Unraveling the Sam Altman Fiasco: OpenAI's Major Missteps

Concerned about OpenAI developing a technological equivalent to a nuclear bomb, the company's overseers grew increasingly uneasy with its caretaker, Sam Altman, for moving at an alarming pace that threatened a worldwide catastrophe. Consequently, the board made the decision to terminate his position, which in hindsight, appeared to be the most rational solution.

The way in which Altman was dismissed, suddenly and without informing some of OpenAI's major stakeholders and partners, was illogical. This action had the potential to cause more harm than if the board had taken no action at all.

The primary responsibility of a company's board of directors is to its shareholders. Microsoft, which provided Altman & Co. with $13 billion, is OpenAI's most significant shareholder. This investment was meant to help Bing, Office, Windows, and Azure surpass Google and maintain a lead over Amazon, IBM, and other aspiring AI companies.

However, Microsoft was not made aware of Altmans dismissal until shortly before the public announcement, as revealed by CNN contributor Kara Swisher, who spoke to insiders familiar with the boards decision to remove its CEO. Following Altmans departure, Microsofts stock experienced a decline.

Moreover, the employees were not informed of the news in advance. This included Greg Brockman, the companys co-founder and former president, who disclosed on X that he learned about Altmans firing just moments before it occurred. As a strong supporter of Altman and his strategic leadership, Brockman tendered his resignation on Friday. Similarly, other loyalists of Altman also chose to leave the company.

OpenAI found itself in a state of crisis as news emerged that Altman and former loyal members of the organization were poised to embark on their own venture, potentially undermining all the significant progress the company had diligently made in recent years.

In an attempt to rectify the situation a day later, the board reportedly made a volte-face and sought to entice Altman back. This unexpected turn of events proved to be both astonishing and a source of embarrassment for a company highly esteemed as the leading producer of groundbreaking technological advancements.

Strange board structure

The bizarre structure of OpenAIs board complicated matters.

The company is a nonprofit. However, in 2019, Altman, Brockman, and Chief Scientist Ilya Sutskever established OpenAI LP, a for-profit entity within the company's larger structure. This for-profit venture swiftly raised OpenAI's value from nothing to $90 billion in just a few years. Altman is widely praised as the mastermind behind this plan and is considered crucial to the company's achievements.

Nevertheless, a company with influential supporters such as Microsoft and venture capital firm Thrive Capital has a responsibility to grow its business and generate profits. Investors expect a satisfactory return on their investment and are not known for their patience.

Altman's likely motivation for driving the for-profit company to accelerate innovation and release products may stem from the Silicon Valley ethos of rapid iteration and disruption. However, this approach may have its setbacks, especially when applied to technology with the ability to convincingly simulate human speech and behavior, leading individuals to mistake fabricated discussions and visuals as genuine.

That is what allegedly frightened the company's board, which still had majority control by the nonprofit division. According to Swisher, OpenAI's recent developer conference marked a turning point: Altman declared that OpenAI would provide tools for anyone to develop their own variant of ChatGPT. For Sutskever and the board, this was a step that went too far.

A warning not without merit

By Altmans own account, the company was playing with fire.

When Altman established OpenAI LP four years ago, the company's charter acknowledged its unease about the potential of AI to bring about swift and unintended transformations for humanity. This concern stemmed from the possibility of the technology inadvertently executing harmful actions due to faulty programming, or, alternatively, intentional misuse by individuals seeking malevolent ends. Consequently, the company committed to making safety its foremost priority, even if it entailed sacrificing profitability for its stakeholders.

Altman likewise advocated for regulatory authorities to establish boundaries on AI usage, aiming to prevent individuals such as himself from causing significant harm to society.

Advocates of AI firmly believe in its capacity to revolutionize all sectors and contribute to the improvement of humanity. It holds the potential to enhance education, finance, agriculture, and healthcare.

But it also possesses the potential to displace jobs -17 million positions could vanish within the upcoming five years, as warned by the World Economic Forum in April. Artificial Intelligence (AI) excels in distributing detrimental false information. Furthermore, there are concerns from individuals such as Elon Musk, a former member of OpenAI's board, who apprehend that this technology will surpass human intelligence and potentially eradicate life on Earth.

Not how to handle a crisis

Given the perceived or actual threats, it is understandable that the board expressed concern about Altman's rapid progress. They may have felt compelled to replace him with someone they believed would exercise more caution with the potentially hazardous technology.

However, it is important to note that OpenAI does not operate in isolation. It has stakeholders, including those who have invested billions into the company. The responsible individuals involved were behaving, as Swisher described it, like a "clown car that crashed into a gold mine," referencing a well-known quote from Meta CEO Mark Zuckerberg regarding Twitter.

Engaging Microsoft in the decision-making process, notifying employees, and collaborating with Altman on a respectable exit strategy... these alternatives are usually favored by a board of directors for a company the size of OpenAI - and they all offer potentially superior results.

Due to the peculiar structure of the company, Microsoft, despite its significant stake, does not have a seat on the OpenAI board. However, this could potentially change, as per reports from prominent sources such as the Wall Street Journal and New York Times. One of the demands made by the company, which includes the reinstatement of Altman, is to secure a position at the decision-making table.

Microsoft felt confident in its decision to integrate OpenAI's ChatGPT-like capabilities into Bing and other core products, considering it a strategic investment in the future. However, the sudden revelation of Altman's termination, disclosed to CEO Satya Nadella and his team on Friday evening, came as an unexpected blow. The board's handling of Altman's removal has not only incited anger from a valued ally but also has the potential to permanently alter the board's composition. As a consequence, OpenAI may witness Altman's return to a leadership position, the inclusion of a for-profit company on its nonprofit board, and a significant transformation in its organizational culture.

Moreover, it might emerge as a formidable rival to Altman, prompting him to consider launching his own venture and poaching OpenAI's skilled workforce.

Regardless of the outcome, OpenAI's current state is likely more unfavorable compared to Friday, when Altman was still part of the team. It is ironic that this predicament could have been prevented had OpenAI taken a more cautious approach.

This story has been updated to clarify the first sentence