The Power of a Charismatic Founder
Reflecting on the repercussions of the firing and rehiring of Sam Altman, CEO and Co-founder of OpenAI.
tl;dr
OpenAI, the creator of ChatGPT, experienced unprecedented growth both in user base and valuation over the past few years.
Shockingly, the company’s board of directors fired Sam Altman, its CEO and Co-founder, causing chaos inside and outside the organization.
Soon after, over 95% of OpenAI’s employees signed a letter demanding that the board reverse its decision, which ultimately led to Altman being reinstated and a new board hired.
The event highlights the power of a charismatic leader in influencing company dynamics and even entire markets.
Uncertainty remains about OpenAI’s future, but it is undeniably tied to Sam’s success.
Ever since OpenAI launched ChatGPT exactly one year ago, it has swiftly evolved into one of the fastest-growing startups in history, both in terms of user base and valuation. Its rapid ascent to AI dominance was nearly overshadowed by an even quicker downfall when its board of directors fired Sam Altman, OpenAI’s CEO and Co-founder, a couple of weeks ago. This unexpected development left the technology world in shock, with no one seemingly anticipating such a move, including Microsoft, OpenAI’s largest investor and partner.
Now that the situation is somewhat more under control, it seems like a good time to examine the current facts and reflect on what this story can teach us about the dynamics of the startup game.
Breakdown of the events
Before we delve into the actual facts, it is important to give some context about OpenAI. The organization was founded in 2015 by Sam Altman, Greg Brockman, Reid Hoffman, Jessica Livingston, Peter Thiel, and Elon Musk. OpenAI was originally registered as a nonprofit research organization whose mission was “to ensure that artificial general intelligence benefits all of humanity”.
It soon became clear that a nonprofit structure wouldn’t be ideal for attracting the necessary resources to achieve this mission. Therefore, in 2019, the organization underwent a restructuring that included the establishment of a for-profit subsidiary capable of accepting external capital. This subsidiary was legally bound to uphold the nonprofit's mission, and a board of directors was formed within the nonprofit to ensure that the organization would successfully fulfill its mission and maintain control over the for-profit subsidiary.
Friday, Nov. 17: Sam Altman fired by the board of directors, Mira Murati, OpenAI’s CTO, appointed as interim CEO.
Up to this day, it is still unclear what the motivations behind the decision were but the company’s official communication stated:
“Mr. Altman’s departure follows a deliberative review process by the board, which concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities.”
Following the news, Greg Brockman, the President and Co-founder of OpenAI announced he was leaving the company as well.
Saturday, Nov. 18: nobody knows what’s going on.
OpenAI employees and investors are infuriated after hearing the news of this sudden leadership change. Rumors started going around that Sam was talking to investors about building a new AI venture focused on hardware components to train models.
Sunday, Nov. 19: Altman joins Microsoft, Emmett Shear replaces Mira as interim CEO.
Microsoft announces that Sam and Greg will be joining Microsoft to lead a new “advanced AI” team inside the corporation. The Open AI board announces that Emmett Shear, the CEO of Twitch, would be replacing Mira Mrati as OpenAI’s interim CEO.
Monday, Nov. 20: employees revolt.
Over 95% of OpenAI’s employees sign a letter critiquing the board’s decision to oust Sam and demanding that the current board of directors resign, stating that they are “incapable of overseeing OpenAI”. The letter also hinted that Microsoft would welcome all employees to join the company’s new advanced AI team.
Tuesday, Nov. 21: Altman reinstated with a new board of directors.
After 5 days of chaos, OpenAI announces that both Sam Altman and Greg Brockman will be coming back to their previous roles at the company. The new initial board will consist of Bret Taylor (Chair), Larry Summers, and Adam D’Angelo. Microsoft received a board observer (non-voting) seat.
Reflections
An ambitious Silicon Valley founder
Sam Altman follows the typical early career trajectory of a Silicon Valley founder. In 2005, he dropped out of Stanford to co-found his first startup, Loopt, a location-based social network app. At its peak, Loopt had millions of users, but it eventually lost momentum and was "acquihired" in 2012, meaning it was acquired primarily for the skills of its employees.
However, Sam soon started to attract the attention of influential figures in the tech industry, including Paul Graham, the co-founder of the renowned startup accelerator Y Combinator. In 2009, Paul listed Sam as one of his top 5 founders, alongside names such as Steve Jobs, Larry Page, and Sergey Brin. Graham highlighted Sam’s ambition and determination as distinguishing factors.
