Sam Altman was the CEO and Greg Brockman was the chairman of the board at OpenAI.org, the parent company that is listed as a not-for-profit organization in the US u/s 501(C)(3).
On 17 Nov 2023 both of them were fired by the Independent Directors of the board. This post talks about the 4-day drama that ensued at the back of these events, focusing on the role of Independent Directors. (Try here for a related earlier post.)
One year ago the company launched the ChatGPT, the Large Language Model, that rose to prominence with its Generative AI capabilities (“GPT” or Generative Pre-trained Transformer) and human-like response and interactive interface (“Chat”). At launch ChatGPT was based on based on GPT-3.5 series. The launch took the internet by storm as Microsoft unveiled its commercial partnership with the firm, and its global marketing machine geared into action.
To accommodate for this new profit-making "partnership" endeavor, the firm came up with another for-profit arm of OpenAI called "OpenAI Global LLC". There was already a "capped" For-profit subsidiary for fund raising et al. However, the supervisory board remained the same as before, and thereby, the corporate governance become hybrid – the same 5-member board now oversaw all the three entities of the company.
Elon Musk claims to have co-founded OpenAI in 2015 “to counter AI dominance that Google had at that time”. He claims that nearly 66% of top AI talent of the planet was cornered by Google at that time, but Google founders did not have AI safety as their priority. The intention was to create an Open-source AI rival to Google’s DeepMind, and hence the name “Open”AI.
Over time, the Corp structure of Open AI has evolved, and it has the following key constituents at present:
- OpenAI (Not-for-profit): The main governing body that is (still) responsible for the overarching decisions of the entire group.
- OpenAI (For-profit subsidiary): For fund-raising and other commercial purposes this subsidiary was created. It also helped in talent acquisition in the competitive AI market.
- OpenAI LP (now OpenAI Global LLC): One of the unique features of OpenAI corporate structure is this Limited Partnership entity. It has a hybrid structure and is a “capped profit” company. It allows for keeping a check on “profit chasing” by investors (and employees) by capping the returns at 100x of their initial investments.
But still, the structure did not have room for Microsoft, Inc., who had substantial investments and pledges, totalling USD 13Bn+, with OpenAI. Microsoft does not have a direct control or a Board presence. (Though this should be more of a worry for the shareholders of Microsoft. With the backdrop of this OpenAI drama, during the Q4 2023 Earnings call, Satya Nadella said "The approach we are always going to take is a broad tent approach").
The Independent Directors of OpenAI.org (17 Nov 2023)
On November 17, the Independent Directors of board - Helen Toner, Adam D'Angelo and Tasha McCauley, along with co-founder Ilya Sutskever, removed Altman as the CEO and Brockman as the Chair of OpenAI. The reason cited was a lack of confidence and candidness. No details have been made public. Check their brief bio at the end of this post.
After 4 days of internal churn and external mayhem, Sam Altman returned to OpenAI as the CEO. Brockman also returned as a President. Except for D’Angelo the entire board was replaced.
Let’s delve into the role of Independent Directors and related questions that surrounded the drama:
Who’s interest should the Independent Directors have protected? The Not-for-profit entity or the For-profit one?
Independent directors on the board of OpenAI should primarily protect the interests of not-for-profit OpenAI.org. This aligns with the original mission of OpenAI to ensure AI benefits all of humanity.
The for-profit arm, OpenAI LP (now OpenAI Global LLC), is a mechanism to attract capital and talent, but its activities should align with the overarching goals of OpenAI.org.
The governance structure must ensure that the profit-driven motives of OpenAI Global LLC do not overshadow the ethical and broader human-centric objectives of OpenAI.org.
Was the Hybrid Governance Model a wrong choice to begin with? How the Board could ensure optimal performance given the challenging nature of the model?
The hybrid governance model was innovative but complex. It aimed to balance ethical AI development with competitive market presence. An industry observer commented that the crisis of Altman’s ouster would not have come to pass if someone like Vinod Khosla was on the board.
