Unusual Governance Structure Backfired Openai, Following The Sudden Oust Altman

In the first quarter of 2023, reporters and tech company analysts said that the governance structure of OpenAI is impeccable. Now the governance structure has backfired the OpenAI. The governance of OpenAI fired its most important member, CEO Sam Altman. 

Later on Friday, Greg Brockman resigned, he and his team protested against this sudden oust. They protest to retrain altman back. In the meantime, Altman was hired by Microsoft’s CEO Nadella. Nadella also offered Brockman and other developers of OpenAI to join Microsoft. 

The investors also ordered to bring back Altaman to this company. Behind the scenes, Tiger Global and Sequoia Capital had been negotiating. 

However, the venture investors including Tiger Global, a16z, and Sequoia Capital, none of them have board seats in OpenAI. Because they hold the shares of this company through tender offers, they don’t have much leverage in the organization. 

On Sunday Jeremy Kahn reported, “entirely dependent on Microsoft’s cloud computing data centers to both train and run its models”.

He also posts a notice:-

By turning to a single corporate entity, Microsoft, for the majority of the cash and computing power OpenAI needed to achieve its mission, it was essentially handing control to Microsoft, even if that control wasn’t codified in any formal governance mechanism. Ironically, if OpenAI’s nonprofit board chooses to ask Altman to return and resign, as they are contemplating, it will prove that Altman’s structure failed—OpenAI was not able to raise billions of dollars from a big tech corporation while somehow remaining free from that corporation’s control.

All of the events from this chaotic weekend suggest that OpenAI’s unusual governance structure—organized by Altman himself—backfired on him. You can read the rundown of what happened this weekend here. If you have more information or thoughts on the situation to share, reach out to me below.

See you tomorrow,

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