Axios Pro Rata

November 18, 2023
Welcome back, readers! Coming to you with a late-night pivot to big news that hit the technology industry yesterday.
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Today's Smart Brevity™ count is 647 words — a 2½-minute read.
1 big thing: OpenAI's shock waves
Illustration: Tiffany Herring/Axios
Silicon Valley experienced a huge earthquake yesterday with OpenAI's ouster of CEO Sam Altman — with the ripples reaching every headline, private group chat, and beyond.
Why it matters: The stunning leadership shakeup raises questions about the organization's future, and the unique structure that gives limited power to even its biggest shareholders.
Catch up quick: On Friday afternoon, OpenAI stunned the world with news that the board concluded that Altman had not been "consistently candid in his communications" and fired him.
- A few hours later, president Greg Brockman announced his resignation given the ouster. He'd earlier been demoted from the board (which he chaired).
- Chief technology officer Mira Murati was named interim CEO while the company conducts a formal search.
- By the evening, three senior researchers reportedly had resigned, according to The Information.
The big question: What exactly happened?
- There are virtually no details from the company, and thus far, public comments from Altman and Brockman have been limited, including a timeline of how they were notified.
- Microsoft — OpenAI's biggest collaborator and investor in its for-profit arm — was blindsided, our colleague Ina Fried reported, learning about the move only a minute before the public announcement. In a statement from CEO Satya Nadella, the company did say it remains committed to OpenAI.
The intrigue: According to journalist Kara Swisher and media reports, a rift had developed within the company's leadership over its tech development vis-a-vis its mission of creating safe AI, leading to the ouster.
Thought bubble: Attracting investors — the primary reason OpenAI created a "capped" for-profit arm in 2019 — requires building a business that keeps creating assets that investors find valuable and potentially profitable.
- Assuming those dynamics are true, it's unclear why the board would be surprised to see Altman push the company in an aggressive direction business-wise.
- But it is a delicate balance to strike, nonetheless.
Meanwhile: This could become egg on Microsoft's face, given how much money the behemoth poured into OpenAI, and how closely it's aligned with its tech.
- So far, Microsoft has reportedly invested $13 billion into OpenAI's for-profit arm, but without a board seat or any other legal mechanism to exercise influence.
- That's also a huge investment into a company that's actually overseen by its nonprofit entity's board — not a group of directors solely focused on shareholder value.
On the flip side: Not finding out about a leadership shakeup until the last minute could be a feature, not a bug.
- Microsoft's deep investment and partnership have enabled it to benefit from OpenAI's tech without having to take responsibility for governance choices or other moves.
Yes, but: Even if Microsoft is fine with the nonprofit, bettering-humanity aspect of OpenAI's structure, venture capitalists paying top dollar for shares in the for-profit arm are, first and foremost, in the business of financial returns.
What's next: Expect some more details to trickle out in the days to come — and perhaps for Altman to reveal the next moves he hinted at in his public statement.
2. Zooming out: OpenAI's structure
Screenshot: OpenAI website.
👆 If you need a refresher on OpenAI's structure, here's one.
- And give this more detailed overview on its website a read.
3. Zooming in: OpenAI's investors
Illustration: Sarah Grillo/Axios
Along with Microsoft, OpenAI's for-profit arm has a number of blue-chip investors, based on news announcements and media reports, but neither of them have any say in its direction. Investors include:
- Sequoia Capital
- Andreessen Horowitz
- Founders Fund
- Thrive Capital
- Y Combinator
- Bedrock Capital
- Tiger Global
- Khosla Ventures
(If we've missed any, feel free to send me a note!)
📚 Due Diligence
- These are the people that fired OpenAI CEO Sam Altman (Forbes)
- Microsoft's $13 billion bet on OpenAI carries huge potential along with plenty of uncertainty (CNBC)
- Rogue superintelligence and merging with machines: Inside the mind of OpenAI's chief scientist (MIT Review)
🙏 Thanks for reading! And to Javier E. David and Brad Bonhall for editing. See you Monday for Pro Rata's weekday programming, and please ask your friends, colleagues and AI investors to sign up.
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