AI: OpenAI's Black Swan moment

...a blip in the AI Tech Wave

The Bigger Picture, November 19, 2023

It’s going to be a riveting movie some day, likely adapted from a best-selling book. THE leading AI company, OpenAI, barely a year into an epochal innovation, at the top of its game, sees management upheaval at its top ranks in the space of minutes on a Friday afternoon. A black swan event indeed, not on anyone’s probabilistic calculations. Two of the company’s founders CEO Sam Altman, and President Greg Brockman, out by the end of the day, one pushed out by the non-profit board, one on his own volition in sympathy with the first. The third founder on the board, Chief Scientist Ilya Sutskevar seemed to have orchestrated the moves, garnering the requisite support from the rest of the six person board of directors. The company’s biggest partner and investor, with over $13 billion dollars in, Microsoft, seemed to find out about the chain of events almost at the same time as the rest of us. The Bigger Picture here is that as dramatic as this event is in its utter surprise, it’s relatively inconsequential where AI technologies will take us for net societal good. Let me explain.

But first, here’s the background blow-by-blow by founder/President Greg Brockman (in light blue below next to Sam Altman), on what seemed to go down from one side of the chain of events:

(Sam Altman, standing in back, followed by Greg Brockman, both board members until Friday. Seated in picture above are Chief Technology Officer, now interim CEO Mira Murati, and Chief Scientist and board member Ilya Sutskevar).

“Sam and I are shocked and saddened by what the board did today. Let us first say thank you to all the incredible people who we have worked with at OpenAI, our customers, our investors, and all of those who have been reaching out.”

“We too are still trying to figure out exactly what happened. Here is what we know: - Last night, Sam got a text from Ilya asking to talk at noon Friday. Sam joined a Google Meet and the whole board, except Greg, was there. Ilya told Sam he was being fired and that the news was going out very soon.”-

“At 12:19pm, Greg got a text from Ilya asking for a quick call. At 12:23pm, Ilya sent a Google Meet link. Greg was told that he was being removed from the board (but was vital to the company and would retain his role) and that Sam had been fired. Around the same time, OpenAI published a blog post.” -

“As far as we know, the management team was made aware of this shortly after, other than Mira who found out the night prior. The outpouring of support has been really nice; thank you, but please don’t spend any time being concerned. We will be fine. Greater things coming soon.”

The moves were followed by three senior OpenAI researchers resigning after the above events, with likely more to follow. Next week should be eventful indeed, with the range of possibilities rife with anything from a reversal by the board, to the departing founders announcing their own new AI company.

Another narrative on how Ilya ended up motivated to potentially initiate the removal initiative with the board can be found in this Twitter/X timeline here. We will likely see other counter-narratives as well.

When the history books and MBA business school case studies are written here, much of the focus will go to the unusual corporate structure at OpenAI, where the non-profit entity controlled the for profit entity in its entirety. Note where Microsoft’s multi-billion dollar investment, all in AI commitment, and participation starts and ends further down the governance chart at the ‘OpenAI Global LLC’, the ‘capped profit company’. They didn’t have a seat on the board at the non-profit entity level.

Of course, going forward, Microsoft and its CEO Satya Nadella, are likely to play a highly influential role in what comes next. Especially given that Sam Altman himself had highlighted just this past week, the needed additional billions in investments by the company to take OpenAI to GPT-5 and beyond in the not too distant future.

What led to these developments and the drama it entails will be compelling for us all to track. But I wanted to highlight the bigger picture and implications for the AI Tech Wave, that the industry is embarked upon, with now hundreds of billions of committed investment capital and momentum.

Yes, OpenAI is the leading company here with its industry leading GPT-4 Turbo, and its plans for a GPT of everyone, distributed via an app store. Google, and over a dozen other companies are in a frenzied race to catch up with billions on the line. Just this past week saw a delay in Google’s next gen foundational LLM AI Gemini, now pushed into some time next year.

The key point is that the AI toothpaste is out of the tube. The world now knows what AI software is capable of, coupled with ever more powerful LLM AI models and parallel processing GPU AI infrastructure, copious amounts of Data, an insane amount of ‘reinforced learning loops’ that make it all so much ‘smarter’ at every iteration. It’s like the steam engine, the light bulb, the telephone, the PC, the Internet, and so many other technology must-haves that make our global societies work, are already well understood, and are being developed. By countless individuals and companies the world over.

The goings on at the leading company in the field, and indeed the ups and downs of the ‘poster boy’ of AI today, are but dramatic details that don’t change the longer term narrative of where it’s all headed. That needs to be kept in mind as we see how these events unfold in the coming days and weeks.

We’ve seen dramatic moves like this of course in other tech waves, not the least of which is the firing of Steve Jobs by Apple and its board in 1985. That had a relative happy ending twelve years later, and presumably this one will too. But the story there was bigger than those amazing actors on that stage at the time.

Yes, it means challenges and opportunities for a wide range of companies large and small in the space. But they’ll all get through it one way or another. The AI changes are underway, and we’re still in the earliest days. We shouldn’t let the drama of one company distract from that bigger picture of what’s ahead, even with unexpected black swans. Stay tuned.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)