OpenAI – corporate drama unleashed

The decision by the board of OpenAI to fire CEO Sam Altman “triggered a Silicon Valley corporate drama”, says Dan Milmo in The Guardian. He is the CEO of the company behind the ChatGPT artificial intelligence chatbot and “the figurehead of a revolution in AI that has enthralled the public and investors but also alarmed industry insiders and experts”. 

With OpenAI’s staff in “uproar” and threatening to quit, investors, led by Microsoft, attempted to reinstate Altman, only for Microsoft to decide a few days later to hire him to lead a new AI division. 

There then followed a “dramatic reversal”, says the Financial Times. Just two days later, it was announced that Altman would return as CEO of the firm that he co-founded. He will be under the supervision of a new board of directors, including former US Treasury Secretary Larry Summers and former Salesforce CEO Bret Taylor. This draws a line under a stand-off that has seen almost all of the company’s workers line up against the original four-person board.

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OpenAI's unusual corporate governance structure
Rumours and speculation relating to the sacking abound, says James Titcomb in The Telegraph. However, the key reason is that while the main part of the start-up, originally a non-profit, was moved to a profit-making subsidiary that could give employees shares and raise money, the original board still has ultimate control. This created an inevitable conflict between the board, which has “become increasingly focused on the risks arising from a commercial influence over AI” and Altman, who concentrated on “growing the technology at pace”.

This governance structure also helps explain why “a group of just four people could make decisions that have rocked a multi-billion dollar technology business”, says the BBC. OpenAI is widely deemed the most important AI firm in the world. The ructions could prove damaging to its reputation. 

“OpenAI can’t be the same company it was, Nick Patience of S&P Global Market Intelligence told the BBC. “That has implications not only for potential investors but also for recruitment”.

The drama erupted at a key moment for the company. At the beginning of November, ChatGPT hit a milestone of 100 million weekly users and the company had been working on plans to sell shares at an $86bn valuation, as Lex pointed out in the FT. But with or without Altman, the company’s valuation looks a stretch, says Anita Ramaswamy on Breakingviews. It’s not just the governance structure, but the fact that its AI still needs work.

Recent research suggests that the quality of the GPT-4 model has deteriorated. Its accuracy rate in identifying prime numbers slumped from 84% in March to 51% in June. And government regulation could eventually “dramatically change the usage” of AI, adds Breakingviews. Nor are rivals standing still, says Simon Hunt in The Spectator. Amazon and Google have both invested in a rival AI firm, Anthropic, while Google and X (formerly Twitter) have come up with chatbots known respectively as Bard and Grok.

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