Why is OpenAI's dismissal of Altman a bad move?

Source: Heart of the Metaverse

OpenAI’s regulators fear that the company is building a technological “nuclear bomb” and that the company’s founder, Sam Altman, is moving so fast that it could trigger a global catastrophe.

So, the board fired him. This could end up being a logical solution.

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But the way Altman was fired — abruptly, opaquely, and without advance notice to some of OpenAI’s largest shareholders and partners — doesn’t make sense. Moreover, the risk of doing so is greater than the loss caused by the board of directors not taking any action.

The board of directors of a company is first and foremost accountable to shareholders. OpenAI’s most important shareholder is Microsoft, a company that has provided $13 billion to Altman and others to help Bing, Office, Windows and Azure surpass Google and stay ahead of Amazon, IBM and other AI upstarters.

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However, according to CNN contributor Kara Swisher, Microsoft was not informed of Altman’s dismissal until it was “publicly announced.” Microsoft shares fell after Altman’s dismissal.

Employees were also not informed of the news in advance. Greg Brockman, the company’s co-founder and former president, said in an article on X that he only found out about Altman a moment before he was fired. Brockman, a key supporter of Altman and his strategically led company, resigned on Friday. Other Altman’s other loyalists have also left.

Suddenly, OpenAI was in crisis. There are reports that Altman and former OpenAI supporters are about to start their own business, which threatens to undo everything the company has worked so hard to achieve over the past few years.

As a result, a day later, the board reportedly demanded a change of course and tried to bring Altman back (which has so far been declared unsuccessful). It was a shocking turn of events and an embarrassing blunder for the company, which is widely regarded as the most promising and exciting producer of new technology.

01.Peculiar Board Structure

The peculiar structure of OpenAI’s board of directors makes things even more complicated.

The company is a non-profit organization. But Altman, Brockman, and Chief Scientist Ilya Sutskever founded the OpenAI LP (Limited Partner) equity platform in 2019, a for-profit entity that exists in the structure of large corporations. The for-profit company has taken OpenAI from worthless to a $90 billion valuation in just a few years, and Altman is largely considered the mastermind of the scheme and the key to the company’s success.

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However, big investors like Microsoft and venture capital firm Thrive Capital want companies to expand their operations and make money. Investors want to make sure they’re getting their money’s worth, and they’re not a group known for their patience.

This could lead Altman to push the for-profit company to innovate and launch products faster. In Silicon Valley’s tradition of “moving fast and breaking the mold,” these products may not work so well at first.

If it’s a dating app or social media platform, maybe it’s fine. But it’s a different story if it’s a technology that mimics human language and behavior and can trick people into believing that their fake conversations and images are real.

And this is what is said to be worrying for the company’s board of directors, as the majority of the board is still controlled by the company’s nonprofit division. According to Swisher, OpenAI’s recent developer conference was an inflection point: Altman announced that OpenAI would provide tools that would allow anyone to create their own version of ChatGPT.

This step is too far for Sutskever and the board.

02. Not unreasonable warning

According to Altman himself, the company is playing with fire.

When Altman founded OpenAI LP four years ago, the new company noted in its charter that it remained “concerned” about AI’s potential to “cause rapid change in humanity.” This can happen unintentionally, due to faulty code that causes technology to perform malicious tasks, or it can be that humans deliberately subvert AI systems out of evil. As a result, the company is committed to prioritizing safety – even if it means reducing stakeholder profits.

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Altman also urged regulators to set limits on AI to prevent people like him from causing serious harm to society.

“Will artificial intelligence, like the printing press, bring greater prosperity and, above all, two greater freedoms, by disseminating knowledge, power, and research to the widespread, giving ordinary people everyday capabilities?” He asked questions at a Senate subcommittee hearing in May, urging regulation. “Or will it be more like the atomic bomb – a huge technological breakthrough, but whose serious and terrible consequences still haunt us today?”

Proponents of AI argue that this technology could revolutionize industries and benefit humanity in the process. It has the potential to improve education, finance, agriculture, and health care.

But it also has the potential to take jobs away – the World Economic Forum warned in April that 14 million jobs could disappear over the next five years. AI is particularly good at spreading harmful disinformation. Some, including former OpenAI board member Elon Musk, fear that AI technology will surpass humans intellectually and could destroy life on Earth.

03. Caught in a greater unknown crisis

In the face of these threats, whether real or perceived, it is not surprising that directors are concerned that Altman is moving too quickly. They may feel obligated to fire him and replace him with someone who, in their opinion, is more cautious about potentially dangerous technologies.

However, OpenAI does not operate in a vacuum. It has stakeholders, some of whom have poured billions of dollars into the company. And as Swisher put it, the so-called adults in the room were like “clown cars crashing into a gold mine,” quoting Meta CEO Mark Zuckerberg about Twitter.

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Involve Microsoft in decision-making, notify employees, work with Altman on a decent exit plan… All of these are common solutions for boards of companies of OpenAI’s size, and all have the potential to lead to better outcomes.

Despite Microsoft’s large stakes, Microsoft does not have a seat on OpenAI’s board of directors due to OpenAI’s strange organizational structure. According to multiple media outlets, including the Wall Street Journal and the New York Times, that could change now. One of the company’s requirements, including Altman’s return, is to have a seat on the board.

With OpenAI’s ChatGPT-like functionality embedded in Bing and other core products, Microsoft sees itself as a smart investment in new technologies that promise the future. So when Microsoft CEO Satya Nadella and his team joined people across the globe on Friday night to learn of Altman’s fire, they were all shocked.

The board has angered a powerful ally, and it is possible that the company will change forever because of the way it handled Altman’s ouster. Eventually, Altman could be back at the helm, a for-profit company would join its nonprofit board, and OpenAI’s culture would shift dramatically.

Alternatively, it could become a competitor to Altman (which will currently join Microsoft), which may eventually decide to start a new company and siphon talent away from OpenAI.

In any case, OpenAI may be in a worse position now than it was before it fired Altman last Friday. Ironically, this problem could have been avoided by slowing down.