How tensions over profitability at OpenAI turned into a full-blown crisis
When the nonprofit OpenAI started selling shares in a potentially world-changing for-profit subsidiary, the tensions between the two were clear to see.
Why it matters: Those tensions erupted over the weekend into a full-scale governance crisis, as the board of the governing nonprofit fired the CEO, Sam Altman, over what Axios' Scott Rosenberg has described as "a deep cultural rift" within the organization.
- The new OpenAI CEO, Emmett Shear, has written that he's "not crazy enough to take this job without board support for commercializing our awesome models."
The big picture: It's relatively common for a nonprofit to use the profits of a corporate subsidiary to fund its operations. U.S. examples include Patagonia, Bloomberg, and Newman's Own; international examples would include Bertelsmann or Novo Nordisk.
Be smart: OpenAI diverges from that model. The nonprofit doesn't want to spend the (nonexistent) profits of the for-profit subsidiary; instead, it wants the subsidiary itself to research and develop safe AI.
- The nonprofit's goals are research-focused. They militate in favor of releasing fewer products, and making sure that any such products are "public goods."
- The for-profit, by contrast, is much more product-focused and provides privileged access for investors like Microsoft. It was created to be able to afford to continue to pay the astonishing costs of the non-profit's research agenda.
Where it stands: OpenAI has four separate power centers: The board of directors; the senior management, led until Friday by ousted CEO Altman; the employees; and the outside investors, led by Microsoft. None of their interests are entirely aligned.
Driving the news: Substantially all OpenAI employees work for the for-profit subsidiary and were looking forward to being able to sell some of their shares at an $86 billion valuation.
- Meanwhile, Altman, who weirdly owns no shares in OpenAI, had been looking to raise billions of dollars from Saudi Arabia and other investors for a separate AI-focused for-profit that would run independently of OpenAI, Bloomberg reported.
Between the lines: As far back as 2020, OpenAI started losing employees who worried that it was becoming too commercial under the leadership of Altman and his colleague Greg Brockman.
- The remaining employees have been largely supportive of Altman. As OpenAI's CEO-for-a-weekend Mira Murati posted after her own replacement, "OpenAI is nothing without its people."
Zoom out: For OpenAI, the stakes could hardly be higher. The organization was founded to save the world from the existential risk posed by profit-hungry technologists — but at this point, capitalist imperatives are so deeply embedded in the organization that they're probably impossible to expunge.
The bottom line: Under the terms of OpenAI's governing charter, its "primary fiduciary duty is to humanity." Humanity as a whole, however, is the one stakeholder that has zero ability to influence the outcome of the current fustercluck.