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Why OpenAI’s ousting of Sam Altman backfired

He's not the messiah, he's a very naughty boy. Credit: Getty

November 21, 2023 - 7:00am

OpenAI’s board has discovered that one should never interrupt the smooth operation of Silicon Valley when it’s in the middle of a speculative gold rush. On Friday, the tech company dispensed with its co-founder and CEO Sam Altman, a sensational decision in a fast-growing organisation. 

Altman was dismissed for “not [being] consistently candid in his communications with the board” — or, it might be suggested, lying. But his friends and supporters, particularly high-worth investors, were appalled. By Sunday, Altman was revisiting the OpenAI offices as a guest, fuelling speculation that he was poised to make a dramatic return. On Monday, however, he joined Microsoft, along with other former OpenAI executives. More than 500 of OpenAI’s 770 staff have now threatened to follow him out of the door unless the board is replaced and Altman reinstated. 

There was only ever going to be one winner in this feud, which tells us much about how money and power are exercised today in Silicon Valley. 

The origins lie in OpenAI’s peculiar structure, a compromise between piety and profit. OpenAI was incorporated as a 501(c) nonprofit private research lab in 2016, with support from wealthy private donors including Peter Thiel and Elon Musk. It was restructured three years later to encourage investors, with two new commercial entities reporting to the original board. 

The board retained its pious mission statement and the ability to hire and fire those executives, setting up a very obvious conflict. A year ago, OpenAI’s ChatGPT captured the public imagination and kickstarted the AI commercial gold rush. Its value significantly boosted, the company is seeking investment valuing the company between $80 billion and $90 billion.

Weekend reports speculated that Altman had gone freelance. He has spent a lot of time in recent weeks raising money for a semiconductor venture, as well as AI consumer electronics such as the Humane AI Pin, a kind of wearable baby-monitor that records one’s waking life. But the board had not raised objections to Altman’s sideline activities before. He has privately raised money for World ID, a biometric identity company that began scanning people’s eyeballs in 20 countries, in exchange giving them a crypto token called WorldCoin. The Kenyan government suspended their activities in August, and the FT describes it as “dystopian cryptocurrency”.  Another questionable initiative, Soylent, marketed a protein substitute that induced flatulence. 

It’s telling that Altman was dismissed for dishonest communications, rather than dubious side-projects. While the transparency of Altman’s communications ultimately cost him his job, some VCs take a much more indulgent line. In the Valley, you fake it until you make it. And in the cases of Elizabeth Holmes and Sam Bankman-Fried, both of whom have been convicted for fraud, the board was either negligent or completely non-existent. Effective altruism may have outlived its usefulness for the capitalist class.

The eagerness of the community to back Altman so unconditionally may seem indecent, but Silicon Valley needs a hit-maker. Rising interest rates and inflation have had two serious consequences. Investors become less anxious to take wild risks and return their capital to safer havens. Inflation also plays havoc with the DCF (Discounted Cash Flow) models used to calculate the long-term value projected for high-growth startups. Rising rates have already seen off manias for Web3, cryptocurrencies, and hit renewable energy and alternative proteins hard — all were big VC bets. For all the bravado of “effective accelerationism”, the VCs badly need AI to be a hit, too.

Altman’s instantaneous resurrection is a sign that investors retain faith in the talismanic technology CEO. What’s more, they don’t like to look too closely at what they’re buying.

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Prashant Kotak
Prashant Kotak
7 months ago

This article’s ‘take’ on OpenAI’s blowout is probably the most pointless one I have seen – it misses out pretty much all the most salient points and instead focuses on a modern-day BBC-like read, telling us almost nothing of value, but with the now obligatory anti-capitalism screed in-built. This piece could been outsourced to Emily Maitlis or Aaron Bastani and we wouldn’t have known the difference.

Allison Barrows
Allison Barrows
7 months ago

There was actually a food company named Soylent??? Holy cr*p, they’re not even bothering to lie to us.

Douglas Redmayne
Douglas Redmayne
7 months ago

Orlowski, as usual, has nothing relevant to say. Why this mediocrity is still employed as a commentator is surprising

Dick Barrett
Dick Barrett
7 months ago

I am not clear as to why Sam Altman was fired by OpenAI. Why was this?

John 0
John 0
7 months ago
Reply to  Dick Barrett

Nobody else is either. Which is quite ironic given the board’s criticism of his communication…

Prashant Kotak
Prashant Kotak
7 months ago
Reply to  Dick Barrett

All the indications are, this was an attempted takeover which used Sutskever as a patsy, which is quite something given that he is one of the smartest people in the AI domain. The coup backfired spectacularly, burning, I dunno, say 60 billion dollars of value in 3 days? No insignificant achievement, that.

The main takeaway, which the author of this article addressed not at all, is that these are people who are de-facto entrusted with creating entities which are safe for humanity, and they couldn’t even predict what would happen 3 days into the future in a situation which is run of the mill in the corporate world. But then, hubris is not restricted to stupid people, indeed all the evidence is that it is more prevalent amongst the very bright. I am aware this argument will cut no ice at all with people who plain flat refuse to see the evidence materialising in front of our eyes that we are very close indeed to creating AGI, which pretty much by definition will display the characteristics of sapient behaviour. But it’s clear to me, that the entire ‘effective alturism’ California crowd, who for people who are so incredibly bright, are in fact a bunch of f*****g idiots who are going to end up wiping us all out because of their all too human egos.

Last edited 7 months ago by Prashant Kotak
Nathan Sapio
Nathan Sapio
7 months ago
Reply to  Prashant Kotak

Here here