OpenAI's misalignment and Microsoft's gain

* Tigris is DOA - If because it would piss off the MSFT board but mostly because the SEC would arrest Sam assuming he’s an officer at MSFT. He could maybe be a passive investor, but that’s it

* People really think many Open Ai employees will give up their equity to get whatever mediocre stock grant their level at Microsoft has? And 1% raises, no bonus some years, and the board forced headcount reductions?

* Sam has even less power with the board, and the board in a 3 trillion dollar corporation would be even more risk averse than the OpenAI one

* there was a ton of fan fiction yesterday online about Satya forcing a move on the board. This was never really a thing. He made one of the worst investments in the history of SV in terms of keeping power to make sure your money is used correctly. $10B for 0 votes or any power to change votes

`The biggest loss of all, though, is a necessary one: the myth that anything but a for-profit corporation is the right way to organize a company.`

I don't see how anything that happened this weekend leads to this conclusion. Yes, it seems likely that the board's actions will result in an OpenAI with much smaller revenue and consumer traction. But the whole reason for setting up OpenAI as a non-profit was precisely ensuring that those were not the overriding goals of the company.

The only conclusion that seems warranted is that "the myth that anything but a for-profit corporation is the right way to organize a for-profit company.", but that is pretty obvious.

I don't think Microsoft is necessarily in a better position than it was on Thursday. If we're tallying up points:

    + More control over the full AI stack
    + Effectively they will own what was once OpenAI, but is now really OpenAI 2.0
    - OpenAI 2.0 is probably a worse business than OpenAI 1.0, which was, prior to the coup, a well-oiled machine
    + Control over OpenAI 2.0 operations, which can lead to better execution in the long term
    - Higher wage costs
    - Business disruption at OpenAI, delaying projects
    - Potential OpenAI departures to competitors like Google, Meta, Anthropic, Amazon, Apple (?)
    - Risk that OpenAI 1.0 (what's left of it) either sells to any of those competitors
    - Risk that OpenAI 1.0 actually goes open source and releases GPT-4 weights

Called it, EEE is complete. This is old Microsoft magic. I hope younger people starting their careers are taking note. All that money gates is giving away to buy his way into heaven came from the same tactics.

Everything is good in moderation, and with AI we are taking our efficiency past that good point. AI not only takes jobs away from creatives such as illustrators and can be used for identity theft, it also is removing the reliance that people have on each other.

Society is held together because people need each other. People meet each other through needing each other, and this is what makes local communities strong. AI takes that away so that the only entities we need are big tech like Microsoft, Google, and other soulless organizations.

It is a descent into feudalism, where everyone will pay big tech for basic living necessities (first option, later a necessity, like the smartphone).

If a man or woman wants to live independently of big tech, it will be harder and harder now, and we are losing are sense of what it means to be human through the immoral actions of these companies.

I think what remains to be seen is who is on the right side of history. The real loser here is probably ethical AI. I know this won’t be a popular opinion around here, but it’s clear to me that with computing and AI, we may be in an echo of the Industrial Revolution where the profit motive of the 19th century led to deep human injustices like child labor and unsafe and inhumane working conditions.

Except of course that AI could have even more impact - both positive and negative, in the same way socmed has.

Hmmmh?

https://en.wikipedia.org/wiki/Robert_Bosch_Stiftung

https://en.wikipedia.org/wiki/Tata_Sons

If anything it seems like the more likely lesson is that Altman manoeuvred OpenAI into a situation which was incompatible with its non-profit objectives.

I would quibble with this slightly. They do have a right to fire, but they're doing a poor job of working in the not-for-profit's interests if they do so in a way that collapses the value of their biggest asset (the for-profit), especially when other options are potentially available. e.g. a negotiated exit, providing proper warning to their investors etc etc.

I don't think it's possible that the cultures of OpenAI and MS can be made compatible. MS is dreary. Highly effective at productizing, yes. But the culture that propels deep innovation -- that is not going to last.

