The structural disorder of OpenAI
The future of OpenAI, whose ChatGPT started an arms race in artificial intelligence, has become even murkier. Most of its workers asked its board of directors to resign after ousting Sam Altman as CEO over the speed with which he would commercialize his technology.
The conflict further highlights the peculiar oversight by some of the leading AI companies that could affect the future of the technology. And there are signs that OpenAI’s board of directors will not budge despite the staff uprising.
Here’s the latest: More than 700 of OpenAI’s 770 employees, including Ilya Sutskever, the chief scientist and board member who initially pushed to remove Altman, demanded that the board resign. Altman is still trying return as CEO and it’s in conversations with the company. The OpenAI board had approached a great rival, Anthropicabout a merger, according to The Information. Marc Benioff from Salesforce is trying to attract OpenAI employees with comfortable financial offers.
The OpenAI Dilemma: Commentators have noted the company unusual, conflictive structure. A non-profit board with mission for the benefit of humanity he oversees a for-profit arm backed by Microsoft and venture capital firms including Thrive Capital and Khosla Ventures.
He company-wide goal is to build artificial general intelligence, highly autonomous systems that “outperform humans in most economically valuable jobs” but “benefit all of humanity.” OpenAI’s commercial arm was created to support that hugely expensive goal, but is limited by limits on profits flowing to investors, as well as a lack of governance rights for investors. That’s why Microsoft, Thrive, and others have little direct influence over how the company is run.
Ironically, Altman helped devise this setup and ultimately fell victim to it.
This is not the only unusual corporate structure in the AI industry. Anthropic, started by a dozen former OpenAI employees concerned about their former employer’s race for profits, is set up as a B Corp, or public benefit corporationwhich aims to balance the interests of a wide range of stakeholders.
It also has a calling long term benefit trust that includes AI ethicists and other experts and can elect most of the company’s directors. (That said, one of Anthropic’s board seats is held by an investor, although that is subject to change.)
But OpenAI’s structure may lead to an irreparable crash. Investors, including Thrive, continue to push to reinstate Altman as CEO, as do employees and Sutskever.
Still, the letter to employees signaled an ominous development for that side: “You also informed the leadership team that allowing the company to be destroyed ‘would be consistent with the mission.’” Reports suggest that, despite the prospect of investors filing lawsuits over the board’s stock decision, the resolve of the three remaining directors has hardened, and if OpenAI fails, so be it.
THIS IS WHAT’S HAPPENING
X sues a media watchdog for an investigation into his advertising. Elon Musk’s social network made good on its threat to take Media Matters to court over the group’s claim that the company placed ads next to anti-Semitic content. The findings, along with controversy over recent posts by Musk, led big-name advertisers like Apple and IBM to halt their spending on X; The company said Media Matters had manipulated its algorithms to support his findings.
US regulators put more pressure on crypto giants. The Justice Department is seeking a Binance $4 billion fine, the world’s largest crypto exchange, to resolve an investigation into allegations of money laundering and fraud, according to Bloomberg. And the The SEC sued Krakena rival, over claims it operated an unregistered stock exchange.
Citigroup prepares layoffs of hundreds of executives. He long awaited move, announced Monday, is the latest step in a plan by Jane Fraser, the bank’s chief executive, to simplify the Wall Street giant’s structure and reduce costs. Citi has already laid off more than 7,000 workers as it grapples with a slowdown in deals and high interest rates.
Wall Street braces for disappointing real estate data. Existing home sales, which will be released at 10 a.m. ET, are expected to have fallen to a minimum of 13 years as rising mortgage rates price out more buyers, especially younger house hunters – off the market.
What Microsoft has gained from the OpenAI mess
OpenAI’s biggest backer, Microsoft, is on the rise, with shares of the tech giant hitting a 22-month high on Monday.
Microsoft CEO Satya Nadella has been on a media tour since hiring now-ousted OpenAI chief Sam Altman and Greg Brockman, another co-founder, and trying to cement his position as a leader in artificial intelligence. A big talking point: how the company structured its deal with the startup and access to its intellectual property.
