Sam Altman’s ouster puts a new twist into OpenAI’s complicated relationship with Microsoft – GeekWire

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Todd Bishop
2023-11-18 11:12:57
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OpenAI CEO Sam Altman
OpenAI CEO Sam Altman waves farewell to the crowd at OpenAI DevDay in San Francisco on Nov. 6. Less than two weeks later, the OpenAI board removed him from the position. (GeekWire Photo / Todd Bishop)

OpenAI CEO Sam Altman was as bullish as ever about artificial intelligence and the ChatGPT maker’s latest advances when he spoke Thursday at the Asia-Pacific Economic Cooperation (APEC) Summit in San Francisco.

“I think this will be the most transformative and beneficial technology humanity has yet invented,” Altman said, adding later, “On a personal note, four times now in the history of OpenAI, the most recent time was just in the last couple of weeks, I’ve gotten to be in the room when we push … the veil of ignorance back and the frontier of discovery forward.”

Getting to do that, he said, “is the professional honor of a lifetime.”

One day later, Altman was out.

The surprise removal of the OpenAI CEO on Friday is the buzz of the tech industry — raising questions about the company’s role in the AI revolution, the ambitions of Altman and his team, the impact of his exit on the rest of the tech industry, OpenAI’s complex corporate structure, and its unusual partnership with Microsoft.

Microsoft has invested billions of dollars in OpenAI and has used its technology to put Microsoft’s own products at the forefront of the AI revolution.

But the Redmond company was blindsided Friday by the OpenAI board’s decision to remove Altman, learning about it shortly before the news was announced, according to a report by Axios, which GeekWire confirmed independently.

Microsoft does not have a seat on the OpenAI board. The unusual arrangement is a quirk that resulted from OpenAI’s origins as a non-profit organization, OpenAI Inc., dedicated to building artificial general intelligence for the advancement of humanity.

OpenAI is a complex set of related entities, as explained on the company’s website. (OpenAI Graphic)

In 2019, the non-profit created an affiliated “capped-profit” entity, OpenAI Global LLC, aimed at giving it the resources to pursue the AGI vision without the profit incentives of a traditional company.

Reports overnight indicate that a conflict between Altman’s ambitions for OpenAI and the mission of the nonprofit were at the core of the board’s decision to oust him as CEO and remove OpenAI co-founder and President Greg Brockman as chairman.

Brockman was initially designated to report to Mira Murati, the OpenAI CTO who was named interim CEO by the board, but he then resigned from his executive role later Friday afternoon.

Based on her reporting, journalist Kara Swisher reported that the problem “was a ‘misalignment’ of the profit vs. nonprofit adherents at the company,” noting that OpenAI’s big moves at its first developer day last week were part of the problem.

At the event, on Nov. 6, Altman announced customized and personalized GPTs and plans for a related marketplace, and told reporters that the company might even come out with its own AI device in the future.

In an interview with the Financial Times, published Nov. 12, Altman said OpenAI would need to raise “a lot more” funding from Microsoft and others, over time, to finance the computing power for future AI breakthroughs. In the same interview, Altman also acknowledged that the company is working on GPT-5, the next major version of its large language model.

The board alluded to a misalignment in its announcement of Altman’s removal, saying that a review had concluded he was “not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities.”

“OpenAI was deliberately structured to advance our mission: to ensure that artificial general intelligence benefits all humanity,” the board said in its statement. “The board remains fully committed to serving this mission. We are grateful for Sam’s many contributions to the founding and growth of OpenAI. At the same time, we believe new leadership is necessary as we move forward. The board no longer has confidence in his ability to continue leading OpenAI.”

According to a transcript of an employee town hall Friday afternoon, obtained by The Information, OpenAI board member and co-founder Ilya Sutskever told employees, “This was the board doing its duty to the mission of the nonprofit, which is to make sure that OpenAI builds AGI that benefits all of humanity.”

