OpenAI – Time Bomb

Philanthropy and profits don’t mix.

• OpenAI looks like a badly run company where there is constant infighting between the executives and the board highlighting that the core problems have not been fixed which is likely to lead to another implosion.
• This is a risk that Microsoft cannot afford to have materialise and so my long-term expectation remains that it will acquire OpenAI.
• OpenAI was founded as a philanthropic organisation with the goal to deliver artificial general intelligence (AGI) to the world and ensure that it was made available to everyone.
• This came under serious pressure in 2022 when the explosion of popularity of ChatGPT led the company to realise that it could make a lot of money by selling AI services.
• PwC is a case in point which has just signed up for 100,000 ChatGPT licences and will also distribute the service to its clients.
• The net result is that OpenAI is straying far from its original purpose which is fine but unless the governance system is changed to reflect that, there is serious scope for conflict and a repeat near-death experience or an actual death experience.
• Most recently, one of the original founders Ilya Sutsekva left the company under a cloud which was followed by the disbanding of the safety and security team.
• This has now been replaced by a committee headed by Sam Altman which is a very far cry from what was promised back in 2016.
• This reads as the CEO of OpenAI not agreeing with the actions of the previous committee, disbanding it and replacing it with one with which the CEO does agree.
• These are not the actions of a non-profit company with a philanthropic intent to bring AGI to the world.
• In 2016 Sam Altman stated “We’re planning a way to allow wide swaths of the world to elect representatives to a new governance board” which intended to allow the world a say in what happens to it if AI becomes as central as OpenAI believes.
• This is a very far cry from what has just been announced and is demonstrative of just how far OpenAI has strayed from its original mission.
• The problem is that to maintain a philanthropic image, the corporate structure and the governance of the board are largely unchanged although most of the faces have been replaced.
• This means that the company is ripe for another blow-up and the bigger the revenues become the greater this risk becomes.
• Satya Nadella has done a stellar job since he became CEO at Microsoft and has completely turned the corporate culture on its head and done so with fantastic effect.
• However, the one blunder he has made is to create a single source dependency of most of his revenue-generating products where that source could self-immolate at any moment.
• This is why I think that Microsoft has no choice but to buy OpenAI at some point.
• This point is likely to be either the next time OpenAI sets itself on fire or when the AI bubble pops and everyone loses interest and cuts spending.
• This is why when I think about the competition in AI, I think of Microsoft and OpenAI as one company.
• This acquisition looks inevitable to me.