They can't just magically recreate what OpenAI has done. The data sets, the tooling, the models, the everything around it. It will take so long for MS to catch up even if they had 100% of their people working on it tomorrow.

The rest of the market is going to benefit more than MS.

I can't get past this snippet:

> they ultimately had no leverage because they weren’t a for-profit company with the capital to be truly independent.

Maybe I don't understand non-profits, but.. they're allowed to amass a war chest for expansion and to pay for dependencies, right? They're not compelled by charter to have no capital like some sort of a corporate equivalent of a monk -- it's just OpenAI that did not have enough capital to grant them better negotiating terms. How is that different from any other startup that gives up ownership of its IP in exchange for investment?

Alternatively, we could have these companies turned into research organizations run by the government and funded by taxes they way most research (e.g. pharmaceuticals) should be. There's more than one way to get good research done, and having it public removes many strange incentives and conflicts of interest.

Be no evil, for example. Billions and billions were made when that phrase was erased.

The argument over for-profit vs. non-profit is largely meaningless, as anyone who is paying attention knows that 'non-profits' just use different methods to distribute the revenue than for-profits do, using various smoke-and-mirrors approaches to retain their legal status. Arguably a non-profit might put more revenue back into R & D and less into kickbacks to VC investors but that's not always the case.

Additionally, given all the concerns about "AI safety" open-source seems like the better approach, as this is a much better framework for exposing biases, whether intentional or accidental. There are many successful models for financing the open-source approach, as Linux has shown.

This is a big picture idea that we should examine more closely. Right now, in the heat of the chaotic collapse, it's easy to conclude that for-proft corp structure is the only way to go. But I think we should take a "proof is in the pudding" approach and remember all the amazing things that OpenAI accomplished under it's non-conventional org structure. Maybe that non-conventional org structure was a key ingredient in OpenAI's success? Sure, we now know that "long-term stability" does not seem to be a quality of this org structure, but nonetheless it seemed to have lots of other desirable qualities.

Ouch. Is that really the ideal vision of founding a SV startup?

"None of these companies appease China; they refuse to provide service under those conditions and/or they are IP range blocked. Microsoft does service China with Bing, for example.

You should not sell OpenAI's to China or to Microsoft, [or to China or Russia through Microsoft]

Especially after a DDOS by Sue Don and a change in billing.

[1] https://en.wikipedia.org/wiki/List_of_websites_blocked_in_ma...

I don't know whether that's true, nor do I know went on, but it seems interesting to consider...

If OpenAI were government, and the history involved awarding a contract, or administering regulations, we have the concept of a revolving door.

A lot more in here, that actually helps to understand what's going on with openai, and what might happen next in the space.

I think the last paragraph is a key point/question.

"Ultimately, though, one could make the argument that not much has changed at all: it has been apparent for a while that AI was, at least in the short to medium-term, a sustaining innovation, not a disruptive one, which is to say it would primarily benefit and be deployed by the biggest companies. The costs are so high that it’s hard for anyone else to get the money... ..This, in the end, was Nadella’s insight: the key to winning if you are big is not to invent like a startup, but to leverage your size to acquire or fast-follow them."

Use models like innovative disruption with caution. Look to their assumptions.

How this plays out is not going to follow the pattern of web 2.0 or Kodak digitization.

The road to AGI is one thing. The road to 1 billion market caps.. not necessarily that same thing.

The road to victory, or definition of victory, are very vague still.

You would first have to make the case that those $11B that gave them the perpetual access to IP are worth $0. Probably not the market cap of OpenAI, but also not 0.

I think he might regret publishing this a wee bit early :)

Remember skype? Microsoft had to buy it twice to gain usable access to IP.

To me the target user of chatGPT needs to have some level of expertise in the domain their asking a question, as based on how gpt works, chatGPT will eventually produce an output with misinformation, therefore someone familiar with the subject matter would have a higher chance at catching the nuance in a response and be able to continue their conversation.

Open AI structured its organization such that there's no boss. And even if there is one, it's not about the money.

Reality hits Open AI: There is always a boss and it's always about money.