Sam's association with Paul Graham led him to join Y Combinator as a partner in 2011, eventually rising to the position of president in 2014. During his time at YC, Altman co-founded OpenAI with Greg Brockman, Elon Musk, Jessica Livingston, and Peter Thiel. In March 2019, Sam left YC to devote himself full-time to OpenAI, assuming the role of CEO. Over the course of his career, it is safe to say that he developed valuable connections and a strong reputation within the Silicon Valley tech ecosystem.
Ramifications of a charismatic leader’s dismissal
You might think that Sam was merely fortunate to have won over some influential individuals, but that's far from the truth. In addition to his previously mentioned determination, his charisma appears to have played a significant role in his journey.
He differs notably from other tech personalities like Elon Musk, Steve Jobs, or Mark Zuckerberg, but the truth is none of them is alike. Charisma manifests in various forms and the common thread that validates a charismatic leader is their ability to gain the unwavering confidence of thousands of individuals who contribute to building their respective companies. And that is certainly the case for Sam.
Altman’s dismissal had the potential to destroy over $80 billion in value. As mentioned in the breakdown of the events, Greg Brockman, who was a key contributor to ChatGPT’s development and OpenAI’s success up to this point, was quick to announce he was following Sam wherever he set out to go. Soon after that, over 95% of OpenAI’s total employee count signed a letter stating that they would also leave the company and potentially join Microsoft if the board’s decision wasn’t reconsidered. A company without its employees is worth virtually $0.
Altman’s dismissal highlighted that a charismatic leader has the power to surpass even the highest level of authority in a company. The board of directors is a group of people whose key goal is to oversee the CEO’s performance and make strategic decisions that will help the company achieve its mission. A majority vote inside a board should be the ultimate say in a decision, and even Altman himself said in an interview that the board could fire him at any moment. Well, that didn’t seem to be the case at OpenAI after all given that he’s back in his previous position.
Altman’s dismissal even destabilized an entire nascent market. Every founder and investor involved in AI seems to have been caught off guard by this unexpected news and was watching the news to learn what would happen next. In addition, Altman’s firing also accelerated an ongoing clash between different points of view on AI development. This conflict deserves an entire post but, in summary, it is a conflict between accelerationists — people who think AI will bring immense benefits to the global population and should be developed as fast as possible — and decelerationists — people who think advanced AI development is risky and must be executed slowly or not at all. Again, we don’t know for sure what was behind the board’s decision but some speculate that Sam wanted to go faster (accelerationist) and the board wanted to go slower (decelerationists).
What’s next?
OpenAI was definitely at its peak when the firing happened. Just two weeks prior, they hosted an event unveiling remarkable new products that generated significant hype. Employees were able to capitalize on the momentum and could sell their shares of the company at an over $80 billion valuation. ChatGPT boasted over 100 million active users, and investors were reaping massive gains from their investments.
However, momentum is everything in the startup game and this event undoubtedly had an impact on OpenAI’s streak. The company appeared to come to a halt when the shocking news broke. Allegedly, OpenAI’s enterprise customers started engaging with their competitors. The recently announced GPT Store was delayed to next year, and many investors realized that their massive gains were not as safe as they once believed.
It is challenging to predict the exact long-term consequences of this event, but it is evident that the company needs to establish an internal governance structure that works. As for Sam, he is undeniably a key figure in OpenAI’s success. And, as we have witnessed with individuals such as Adam Neumann and Elizabeth Holmes, charismatic leaders can fail spectacularly and bring their entire legacy with them. I’m not suggesting that he will follow their fates, but the mysterious nature of the board’s decision is unsettling, to say the least.
Dive Deeper
Sam Altman explains being fired and rehired by OpenAI - The Verge
The Unsettling Lesson of the OpenAI Mess - The New York Times
Lessons from the corporate governance 'mess' at OpenAI - Yahoo.com
Thought of the Month
In tribute to Charlie Munger, who passed away last month, I’m sharing one of his many wise quotes. Not many people know it but he had a very tough early life, going through a divorce at the age of 29 and losing one of his 3 children around the same time to leukemia. Yet, he didn’t give up and managed to become one of the greatest investors of all time.
"You should never, when faced with one unbelievable tragedy, let one tragedy increase into two or three because of a failure of will." — Charlie Munger.
Chart of the Month
BYD, the Chinese car manufacturer, is closing in on Tesla’s leadership in the electric car market. Of course, there is a big positioning difference between the two companies’ products, with Tesla being much more focused on the premium market segment. Nonetheless, it is impressive to see BYD’s more under-the-radar growth.