When the sun came up on Friday, 17 November 2023, OpenAI was a vibrant, exciting company — the acknowledged leader of the AI pack — headed by 38-year-old Sam Altman, a Silicon Valley wunderkind who had started a company, sold it, was the head of Y Combinator for 6 years, and at the helm of OpenAI (ChatGPT) for 8 years.
Punchline alert: When the sun went down on Friday, 17 November 2023, the survival of OpenAI was a huge uncertainty.
Sam Altman was an important voice for AI at recent Congressional hearings.
He lived the successful founder/investor Silicon Valley Illuminati lifestyle with a Democrat funding penchant ($250,000 to Joe Biden) and great investments in the likes of Airbnb, Stripe, Reddit, Asana, and Instacart. Running Y Combinator gave him a strong public profile.
He wore $300 Puma Blaze of Glory kicks and a semi-matching backpack and cargo shorts. With his $300MM net worth, he was a Silicon Valley guy and generally a well regarded CEO buttressed by the gigantic success of products from his firm.
He had founded and funded with others (including Elon Musk) OpenAI as a non-profit (OpenAI, Inc) within which he then slickly created a “for profit” core (OpenAI Global, LLC) with a recent value of $80,000,000,000 and a reputation as having leapfrogged the entire tech industry to become the front runner on artificial intelligence.
This was not vaporware or a high tech headfake; they ground out a great number of truly useful products and captured a client list of the biggest firms on the planet.
Sam and his horde were the leaders in the pursuit of the Holy Grail of AGI — artificial general intelligence meaning AI that is smarter than people. [I had a Shih Tzu named Rufus who was smarter than 98% of the people I have ever known. He had a mean streak.]
On Friday, The Board of Directors of OpenAI fired Sam Altman citing a lack of communication candor and confidence — the two things a board mouths when they can’t come up with a substantive reason.
“Haha, let’s use the old standby shibboleth: candor and confidence, y’all?”
Therafter, they were quick to note there were no “irregularities” pertinent to sexual or financial misconduct.
The Board members at the time of the firing are:
Greg Brockman — co-founder of OpenAI who resigned after Altman’s ouster, former CTO of Stripe. He was, apparently, kept in the dark about the firing though he was the bloody Chairman of the Board. Brockman played no part in the lynching.
Ilya Sutskeyer — co-founder of OpenAI with legitimate AI chops having started DNNResearch and sold it to Google where he remained through a 3-year non-compete before co-founding OpenAI and becoming its head research scientist. Somebody told me his middle name is “Judas?”
Adam D’Angelo — independent director and current CEO of Quora after being CTO of Facebook for two years
Tasha McCauley — adjunct senior management scientist at Rand Corporation and board member since 2018 as well as board member at GeoSim Systems (geospatial tech company)
Helen Toner — Director of Strategy at Georgetown Center for Security and Emerging Technololgy
Sam Altman was also on the Board, but he was not invited to the meeting until it was time to lower the boom.
I am smelling that Ilya Suskeyer — co-founder — must have voted against his pal, Sam. He subsequently said he regretted his role in the coup. [Little late for that, Ilya, baby!]
It was a punk move by all involved and shall forever be enshrined as the way NOT to fire a CEO/founder.
1. Late last Thursday night (Sam Altman had just given a talk at APEC on AI and was clueless to the backroom scheming), Ilya Suskeyer set up a Google Meet call for Friday at noon with Sam and the Board. Who do you think was the Board’s henchperson, y’all?
2. At that Google Meet noon call — at which Greg Brockman was cynically excluded — Ilya informed Sam he was fired. No discussion. No bill of particulars, just the weak baloney “candor” and “confidence” stuff. I hope somebody recorded that video and audio for posterity. In the background you will hear billions of dollars self-immolating.
3. Greg Brockman — who had not been invited to the earlier Board call though he was the bloody Chairman of the Board — got a call from Ilya at 12:19 asking to speak which they did 4 minutes later.
4. In that convo, Greg learned Sam was canned and he, Greg, had been fired as Chairman of the Board, but would be retained in his employment relationship as a member of management. What genius thought that would actually work?
5. As the call from Judas Ilya was underway, the company ran a blog post up the flagpole explaining the Board of Directors had fired Sam, but all was otherwise well.
Hahaha, listen to you. The short answer is no. The longer answer is they informed them — Microsoft and Thrive Capital — after the action was taken, but before the blog post.