According to The Information, Altman’s exit was preceded by internal debates over whether the company was taking enough safety precautions in its development and deployment of artificial intelligence.

OpenAI’s capped-profit company does not have a board of its own, which is why Microsoft does not have a seat on the board.

It did have an indirect presence on the board previously, when LinkedIn co-founder Reid Hoffman was on the OpenAI board. Hoffman, who sold the business social network to Microsoft in 2016, is also a Microsoft board member. However, he stepped down from the OpenAI board in March.

Following the news of Altman’s abrupt departure, Microsoft CEO Satya Nadella issued a statement, offering reassurances to Wall Street and Silicon Valley about the company’s relationship with OpenAI and its ability to capitalize on the AI revolution with products of its own. He did not directly mention Altman.

“We have a long-term agreement with OpenAI with full access to everything we need to deliver on our innovation agenda and an exciting product roadmap; and remain committed to our partnership, and to Mira and the team,” Nadella said.

But the corporate structure isn’t the only part of the relationship that’s complicated.

As part of its strategy under Altman, OpenAI has begun pursuing enterprise customers directly. During a media Q&A at OpenAI’s DevDay on Nov. 6, Altman was asked how Microsoft and OpenAI were balancing their parallel and potentially competing quests to sell the same core AI technology to enterprise customers.

“The answer is, we’re both going to do it. We set up the relationship between two of us so that we’re very happy when they succeed with a sale, and they’re very happy when we succeed with the sale,” Altman said. “I’m a huge believer that incentives are superpowers. If you get everybody’s incentives right, everybody just wants the most shared success possible. And I think we’ve designed that very well.”

Whether that’s how it actually plays out remains to be seen.

Along these lines, questions about OpenAI’s future could work to Microsoft’s advantage, if enterprise customers decide it’s safer to access GPT-4 and other OpenAI technologies through the Azure OpenAI service and other Microsoft offerings, rather than doing business directly with OpenAI through its ChatGPT Enterprise service, for example.

But that’s a silver lining, at best. Microsoft shares fell more than 3% in after-hours trading Friday, underscoring the importance of the OpenAI partnership to the company, and the impact of the uncertainty created by Altman’s ouster.

Microsoft was wise to speak out quickly, said Matt McIlwain, a managing director at Madrona Venture Group in Seattle who focuses on areas including applied artificial intelligence and intelligent applications.

“What they’re saying is, ‘We’re the ones with all the enterprise customers, we’re the ones that are putting out all these copilots … we’re standing in front of our capabilities … and so you can trust us (Microsoft) even if there’s some instability with one of our key partners.’ ” McIlwain said.

Matt McIlwain. (Madrona Venture Group Photo)

Ultimately, he said, the instability at OpenAI underscores the need for a diversity of AI foundation models in the industry, with cloud platforms such as Microsoft Azure, Amazon Web Services, and Google Cloud offering their customers a broad selection of AI technologies.

AWS has been a leader in this regard with its Bedrock service, providing access to a variety of foundation models. In that regard, McIlwain said, the shakeup at OpenAI could provide a new opening for Amazon: “I think their opportunity is to say, ‘Hey, we’ve been about price, convenience and selection.’ That’s the Amazon thing.”

Microsoft has also been moving to expand its offerings further beyond OpenAI, including the announcement this week at its Ignite conference of expanded availability of Meta’s Llama 2 model through a new Azure AI service.

McIlwain said this week’s OpenAI news creates “an opportunity for a bit of a rethinking by some customers as to who they’re going to partner with deeply” in applied artificial intelligence.

“I think the cloud players, and specifically Microsoft and Amazon, are going to do very well in this world,” McIlwain said. The key, he said, is to make it clear that “they are providing a lot of choice and options to customers — because you just truly never know quite what’s going to happen.”

Matt McIlwain discusses the OpenAI news on this week’s episode of the GeekWire Podcast. Listen above, or subscribe to GeekWire in Apple Podcasts, Google Podcasts, Spotify or wherever you listen.




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