Tuesday, May 28

Microsoft ends weekend of OpenAI drama with coup of its own

After three days of high drama at the world’s most closely watched startup, which many compared to a coup, Microsoft Corp. capped the weekend with one of its own: the software giant hired ousted OpenAI chief Sam Altman.

The moves reshape the world of artificial intelligence given that OpenAI is behind the hugely popular ChatGPT app that took generative AI into the mainstream, and Altman was its figurehead.

He was unexpectedly fired by OpenAI’s board on Friday, setting off a frenzied weekend campaign to reinstate him, led by OpenAI executives and key investors — including Satya Nadella, the chief executive officer of Microsoft, which had pledged more than $10 billion for the startup.

Instead, OpenAI’s board replaced Altman with Emmett Shear, the former CEO of Twitch, in a stinging rebuke to its investors. Nadella then announced that he had recruited Altman and Greg Brockman (picture), another OpenAI co-founder who had quit in protest, to lead a newly formed in-house AI research unit at Microsoft, casting a shadow over the future of its prized investment.

Now OpenAI, which was in talks with investors about a $86 billion valuation, risks an exodus of employees to Microsoft and other rivals, and an end to its stunning growth. And the startup will face close scrutiny over its ability, or willingness, to turn its cutting-edge AI into profits.

At the heart of the divide is whether AI should be a commercial opportunity or is a potentially dangerous technology that needs to be checked and scrutinized at every turn.

Confidence

In a post on Linkedin, Nadella wrote that Microsoft remains committed to its partnership with OpenAI and has “confidence in our product roadmap.”

But by tapping Altman, Nadella acquired a driver for the new brand of AI captivating executives and politicians everywhere. At OpenAI, the co-founder was credited with kicking off a race for artificial intelligence supremacy from Washington to Beijing, inviting comparisons to Bill Gates and Steve Jobs.

On Monday, Brockman posted online that he Altman had already recruited three OpenAI scientists to work with them at Microsoft. “The mission continues,” he wrote on X, the platform formerly known as Twitter. Microsoft’s shares climbed as much as 2.7% in pre-market trading in New York, after closing 1.7% lower Friday.

Altman’s replacement, Shear, stepped down as CEO of Amazon.com Inc.’s game-streaming site Twitch earlier this year. He won over directors at OpenAI because of his past recognition of the existential threats that AI presented, a person familiar with the matter said.

A computer scientist who spent more than a decade building Twitch into one of the world’s most successful video platforms, Shear is regarded as having the heft to lead a large engineering group, the person added, asking to remain anonymous discussing private matters.

The weekend drama bares the divisions that built up at OpenAI over the years, culminating with the removal of Altman.

One of the fissures was Altman’s drive to turn OpenAI, which began as a nonprofit organization, into a successful business — and how quickly he wanted the company to crank out products and sign up customers. That ran headlong into board member concerns over the safety of AI tools capable of generating text, images and even computer code with minimal prompting.

The fallout from the board’s decision to defy investors is likely to be widespread. Thrive Capital had been expected to lead an offer for employee shares, a deal that would value OpenAI at $86 billion. As of this weekend, the firm had not yet wired the money and it told OpenAI that Altman’s departure will affect its actions.

The turmoil also threatens to undermine Microsoft’s biggest investment in AI, a $13 billion bet on OpenAI and its former CEO. The US software leader owns almost half of the startup but wasn’t able to sway the board.

OpenAI President Brockman quit hours after Altman’s firing. The remaining board of directors are OpenAI Chief Scientist Ilya Sutskever, who led Altman’s firing, as well as Quora Inc. CEO Adam D’Angelo, tech entrepreneur Tasha McCauley and Helen Toner, director of strategy at Georgetown’s Center for Security and Emerging Technology.

Like some members of OpenAI’s board, Shear has ties to the sometimes controversial effective altruism movement, which sees serious risks from advanced AI. Many effective altruists — a pseudo-philosophical movement that seeks to donate money to head off existential risks — have imagined scenarios in which a powerful AI system could wreak widespread harm.

In September, Shear tweeted that he’s “in favor of a slowdown” of artificial intelligence technological advancement.

“We can’t learn how to build a safe AI without experimenting, and we can’t experiment without progress, but we probably shouldn’t be barreling ahead at max speed either,” he said.

Shear and representatives of OpenAI didn’t respond to requests for comment.

Altman attached several conditions to his return, including changes to the way OpenAI is governed, the removal of the board and a statement absolving him of wrongdoing, people with knowledge of the matter have said. The board was ultimately unwilling to give in to the demands, some of the people said, and instead embarked on their own search for a CEO. The decision to hire Shear is a stinging rebuke to the investors.

In a post on X, Shear wrote that his plans for his first 30 days as OpenAI CEO included reforming the management team and hiring an independent investigator to issue a report about the recent events at the company. He wrote that the board did not remove Altman “over any specific disagreement on safety” and dismissed the idea that the board was uninterested in a profitable model.

“I’m not crazy enough to take this job without board support for commercializing our awesome models,” Shear wrote.

Ethan Kurzweil, a partner at venture capital firm Bessemer Partners, was on the board of Twitch when Shear was CEO.

“It’s a great pick,” Kurzweil said in a text message. “No easy task to pick up the pieces right now but Emmett has all of the skills to succeed in this and I would think enough credibility to calm the rocky waters right now. He’s forward thinking and a very deep technologist but also a good communicator.”

Shear departed just days before Twitch announced job cuts that affected the company’s ability to police abusive or illegal behavior. At a time when the toxicity associated with gaming culture began running rampant on Twitch, Shear championed trust and safety efforts, people with knowledge of the platform told Bloomberg at the time.

When he departed Twitch, which he co-founded, Shear said he wanted to spend more time with his son. On Monday, Shear wrote that he consulted with his family and took the OpenAI job within “a few hours” of the offer.

Sutskever told staff that Altman wouldn’t be returning. The day before, on Saturday, Shear liked a post on X that supported Altman’s ouster that read, “congratulations to ilya for taking his company back after (Altman’s) nefarious coup.” – Bloomberg

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