To put this in perspective, Microsoft is the largest investor having written a check for $1,000,000,000 in 2019 when things began to hop, following on with another $2,000,000,000; and, committed $10,000,000,000 recently of which only the first installment was funded.
Much of Microsoft’s $13,000,000,000 investment is in services.
Other investors include Khosla Ventures, Infosys, and Thrive.
Microsoft has a funny arrangement in that they are entitled to 75% of distributable cash flow until they recover 100% of their investment and 49% thereafter which appears to peg their equity at 49% with a preferred return of equity invested.
Killer mistake: Microsoft has no board seat because board members are not allowed to own any part of the for profit OpenAI Global, LLC. Stupid arrangement.
OpenAI Global, LLC was in the middle of a capital raise based on a $80,000,000,000 value in which current employees would sell shares in a tender — no new shares, just the selling of existing shares — to the likes of Thrive Capital, Sequoia, Andreessen Horowitz and K2 Global.
This deal is now hanging fire and as one can imagine there are a lot of employees who are pissed.
With Sam Altman out and Greg Brockman resigned, critical employees — loyal to the departed one must believe — began to resign and make demands.
Their first demand was the rehiring of Altman/Brockman and the resignation of the Board of Directors.
A meeting was held with the CEO of Microsoft who attempted to negotiate a return of Sam Altman and Greg Brockman with the assumption of recovering other employees. When you have $13B invested in a management team — nobody invests in a Board of Directors — you will do things like this.
This attempt on Sunday night seemed unsuccessful until it wasn’t. It blew up over the changes proposed to corporate governance which is a little odd as the former Board was to resign as part of the process.
What happened next is that Sam Altman and Greg Brockman slid beneath the flannel sheets of a warm Microsoft bed and said, “We are going to put Microsoft in the AI business, y’all.”
MS threw in a bottle of champagne, a set of flannel PJs, and a 90-minute deep tissue massage. Very inexpensive acqui-hire. Well played, MS.
One has to assume they will be able to hire anyone who worked for them at OpenAI Global, LLC. They took 8 years to build that team and MS gets them in 8 seconds.
Clearly, whatever employment agreement that Messrs. Altman and Brockman had did not include a non-compete or a no-hire provision. This is on you, Board of Nincompoops.
A few important details:
1. Let’s recognize that top flight AI folks are the new rock stars of Silicon Valley and that OpenAI hired a dozen of the best in the entire world.
AI is a business of hiring the native intelligent to create AI.
2. If you lose the talent — the people — in a company, you are screwed.
3. When you have a company like Microsoft as your largest investor and a huge client, then if you lose that goodwill, you are screwed.
OK, here it is:
1. Gigantic failure of corporate governance created in part by a stupid corporate governance structure driven by an overdose of wokeness and a truly dopey actual board at the individual level.
2. OpenAI Global, LLC is dead. Long live the King.
3. Microsoft is going into the AI business as of this morning and they will be huge. Sam Altman and Greg Brockman, men scorned, will drive the ship.
4. This was the Clash of the Accelerators v the Doomers.
The Accelerators want to ship, work out the bugs, break a few things, and trust in mankind and regulation to keep evildoers from hijacking AI — AGI.
The Doomers want to STOP and figure it out before mankind overeats all the free Twinkies and kills itself. The Doomers — led by Ilya — won this round, but wrecked the company in the process.
But, hey, what the Hell do I really know anyway? I’m just a Big Red Car and I have native intelligence.
Be good to yourself and get the popcorn. This isn’t over.
My prediction: OpenAI Global, LLC disappears from the face of the earth by Christmas.
Today 715 out of approximately 800 OpenAI Global, LLC employees signed a letter to the Board of Directors that contained the following:
Your actions have made it obvious that you are incapable of overseeing OpenAl. We are unable to work for or with people that lack competence, judgement and care for our mission and employees. We, the undersigned, may choose to resign from OpenAI and join the newly announced Microsoft subsidiary run by Sam Altman and Greg Brockman. Microsoft has assured us that there are positions for all OpenAl employees at this new subsidiary should we choose to join. We will take this step imminently, unless all current board members resign, and the board appoints two new lead independent directors, such as Bret Taylor and Will Hurd, and reinstates Sam Altman and Greg Brockman.
Just when you thought the soap opera could not get any soapier. Boom!
