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In a shock announcement last Friday, OpenAI announced that Sam Altman would be leaving the organization after an internal review said he was “not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities.”
Since then, Microsoft CEO Satya Nadella has quickly capitalized on the situation, hiring not just Altman but also OpenAI co-founder Greg Brockman to lead a new advanced AI research team while extending an invitation to all of OpenAI’s talent.
Update 22/11: Well, that lasted long! Four days after Sam was removed from the OpenAI board, and two days after Sam joined Microsoft, Sam returned to OpenAI as CEO.
The below remains as a record of four days that – whatever twist comes next – will likely be seen as pivotal for the futures of the two tech giants and the Artificial Intelligence industry as a whole.
Internally, OpenAI appears to be on the verge of a mass mutiny, not just after the first interim CEO, Mira Murati, posted on X yesterday that “OpenAI is nothing without its people,” but also as over 670 employees have signed a letter to the board calling on them to step down after failing to reinstate Sam Altman.
“Your actions have made it obvious that you are incapable of overseeing OpenAI,” the letter said.
“We are unable to work for or with people that lack competence, judgment and care for our mission and employees. We, the undersigned, may choose to resign from OpenAI and join the newly announced Microsoft subsidiary run by Sam Altman and Greg Brockman.”
Now, for the first time in the generative AI arms race, OpenAI looks vulnerable. If leadership and research staff continue to defect to Microsoft, then the organization is going to have to work much harder to maintain its dominance in the market.
What OpenAI’s Defection Crisis Means for the AI Arms Race
One of the most interesting elements of Altman’s dismissal is the lack of detail provided by the board. It’s unclear what failing to be “consistently candid” means and signals a lack of transparency in how the company operates.
The event is also strangely timed, particularly considering that OpenAI concluded its first Dev Day Event in San Francisco earlier this month and unveiled new customizable GPTs.
READ MORE: Who Owns OpenAI?
However, perhaps the most significant implication for the AI arms race is that Microsoft has an unprecedented opportunity to catch up on years of research.
According to Fortune, Microsoft has invested $13 billion into OpenAI, but the rapid movement of Satya Nadella to “acquire” OpenAI defectors suggests that these two organizations have moved from courting a strategic partnership to a more openly competitive, “frenemy” style relationship.
At least on the surface, Nadella is trying to maintain the appearance of an alliance with OpenAI.
Nadella wrote in a post on X:
“We look forward to getting to know Emmett Shear and OAI’s new leadership team and working with them. And we’re extremely excited to share the news that Sam Altman and Greg Brockman, together with colleagues, will be joining Microsoft to lead a new advanced AI research team”
We remain committed to our partnership with OpenAI and have confidence in our product roadmap, our ability to continue to innovate with everything we announced at Microsoft Ignite, and in continuing to support our customers and partners. We look forward to getting to know Emmett…
— Satya Nadella (@satyanadella) November 20, 2023
While Microsoft is a long-time investor in OpenAI with a financial incentive to see OpenAI do well, the rapid move to acquire as many employees as possible is unmistakably an attempt to strengthen its own AI ecosystem.
OpenAI’s leadership turmoil is also a positive for Google, who announced the release of PALM 2 earlier this year. It is in the process of producing a highly anticipated family of multimodal large language models (LLMs) known as Google Gemini.
The Upside for Microsoft
At the time of writing, Microsoft is not only onboarding two of OpenAI’s top executives who’ve presided over the most successful AI startup in history but is also onboarding other OpenAI research staff, including Jakub Pachocki, director of research at OpenAI, and Szymon Sidor, a research scientist.
Given that there is the very likely prospect that more OpenAI employees will follow this exodus and the fact that Microsoft is waiting with open arms, this newly created research team could be a force to be reckoned with in the AI market.
Though Microsoft has been playing catchup in the LLM market, it has an impressive AI product ecosystem comprising solutions like Bing Chat and Security Copilot, designed to support a mix of personal users and enterprises.
This ecosystem is also being enhanced at the hardware level, with the organization creating custom AI chips designed to help train LLMs and compete against competitors like Nvidia.
As an established, respected, and trusted brand in the enterprise market, Microsoft also has an opportunity to capture the interest of organizations that have experimented with AI but are nonetheless concerned about the risks of its deployment.
Infighting and a PR Crisis
The board’s decision to release Sam Altman has also created severe reputational challenges for OpenAI, with interim CEO Emmett Shear being forced to admit that the “process and communications around Sam’s removal has been handled very badly, which has seriously damaged our trust.”
From an outside perspective, it is concerning that OpenAI, an organization that has stood at the forefront of the conversation around the regulation of safe and responsible AI, has demonstrated such a disconnect between the board and its senior leadership team and how poorly it has communicated the reasons behind Altman’s departure.
The reality is that if OpenAI can’t get a hold of this crisis and get employees aligned with the board on pursuing responsible AI development, then the organization won’t have the alignment necessary to guide the broader conversation around AI regulation.
It’s an unsettling time for the flagship AI company, with prominent analyst Balaji suggesting: “Billions in value has apparently been destroyed overnight, though we’ll need to wait for the next OpenAI valuation to confirm that.”
NOT YOUR WEIGHTS, NOT YOUR MODELS
I hate to make this parallel, because (a) I respect everyone involved and (b) there is zero true wrongdoing alleged, (c) everyone seems to be acting on sincere beliefs, and (d) OpenAI is a historical accomplishment technologically, and…
— Balaji (@balajis) November 20, 2023
The Bottom Line
OpenAI may still be at the forefront of the AI arms race, but that position isn’t as entrenched as it was at the start of last week.
Mass defections, infighting, and reputational damage threaten to weaken that position going forward, even if the popularity of tools like GPT-4 and DALL-E 3 remain popular among consumers and organizations.
If Microsoft can onboard and retain Altman and a significant proportion of ex-OpenAI employees, it will be in an ideal position to close the gap.
