team, and a bunch more. It's honestly way more in depth than most of the stuff I put out publicly. And my favorite section is the part where I walk through how to build an AI powered growth engine, from content to customer support to product ideas, using automations that run in the background while you sleep. Every entrepreneur who feels like they don't have enough time needs to read that section. So if you actually want to use AI to ramp up your business or personal projects, download the free playbook at the link in the description. And thanks so much to HubSpot for sponsoring this portion of today's video. And then pretty quickly after that Sam Altman incident, OpenAI started having a brain drain problem. Some of their most talented and well known scientists and engineers were bailing to like go create their own companies or to join other frontier model labs. Andrej Karpathy, one of the founding members who worked on computer vision and generative modeling. He left in early 2024 to go focus on personal projects. Ilya Suskover, one of the co founders and the former chief scientist who was really deeply involved in OpenAI's foundational work. He quit in mid 2024 to build his own lab called Safe Superintelligence or SSI. And then you have Mira Morati who was the company's former cto and she actually like briefly became CEO for a little bit when they booted Sam out. Well, she left later in 2024 to go build thinking machines labs and those are just known names. Beyond them there's like a pretty long list of senior researchers, execs and product leads who all exited themselves or moved to other rival labs. Then fast forward to November of 2025. Just recently, as of the recording this video, Google dropped Gemini 3, one of the most anticipated models of the year, and it blew people's minds. Not only did it seem like a huge up level in capabilities of an AI model, but it also outperformed OpenAI models on pretty much every industry benchmark. Marc Benioff, the CEO of Salesforce, said, I've used ChatGPT every day for three years. I just spent two hours on Gemini 3 and I'm not going back. This leap is insane. The reasoning, the speed, the images, video, everything is sharper and faster. It feels like the world just changed again. And Gemini use is growing really fast too. In October, Google claimed that Gemini had 650 million monthly active users, and that's up from 450 million monthly active users in July. It grew by 200 million monthly users in just three months. Google had once again become the king of AI, at least from a model capability standpoint. And not only that, but Google had positioned itself to actually stay on top too. OpenAI has great foundational models, but they're still relying on compute and infrastructure from other companies. Google, on the other hand, they have state of the art models as well, but they also have custom Silicon Valley like their TPU chips, they have their own cloud hosting, they have seamless integration across billions of users in search, Chrome, Android, Gmail, Google Drive, and so much more. Google also has all of that revenue that it generates from its search and other businesses, which help subsidize all of this AI use. OpenAI, on the other hand, well, it's literally losing hundreds of millions of dollars per month and constantly needs to raise more capital to keep up with these costs. And to add to OpenAI's troubles, rivals like Anthropic have been gaining traction as well, especially among enterprise customers and coders. In fact, almost everyone who's serious about coding or revive coding knows that Anthropic's models are still the superior option over OpenAI's and honestly, kind of over Google's for the most part too. So, to sum it all up, OpenAI, who was once the clear leader, is no longer being uncontested. They no longer lead in the benchmarks, and the field is fragmenting. So, bringing this all together, why did they actually issue the code red? Well, you had benchmark losses. OpenAI is no longer automatically the best model. Gemini 3 and Cloud Opus 4.5 beat them in most benchmarks. Even Grok from Xai is beating OpenAI in a lot of the benchmarks. Now there's rising competition from well funded rivals like Google, Anthropic and these new labs that are popping up from ex OpenAI founders and team members. You have talent, attrition, brain drain is making it harder to innovate and maintain the lead. And you have internal strategic uncertainty like there's too many initiatives, too many possible directions, and likely a pretty diluted focus. They want to build browsers and news aggregators and agents and image generators and video generators and new voice modes and health agents and coding apps and they're even working on physical hardware, when in reality most people just want ChatGPT to get a little bit smarter and respond more how they want it to respond. Most of the world sees the rest as just noise and myself kind of included most of the time. So rallying the troops with a Code Red makes sense. Prioritize what still defines them chatgpt. Double down on the core competency, delay distractions and try to fight back from a position of strength. It may also be a statement to investors, stakeholders and the broader AI ecosystem. As in, like, yes, we see the danger, we're doubling down. Let's be honest, Sam and the OpenAI team have a tendency to hype things up a bit, only to over promise and underdeliver. Many out there, and I'd probably put myself in this camp, believe that this Code Red is kind of just another marketing play by OpenAI to spread rumors and excitement about their next model. Which brings me to the next little tidbit that came out of this whole story. According to the reports, OpenAI plans to roll out a new reasoning model next week, presumably to get back into being the main story in the AI narrative. That's playing out because they're not who everybody's been talking about lately, and they claim this new model already scores ahead of Gemini three on their own internal evaluations. Now, I'm not clear if this new model is going to be publicly released, if it's going to be something their internal team gets access to next week, or if it's all just, you know, unfounded rumors. They haven't really made public announcements about this next model yet, but I do think most OpenAI users are on board with the idea of shifting focus back to just like making better models and continuing to improve the user experience for everyone. That's what most of us really care about. Anyway, here's my final thoughts. Here's how I see it all. OpenAI has gotten a little too caught up lately in things like browsers or N8N competitors and new voices and things that most people don't really care that much about and they strayed a little bit too far from being that research lab that focuses on making better and better models. In fact, personally, I actually think OpenAI models have regressed a little bit. This may just be me, I don't know for sure, but Personally I've noticed ChatGPT becoming less and less accurate lately. Again, I could be going crazy, but it feels like it hallucinates so much more for me lately than the previous models did. I feel like OpenAI decided they wanted to build a killer product that would get a lot of users and keep people on their platform when they should have been focused on making more and more capable models. And I think Sam is finally seeing that for himself and course correcting. Now, I don't actually know if we're going to get a new model next week or not, but I personally have been fighting myself super frustrated lately at thinking that, well, ChatGPT has gotten stupider than it used to be. Like, am I the only one? Anyway, hopefully whatever's coming, it fixes that. Like stop being stupider and get smarter again. That's what we want. So yeah, that's pretty much the breakdown of this whole Code Red thing. I figured people will be hearing this pop up and will wonder what's going on there. So I figured I'd make this quick little TLDR for you and all the lazy Daves out there. 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