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The idea of OpenAI is dead. Now, Microsoft is in the driver’s seat.


OpenAI, which was reeling Monday after the ouster of CEO Sam Altman and his subsequent hire by Microsoft, was never meant to be a typical highflying tech start-up. The creator of wildly popular artificial intelligence tools such as ChatGPT and Dall-E was founded in 2015 as a nonprofit, with the stated mission of developing AI in the manner “most likely to benefit humanity as a whole, unconstrained by a need to generate financial return.”

The idea was that a nonprofit could put ethics before profits and safety before a race to develop and commercialize a technology that its founders believed could pose an existential threat to the human race.

But after Altman’s stunning ouster, followed by his apparent leap to Microsoft and a mutiny among OpenAI’s staff demanding his reinstatement, that idea is in shambles. And no one stands to benefit more than Microsoft, which can now work with Altman and potentially many of his loyalists without the constraints of OpenAI’s nonprofit board.

Microsoft said Nov. 20 that it has hired Sam Altman to lead its artificial intelligence research team after he was ousted from OpenAI days earlier. (Video: Reuters)

Microsoft CEO Satya Nadella “just pulled off a coup of his own,” Fred Havemeyer, a senior enterprise software analyst at the Macquarie financial services firm, said in a note to investors on Monday.

Under Altman, OpenAI had developed a deep partnership with Microsoft, which used the models underlying ChatGPT and Dall-E to power its own AI tools, including a chatbot built into its Bing search engine. For its part, OpenAI got billions of dollars of investment from Microsoft, including access to its vast computing resources. The astronomical expense of the computing power that cutting-edge AI systems require has been a major barrier to start-ups trying to compete with tech’s incumbents.

In 2019, OpenAI spun up a for-profit subsidiary to stimulate further investment. Still, Altman leaned on OpenAI’s nonprofit status to convince regulators around the world they could trust him as a responsible steward of AI and an ally in the push to regulate it.

All the while, OpenAI’s board thought it controlled an emergency brake on the development of AI, which it could pull the moment it sensed the technology’s commercialization was racing ahead of society’s ability to adapt to it. On Friday, for the first time, it yanked on that e-brake by publicly firing Altman — and the lever broke off in its hand.

The board announced publicly that it had lost confidence in Altman as a leader and would be replacing him with CTO Mira Murati, effective immediately. The board said in a blog post that it had pushed out Altman because he was not “consistently candid” with some of its members.

While the motives behind that move remain murky, it reportedly was fueled at least in part by concern that Altman was prioritizing the rapid commercialization of products such as ChatGPT, GPT-4 and Dall-E 3 above the organization’s founding mission and research on AI safety.

By Monday, Altman and founding OpenAI board member Greg Brockman had been snatched up by Microsoft. And nearly all of OpenAI’s 770 employees had signed a letter threatening to quit and join them there unless the board resigned and reinstated Altman. Among them were Murati, whose appointment as Altman’s interim successor lasted two days, and Ilya Sutskever, one of the board members who had approved forcing Altman out.

“I deeply regret my participation in the board’s actions,” Sutskever tweeted Monday. “I never intended to harm OpenAI. I love everything we’ve built together and I will do everything I can to reunite the company.”

What will become of OpenAI, or what’s left of it, is not clear. There have even been suggestions Altman could make a triumphant return, though the employee letter said that board members have told “the leadership team” that “allowing the company to be destroyed ‘would be consistent with the mission.’”

What is clear, analysts say, is that the radical experiment in tech governance that OpenAI represented has backfired.

“They thought they could have it all,” said Sarah Kreps, director of the Tech Policy Institute at Cornell University. “So they could be fast and safe in developing AI. And that worked fine for a while.”

But after ChatGPT captured the world’s imagination and sparked an industry-wide race to commercialize large language models, OpenAI became “a victim of their own success,” Kreps added, reliant on Altman to keep bringing in revenue and investments so it could stay in the lead. The board may have thought it could rein things in by firing Altman, but it underestimated his popularity, she believes. “And so now you have this principled ethos of safety, but no one left to implement it.”

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Working with Altman and those loyal to him without the oversight of a nonprofit board of directors may be an even more promising development for Microsoft than its initial OpenAI investment, said Adam Struck, managing partner of venture capital firm Struck Capital.

“Microsoft is in the driver’s seat, because they’ve essentially acquired all of OpenAI’s value for essentially zero. … Now, they’ve got Sam and now they’re not beholden to a 501(c)(3),” said Struck, referencing a nonprofit organization. “What’s scary now, though, is Sam was obviously removed for a reason. He’s now going to have no limitations at Microsoft.”

Analysts widely predicted that many OpenAI employees loyal to Altman would follow him to Microsoft, and that a brain drain of OpenAI talent into a new Microsoft unit comes with less antitrust baggage than a traditional acquisition.

“There’s never going to be an antitrust issue here because Sam was literally fired by the board,” Struck said.

In a note Monday, Wedbush analyst Dan Ives compared Microsoft’s hiring of Altman to a “World Series of Poker move for the ages,” saying the company’s already strong AI position is now stronger.

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The reshuffling in the industry will not happen instantly, Deb Raji, an AI researcher and fellow at Mozilla, tweeted Monday. Altman’s jump to Microsoft could effectively result in the six-month development pause that some AI leaders sought this spring.

“Whatever happens at Microsoft, it will take at least six months for onboarding and ramp-up — and on the OpenAI side, it will take at least that long or more to rehire and recover,” Raji wrote.

OpenAI might reemerge as a much smaller research organization, one that more closely follows its founding mission, mused Havemeyer, the Macquarie analyst. He added that if OpenAI loses most of its talent, a huge question remains: What happens to ChatGPT, which attracts more than 100 million users weekly?

Havemeyer said it’s possible the chatbot would be kept running on a “skeleton crew,” with resources still available through its long-term partnership with Microsoft.

“However, if ChatGPT performance degrades, we think an exodus of ChatGPT users to alternatives … or a product shipped by Mr. Altman’s new team would be likely,” he said.

Whatever happens, the notion that OpenAI’s nonprofit board could simultaneously lead the AI revolution and keep it under control has likely gone out the window.

“The personal and dramatic and inconsistent events of the past few days raise a question: Are these the people keeping us safe from AI?” said Matt Calkins, CEO of the software company Appian. “They look a lot like the rest of us. Nobody in this market is infallible.”





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