GM Readers! ☀️

Welcome to the 15th issue of Evolving Internet Insights’ 🧠 Brainfood — a weekly deep dive into a relevant emerging tech topic.

It’s been a crazy week and a half for OpenAI with Sam Altman’s surprise firing followed by his return to the company under a new board just days later. This saga is going to be studied for years to come and there are many takes here. 

One area that is important to understand is OpenAI’s governance structure, particularly through the lens of hard power versus soft power. Let’s dive in.

Thanks for reading!

Liang 🙌

(Writing solo this week, Dan is halfway across the world “touching grass” 🙏🕺🌐and I’m feeling major FOMO 🥲)

🧠 Brain Food

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What Happened?

Here is a TL;DR of what happened. For a more detailed version, check out Insights #20.

On Friday Nov 17, the OpenAI Board fired CEO Sam Altman in a surprise announcement. The OpenAI board stated “he [Altman] was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities.”

The key events:

• On Friday Altman was fired, and CTO Mira Murati was named Interim CEO. 

• Greg Brockman, OpenAI cofounder, president and board member (he was not involved in the decision to fire Altman) and 3 senior researchers resigned from OpenAI.

• Over the weekend, investors like Microsoft tried to work with the Board to bring Altman and Brockman back to Open AI. Investors got no advance notice of Altman’s firing.

• On Sunday, talks to bring Altman and Brockman back fell through, the Board hired Emmett Shear (Cofounder and ex-CEO of Twitch) as Interim CEO on Sunday. (3 CEOs in 3 Days) 

• Microsoft hired Altman and Brockman (and other OpenAI employees who left) to start an advanced AI research team.

• Over the course of the last week, more than 700 of the 770 employees signed a letter threatening to quit unless OpenAI brings Atlman and Brockman back and installs a new board.

• By the end of the week, Altman and Brockman returned to OpenAI. A new board has been put into place, that includes:

  • Larry Summers, Former US Secretary of Treasury and Former President of Harvard University

  • Bret Taylor, Former Co-CEO of Salesforce

  • Adam D’Angelo, CEO of Quora (and is the only person from the old board to remain)

It was a whirlwind of events. The disagreement here was partially influenced by OpenAI’s structure.

OpenAI’s Structure

OpenAI was founded as a non-profit in 2015 with the following (stated) goal: “OpenAI is a non-profit artificial intelligence research company. Our goal is to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return. Since our research is free from financial obligations, we can better focus on a positive human impact.”

As a non-profit, OpenAI wanted to raise $1B to develop the technology, but was only able to raise ~$130M. In 2018, it introduced a capped for profit company to allow more traditional (profit seeking) investors to invest and fund OpenAI’s mission. This structure allows OpenAI to be a non-profit that has a broader mission to develop AI in a safe way and also have a for profit entity that allows it to commercialize its technology.

OpenAI Global, the for profit entity, stated in its operating agreement that its goal and mission is to adhere to the goal and mission of OpenAI Inc. the non-profit, above the interest of investors and financial gains. When OpenAI introduced this structure, it reiterated: “... because the board is still the board of a Nonprofit, each director must perform their fiduciary duties in furtherance of its mission—safe AGI that is broadly beneficial. While the for-profit subsidiary is permitted to make and distribute profit, it is subject to this mission. The Nonprofit’s principal beneficiary is humanity, not OpenAI investors.”

In this structure, the board of directors ultimately has the most power and their goal is to ensure that OpenAI develops AI in a safe way that is beneficial to humanity.

One way to look at Altman’s firing is that the board felt he was focusing too much on commercializing OpenAI’s technology at the cost of deviating from OpenAI’s mission.

Given the board has so much power in this structure, what happens if they make a bad decision? Or an unpopular decision? More broadly, who governs the governors?

The Role of Social Media

While there are probably mechanisms in place to properly replace the board if they do something wrong, different stakeholders like employees and investors took to social media and collective action instead. After Altman’s firing, over 700 employees (out of 770 employees) signed a letter threatening to quit if OpenAI didn't reinstate Altman and Brockman and replace the board. Much of the OpenAI saga unfolded on X (fka Twitter) with OpenAI leadership, employees, investors and press all chiming in. Many first heard about and read the employee letter on X/Twitter.

The role of social media platforms in this scenario cannot be overstated. 

These platforms have drastically shifted the power dynamics, enabling various stakeholders to voice their opinions and influence corporate decisions. One interesting thought experiment is: would the employee letter have had as much of an impact without social media? 

Before social media, the majority of those impacted by a CEO firing would hear about it in traditional media and only through a “one way street.” As an employee, even if you disagreed with the decision, you couldn’t do much. In the age of social media, if enough employees say they are dissatisfied and they see other employees / stakeholders are also dissatisfied, they can actually band together and do something about it. And this was the case in how the events unfolded — ultimately the employees (and other stakeholders) applied enough pressure in public to influence Altman’s return.

For a company like OpenAI where employees are critical to the success of the organization, the board could not ignore what the employees wanted… whether the board agrees with the employees or not is besides the point.

In this instance, social media has enabled more discussion and greater transparency into a complex system without having to depend on top-down information, analysis and thinking.

Whether this was the right outcome or not, time will tell. But for now, everyone involved knows that OpenAI is nothing without its people.

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DISCLAIMER: This post is provided strictly for educational and informational purposes only. Nothing written in this post should be taken as financial advice or advice of any kind. The content of this post are the opinions of the authors and not representative of other parties. Empower yourself, DYOR (do your own research).