Let’s also remind ourselves of Eric Schmidt as Google’s CEO from 2001 to 2011 (and subsequently as the chair of the board until 2017). During his time as the CEO of Google, which was but a search algorithm at the time, came to transform the world of Internet as we know it. Schmidt was 18 years senior to Google founders Brin and Page. And he famously described his role with Brin and Page as that of “adult supervision”.
In addition to missing oversight from a seasoned leadership, the criticism of this model centers on potential conflicts between profit motives and ethical AI development.
After Sam Altman's return as CEO (but without a Board membership, at least for now), and constitution of the new board of directors, better governance can be provided by:
- Ensuring clear, transparent governance structures that align both entities' goals.
- Implementing robust checks and balances to manage conflicts of interest.
- Fostering a culture of ethical AI development, even within the for-profit arm.
Endurance of the ‘Startup’ and Influence of ‘Sharks’?
- OpenAI, initially a startup, has rapidly evolved, partly due to significant investments from companies like Microsoft.
- The influence of large tech firms, referred to as ‘sharks’, can be double-edged. While they provide necessary capital and resources, their business interests might conflict with OpenAI's original mission.
- The longevity of OpenAI's startup ethos depends on its ability to maintain a balance between innovation, ethical AI development, and commercial pressures.
- The governance structure and board's role are crucial in navigating these challenges and ensuring OpenAI's mission isn't compromised.
In conclusion, the governance of OpenAI, especially in light of recent events in Nov 2023, highlights the complexities of balancing ethical AI development with commercial success. The independent directors and the new board have a critical role in maintaining this balance and ensuring the organization's original mission is upheld.
Sources and further reading:
- OpenAI announces leadership transition (Removal of Sam and Brockman) (try here.)
- Elon Musk – comments on Founding OpenAI (try here.)
- CNBC: Microsoft CEO Nadella says OpenAI governance needs to change no matter where Altman ends up (try here.)
- Microsoft, Inc earnings call - Nadella hedges against the big bet on OpenAI (try here.)
- OpenAI Blog: Moving AI Governance Forward (try here.)
- Eric Schmidt on Twitter, “Day-to-day adult supervision no longer needed! http://goo.gl/zC89p” (try here.)
Ilya Sutskever is the co-founder and chief scientist of OpenAI who leads the research in the artificial intelligence company. He has also been one of the architects behind the ChatGPT models. Sutskever is a Russian-born Israeli-Canadian who specialises in machine learning.
Prior to his involvement in OpenAI, Sutskever was the co-inventor of AlexNet and Sequence to Sequence Learning. He is also amongst the co-authors of the AlphaGo paper.
Helen Toner is the Director of Strategy and Foundational Research Grants at Georgetown’s Center for Security and Emerging Technology (CSET). She has previously worked as the Senior Research Analyst at Open Philanthropy.
She is a member of the board of directors at OpenAI. Tones holds a master’s degree in Security Studies from Georgetown, as well as a bachelor in science degree in Chemical Engineering and a Diploma in Languages from the University of Melbourne.
Tasha McCauley is an independent director at the company and has been recognised for her work as a technology entrepreneur in Los Angeles. McCauley also enjoys a fan following as she is the spouse of American actor Joseph Gordon.
She is the chief executive officer (CEO) at GeoSim Systems, which is a pioneering company involved in developing 3D city modelling systems. Additionally, Tasha McCauley is also the co-founder of Fellow Robots. She holds an MBA degree from USC Marshall School of Business.
Adam D’Angelo is an American internet entrepreneur who is known for co-founding and directing Quora. Earlier, D’Angelo held a pivotal position at Facebook, while serving as its Chief Technology Officer (CTO) wherein he oversaw new product development and managed the engineering team.
D’Angelo holds a Bachelor’s degree in Computer Science from the California Institute of Technology in 2002. After working for Facebook, D’Angelo embarked to found Quora in 2009. Later in 2018, he joined as a board member of OpenAI.
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