Welcome to Runtime! In today's special edition: how OpenAI's board of directors changed the course of Microsoft's AI strategy, and what comes next.
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Own and control
During a wild, perhaps unprecedented weekend in tech history, OpenAI's board of directors exposed the glaring weakness behind Microsoft's decision to bet the company on its technology only to give the software giant a chance at emerging from the turmoil in a much stronger position than it was last week.
It's hard to imagine that anyone receiving this email today is unaware of the basic sequence of events that followed Friday's shocking announcement that OpenAI's board had fired co-founder and CEO Sam Altman after "a deliberative review process" that "concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities." But just in case, here's a quick recap:
- Altman, OpenAI's high-profile leader and the de facto spokesman for the generative AI boom, was replaced by OpenAI CTO Mira Murati, who The New York Times described as essentially the head of operations for the company.
- OpenAI co-founder and President Greg Brockman, who was also chairman of OpenAI's board of directors yet kept in the dark about the plan to dismiss Altman, resigned shortly after the news broke.
- Tense negotiations between OpenAI's board, Altman, and Microsoft (its most prominent investor, said to have been "blindsided" by the announcement) began almost immediately in hopes of finding a way for Altman to rejoin the company after employees revolted over the decision.
- After OpenAI announced late Sunday night that Altman would not return and that former Twitch CEO Emmett Shear would take over, Microsoft CEO Satya Nadella announced that it had hired Altman and Brockman to lead a new division focused on AI research.
Given that hundreds of current OpenAI employees seem interested in following Altman and Brockman, Microsoft might have just started the process of slowly acquiring the top AI research company in tech for little more than a hectic weekend. It also solved a very basic problem that accompanied its embrace of OpenAI.
- Under the terms of Microsoft's $13 billion investment in OpenAI, it enjoys the rights to its ground-breaking AI models until the development of artificial general intelligence, which for the purposes of this conversation is far enough away not to matter.
- But while it owned the rights to use those models as the backbone of nearly every new product release it has lined up for the foreseeable future, Microsoft had no control — or even influence — over the people who were developing that technology.
- If Altman and Brockman successfully entice the bulk of OpenAI's staff to join Microsoft, it will have direct control over the future development of GPT models while still having rights to use whatever the diminished OpenAI produces.
- And according to Semafor, it has only transferred a small amount of cash from its most recent $10 billion investment round to OpenAI, with the rest booked as future cloud computing credits on Azure.
The chaos opens a small window for Microsoft's rivals to catch up to OpenAI's product roadmap.
- Altman and Brockman will need some time to get up and running at Microsoft, and OpenAI might be dead in the water if most of its staff quits before Thanksgiving.
- That gives AWS, Google, Anthropic, Hugging Face, and Cohere a chance to recruit OpenAI's engineers and customers, a process that is already underway according to The Information.
- Given how quickly everything related to OpenAI has moved in the last year and especially the last weekend, however, those rivals will have to move fast to capitalize on this opportunity.
- Case in point: right before this email went out, The Verge reported that Altman is still considering a return to OpenAI if the board of directors resigns following the employee revolt.
Should it pull off this coup, Microsoft is taking an enormous leap of faith by once again betting the future of its company on Altman.
- OpenAI's board has yet to explain what caused them to fire Altman for a lack of candor, raising more questions than it answered by clarifying that it had nothing to do with financial wrongdoing or product missteps.
- As Eric Newcomer noted, Altman left his leadership position at startup incubator Y Combinator under murky circumstances, and early OpenAI employees were concerned enough about the direction of the organization under Altman to break off and start Anthropic (backed by Google and Amazon) in 2021.
- Microsoft employees have been through round after round of layoffs this year only to see Nadella offer Altman and Brockman "the resources needed for their success," and another reorganization of its considerable AI research division seems inevitable.
- But if Altman takes the helm, Microsoft's long-term AI strategy immediately looks more attractive to its current and prospective enterprise tech customers, who will feel more confidence about embracing OpenAI's tech roadmap if it is being shepherded by an enterprise vendor rather than a mission-oriented non-profit.
And unless anything else crazy happens during what is traditionally one of the slowest weeks of the year for technology industry news, it's not hard to predict what folks will be talking about at every cocktail party next week in Las Vegas.
Thanks for reading this special edition of Runtime! We now resume our previously scheduled vacation already in progress, and see you next week from AWS re:Invent in Las Vegas!