Reflecting on the OpenAI Saga
Reflecting on the OpenAI Saga
Lessons from a Dramatic and Turbulent Week
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Hi friends,
I hope everyone had a fantastic Thanksgiving break. This week, I want to unpack some observations and lessons from the recent OpenAI saga, a pivotal event that has resonated across the tech industry. Let’s dive into the timeline of events and the key lessons we can learn from this unfolding drama.
Timeline
Here’s a quick timeline of the events that started with Sam’s firing and ended with his return 5 days later.
Friday, November 17, 2023, Afternoon - OpenAI's board fires CEO Sam Altman citing that he hadn’t been “consistently candid in his communications”. Greg Brockman is also removed from his role as chairman but retains his position as president of OpenAI.
Friday, November 17, 2023, Later that Day - Brockman announces his resignation from OpenAI.
Saturday, November 18, 2023 - Internal memo from OpenAI COO Brad Lightcap states that the board's decision was not due to malfeasance.
Saturday, November 18, 2023, Later that Day - Discussions of Altman's return begin amid employee and investor pressure.
Sunday, November 19, 2023 - Altman spends the day at OpenAI's headquarters for negotiations, but it is announced that he will not return as CEO. Emmett Shear is named interim CEO.
Monday, November 20, 2023 - Altman and Brockman are to join Microsoft to lead a new AI research team. Later, Over 550 of OpenAI's employees threaten to resign and join Microsoft if Sam isn’t reinstated as CEO in an open letter.
Tuesday & Wednesday, November 21-22, 2023 - Negotiations continue, leading to Altman's return as CEO of OpenAI with a new initial board including Bret Taylor, Larry Summers, and Adam D'Angelo, with Helen Toner and Tasha McCauley stepping off the board.
Now, onto a few lessons from the saga.
Lessons
I. Governance: A Delicate Balance
OpenAI's governance structure was quite complex, largely because of its capped nonprofit status and mission beyond profits. The corporate entity was overseen by a non-profit board, which had shrunk from nine to six members. This structure, while innovative, reminded me of the complex setups at FTX and Alibaba, both of which faced significant challenges in part to due to governance reasons.
At OpenAI, there was a constant tension within the board, with some members seemingly willing to destroy the entity in sake of the mission, as highlighted below.
Ironically, Sam Altman had written a post in 2014 on the importance of good board members (and how disastrous bad ones can be) including that ideally they have some skin in the game to align incentives. Definitely a lesson for OpenAI going forward.
The lesson here is clear: innovating on product rather than corporate structure or governance is the more effective path for the vast majority of companies.
2. Employee Voice and Leadership
By Sunday, rumors were swirling that Sam Altman would join Microsoft, and OpenAI had appointed an interim CEO, Emmett Shear. However, when a letter signed by over 95% of OpenAI's employees surfaced, stating they would resign and follow Sam to Microsoft, it became clear to most that his return to OpenAI was the only viable option. This episode underscored the power of employee voice and influence, as well as Altman's remarkable leadership in building such loyalty and followership. Twitter was abound with stories of Sam helping people when he didn’t need to, and OpenAI employees wanted to work with and for him, willing to quit in protest.1
3. Social Media’s Turbocharged Impact
The role of social media in this saga was undeniable. Twitter became the tech community's group chat, constantly updating with breaking news, memes, pushing the story forward and also the avenue for Sam’s side in some ways to show their support and push forward their narrative through constant tweets with heart emojis, the open letter, and a lot more.
Similar to the SVB situation, where social media arguably accelerated the bank run and the speed of events unfolding, here it seemed to hasten the resolution and added to the drama. It was another reminder of how social media can dramatically speed up corporate developments, and that stories of Twitter’s demise are greatly exaggerated.
The below tweet summed it up well:
4. The Importance of Owning the Narrative
The board's handling of the situation was a masterclass in poor communication.
Not only were key people involved with the company such as Microsoft completely in the dark about the decision prior to it happening (Satya Nadella found out 1 minute before it became public), they didn’t provide any actual reason for the firing in the coming days after the blog post which cited communication that wasn’t always candid.
Their failure to control the narrative and lack of transparency only added to the confusion and made the perception very quickly that the other side had been wronged, and that there was no actual reason for this, which caused the narrative to shift quite quickly.
It seemed as though decisions were made hastily, without a clear plan or communication strategy. This debacle highlights the critical importance of owning your narrative in crisis management.
Closing Thoughts
Although the OpenAI saga resolved quickly, the fallout is ongoing. Many of OpenAI's customers are now re-evaluating their reliance on the company’s models, potentially looking at other vendors and open-source options. Within OpenAI, the reshaped board is likely just the beginning of what might be broader governance changes.
OpenAI’s prospects aside, this saga illustrated that while AI alignment is an increasing important topic that will merit a lot of discussion in the coming years, human alignment has and will continue to also be extremely challenging and more important for most companies.
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Skeptics might argue that employees were motivated by their OpenAI equity in the form of “PPUs” not going to basically zero, but the overwhelming response suggests a deeper commitment, at least in part motivated by reasons beyond monetary incentives, especially considering many of the people who signed it were in tenuous situations such as on visas.