Nov 21, 2023 - Business

3 reasons why the OpenAI meltdown matters

Illustration of the OpenAI logo looking nervous with a large bead of sweat.

Illustration: Allie Carl/Axios

The chaos at OpenAI in the wake of CEO Sam Altman's abrupt firing is no mere boardroom drama — it's a fight for the future of AI.

Why it matters: OpenAI and its ChatGPT product ignited the boom in AI, the most important new technology since the advent of the internet — and now the company is essentially up for grabs.

Context: AI has the potential to reshape the entire economy. (And if doomsayers are right, much worse stuff, from waves of disinformation to, you know, the obsolescence of human minds.)

  • The outcome of this drama will play out in the tech industry, sure, but also the job market and the stock market, and, to borrow a line from OpenAI's charter, possibly the future of humanity.

The latest: OpenAI's fate is still unclear. Nearly all of its 770 employees signed a letter threatening to quit the company and join Microsoft, its biggest investor, if the board didn't resign and bring back Altman.

  • But so far the board is standing firm, trying to reunify the company. While investors in OpenAI are reportedly mulling a lawsuit against the board and still trying to get Altman back; a move Microsoft's CEO Satya Nadella said he'd support with some conditions.

Zoom in: Here are three reasons you should pay attention.

1. The blowup accelerates the commercialization of AI.

  • Though the full story has yet to emerge, the rift between Altman and OpenAI's board reportedly involved the former CEO's work to speedily popularize and commercialize generative AI, Axios' Scott Rosenberg writes.
  • Whether back at OpenAI or at Microsoft, Altman would likely be unleashed to develop the tech — profitably.

2. It juices the Big Tech battle for dominance in AI.

  • OpenAI was the "It Girl" — the public face of AI's mainstream rise — and now there's an opening for a new belle of the ball. It's not necessarily Microsoft's for the taking, even with Altman.
  • OpenAI's implosion gives the rest of Big Tech time to catch up. And competitors are already plotting their next moves, The Information reported.
  • Google has been "trying all year to race and catch up to OpenAI after the release of ChatGPT," said Jon Victor, a reporter at The Information, on a chat with subscribers yesterday. "This resets the dynamic."
  • OpenAI customers are already reaching out to its biggest competitor in the startup space, Anthropic, as well as Google and another rival, Cohere, per The Information.

3. It underscores the importance of AI talent.

  • None of these companies have a shot at dominance without the talent to do the work. AI-skilled engineers are the hottest thing in tech right now. While the industry has gone through a rough patch of layoffs, these workers are commanding big wage premiums.
  • OpenAI's employees are its "core differentiation — its ambitious and experienced technical talent," said Macquarie analyst Fred Havemeyer, in a note, per the FT.
  • If they carry out their threat to quit en masse and go to Microsoft, that's a win for the tech giant in the AI talent war.
  • It also may mean that Microsoft can acquire a critical company — and skirt antitrust attention. "[Y]ou can make the case that Microsoft just acquired OpenAI for $0 and zero risk of an antitrust lawsuit," writes Ben Thompson.
  • Other tech companies are pouncing. Salesforce CEO Marc Benioff offered to hire any OpenAI researcher who's resigned, in a post on X.
  • Yes, but: Where all that talent lands is still very much in play. The Information's Victor suggested some could return to Google after having been lured away by OpenAI earlier this year.

The bottom line: OpenAI was founded with the aim of placing principle over profit in the development of artificial intelligence. The board perhaps believed that firing Altman was a step in furtherance of that aim.

  • Instead, it appears to have unleashed the very thing it was trying to avoid.
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