Altman and Brockman will lead Microsoft AI Research Lab. After most of OpenAI’s remaining staff threatened to quit, Altman and Brockman were eventually able to recruit hundreds more from their former employer. That would allow Microsoft to essentially rebuild “OpenAI within Microsoft and not waste a lot of time or money,” Karen Weise reports for The Times.
Some investors want OpenAI’s co-founders to return. including Thrive Capital, Khosla Ventures and Tiger Global Management, to protect your investment. (Vinod Khosla also asked OpenAI interim CEO Emmett Shear to give up “before he becomes OpenAI’s only employee”).
Even Nadella is open to the possibility, with one big caveat. Microsoft had no official voice before the board of directors when Altman, the company’s key contact, was fired. Nadella told the “Podcast With Kara Swisher” that if Altman and Brockman return to OpenAI, “we will make sure that the governance is fixed so that we have more security and guarantee so that we do not have surprises.”
But Nadella insisted they have the tools to innovate anyway. Microsoft has secured intellectual property rights to OpenAI, as well as copies of the source code for its key systems and the “weights” that guide the system’s results after it has been trained with data, people familiar with the deal told The Times. . This is partly a hedge for the fact that he has no control over the board of directors of the new company.
There is one big exception. It involves the holy grail of OpenAI’s work: achieving artificial general intelligence, or AGI. OpenAI defines that advancement as “a highly autonomous system that outperforms humans in most economically valuable jobs.” To achieve the promise of AGI, immense computing power is needed, exactly what Microsoft provides. The warning: AGI is out of reach of Microsoft.
Still, Microsoft’s intellectual property deal could be problematic. Scott Syphax, a corporate governance expert, told DealBook that the deal could raise red flags with regulators if it threatens the nonprofit’s tax-exempt status. Another area Syphax is looking at: the valuation Microsoft gave OpenAI after its investment and whether it acquired the intellectual property at a fair price.
Some veterans of the Silicon Valley startup wars applauded Microsoft’s moves. “If you had told me 10 years ago that a group of the world’s smartest engineers would conjure up the threat: ‘Do what I tell you or I’ll go work at Microsoft,’ I wouldn’t have believed you,” said Bill Gurley, a general partner at Benchmark and investor in Grubhub, Uber and Zillow, published in Xadding “a lot of credit to Satya.”
But others wondered what Microsoft was thinking First, by making such a big bet on OpenAI “without any real governance controls.”
“People say, ‘Don’t economists know why we’re unhappy?’ Just look at the prices!’ We look at the prices and ask ourselves: why do they buy so many things?
— Betsey Stevensoneconomist at the University of Michigan who worked in the Obama administration, about the disconnect between Americans’ perception of the economy and their actual experiences.
Goldman reconsiders golf deal
Goldman’s first big bet on sports sponsorship is coming to an end. The bank will not renew its sponsorship deal with golfer Patrick Cantlay, DealBook’s Lauren Hirsch reports.
The deal was part of the bank’s consumer push. Goldman signed a three-year deal with Cantlay in 2020, in part to help build brand awareness for Marcus, its online consumer banking service. Cantlay, currently fifth in the world, wore a Marcus-branded cap during the tournaments, and the two sides signed a new one-year contract in early 2023.
But Goldman has withdrawn from retail banking. The bank sold parts of Marcus and restructured the business to refocus on its traditional trading and investment banking services. “We are constantly evaluating the company’s partnerships and at this time, our logo will no longer appear on its hat,” Goldman Sachs spokesperson Tony Fratto told DealBook.
Cantlay and Goldman will still have some ties. He may still appear at bank events in the future, a person familiar with the relationship told DealBook. And both Cantlay and Goldman chief Mark Flaherty are on the board of the PGA Tour, which is trying to strike a partnership with Saudi Arabia’s sovereign wealth fund and court new investors.
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