By Kenneth Tiven
It’s been a turbulent time for Big Tech leadership, with Sam Bankman-Fried convicted of financial fraud at FTX Cryptocurrency; Changpeng Zhao will pay a $50 million fine and step down as chief executive of Binance, the cryptocurrency company he created, and of course, the story behind the darling of artificial intelligence, Sam Altman. The company’s governing leadership wanted slow and steady growth with safeguards over how it is used. Altman and the company’s software whiz-kids want rapid development and sale of the software.
Involved in this is a familiar figure, India-born Satya Nadella, who is Microsoft CEO. Over five days, he has protected his company’s $10 billion investment made in early 2023 for 49% of the software company that turned ChatGPT loose on the world, nine months ago. After offering to hire Altman and OpenAI President Greg Brockman and those employees who had revolted over Altman’s sacking, he was fine with the turn of events since he had defended Microsoft’s investment in a not-for-profit company which controls the profit-making OpenAI software development.
In the OpenAI conflict, Nadella didn’t just talk, he acted because Altman is the public face of the emerging artificial intelligence field. Instead of hiring them, Microsoft now orders them back to their old jobs. Of course, this is a company where Microsoft has a major influence. Nadella, when he was hiring them, described the AI group as leading “a new advanced AI research team,” which is what they continue doing. That level of workforce support for a CEO is unusual, but understandable: In every story if you just follow the money, the motives are clarified.
That starts with understanding that OpenAI has an unusual structure as a combination of a not-for-profit corporation with a profit-making subsidiary. Founding documents refer to its not-for-profit status as a way “to ensure that artificial general intelligence benefits all of humanity”. Arrangements like this exist in the United States.
It’s common for a non-profit to use the profits of a corporate subsidiary to fund its operations. US examples include Patagonia, Bloomberg, and Newman’s Own; international examples include Bertelsmann or Novo Nordisk. In Bloomberg’s case, its profits fund global philanthropies, with founder Michael Bloomberg leaving his company shares to the fund. He has said he will die technically broke.
OpenAI was founded roughly eight years ago as a not-for-profit organization “to ensure that artificial general intelligence benefits all of humanity”. OpenAI’s founding documents refer to making its products help humankind. There was an understanding of the need to research and create safeguards for the anticipated product. OpenAI has four separate power centres:
- The board of directors.
- The senior management, led until November 17 by Altman.
- The employees.
- The outside investors, led by Microsoft.
None of their interests are entirely aligned. Altman and his team wanted to release and dominate the AI space, taking a sales-focused approach. The board, mindful of its stated values at start-up, wanted safeguards for the public good, investing in development with less concern about market valuations and stock options.
In these hi-tech start-ups, the salary packages include generous stock options. For example, if an employee receives 1,000 shares yearly at $5 a share, that cost is only paid when the option sells. If each share on the stock market has a value of $100, then the employee’s net gain on his option is $95,000. A grant of 1,000 shares in year two might be worth $200 a share on the stock market. The profit is $195,000. Staff wants the stock to soar in value. In short, the tug of war is between getting incredibly rich or merely wealthy while helping humanity.
For unclear reasons, Altman owns no shares in OpenAI. Bloomberg News reports he had been looking to raise billions of dollars from Saudi Arabia and other investors for a separate AI-focused for-profit that would run independently of OpenAI. Word of this did not inspire loyalty among the board. On the other hand, most of the company’s employees work for the profit subsidiary and dream about selling shares at a high valuation.
Back in January, in making the OpenAI investment announcement Microsoft stressed the necessity of changing how it competes with Google, Apple and other tech giants. Artificial intelligence is the new game-changer in many areas of business and life. Some experts believe there will be a competitive AI landscape as companies seek ways to optimize business operations with machine learning.
Altman’s pursuit of profits and his growing ambitions to build a world-spanning consumer business triggered concerns among some OpenAI employees that the company had abandoned its founding principles to be a counterweight to Big Tech, according to a person familiar with internal discussions at the company, who spoke on the condition of anonymity to discuss private conversations. The Washington Post reported that, “Many in the technology world credited Altman with infusing new energy and a sense of possibility into a beleaguered sector that tech giants like Google and Amazon have dominated for more than a decade. Altman was hoping to enter the league of tech titans, such as billionaire Elon Musk, Meta CEO Mark Zuckerberg, and even the late Apple CEO Steve Jobs.”
This is not the first time Altman, a shrewd Silicon Valley leader, has found himself on the outs. In 2014, Altman’s mentor, Y Combinator founder Paul Graham, surprised the tech world in 2014 by tapping Altman, then in his 20s, to lead the vaunted Silicon Valley incubator. Five years later, he flew across the Atlantic with concerns that the company’s president put his own interests ahead of the organization and fired Altman.
Though a revered tactician and chooser of promising start-ups, Altman had developed a reputation for favouring personal priorities over official duties and for an absenteeism that rankled his peers and some of the start-ups he was supposed to nurture, according to people speaking on conditions of anonymity to candidly describe private deliberations.
—The writer has worked in senior positions at The Washington Post, NBC, ABC and CNN and also consults for several Indian channels