Money, Power, and Stewardship: Decoding the “OpenAI Saga” of 2023
In November 2023, the tech sector and Silicon Valley ecosystem was holding its breath following a series of quick-fire events at OpenAI. The US-based organization behind the revolutionary chatbot ChatGPT fired its co-founder, CEO and spokesperson Sam Altman as well as co-founder and chairman of the board Greg Brockman and, under an uproar of employees, investors, stakeholders and press, rehired him a few days later.
While a fascinating spectacle in itself, special about this case is that, as Sam Altman puts it, “in some important sense, [OpenAI is] just not a regular company”, both in terms of 1) OpenAI’s ownership structure as a “capped profit” company combining a nonprofit and a for-profit arm and 2) OpenAI’s role in spearheading the development of artificial intelligence (AI) with profound implications for the future of humanity.
So these events — in the press and media already known as the “OpenAI Saga” — have brought the topics of ownership and governance, power and money and the fear of game-changing technologies controlled by shareholder value maximizing capitalism to the frontpages of media outlets.
Many people have contacted us for our view on OpenAI’s structure and evaluation regarding the recent happenings around OpenAI from a steward-ownership perspective — asking questions we have ourselves been harboring for some time. We wanted to understand
- what happened at OpenAI and why;
- what parts of the events were based in the ownership, financing and governance structure;
- what similarities and differences exist between the OpenAI structure and steward-ownership as implemented in companies around the world;
- and what we and other entrepreneurs, investors and changemaker organizations around the world can learn from it.
In exploring OpenAI’s structure and the events around the firing of Sam Altman in the context of steward-ownership, we show that OpenAI’s structure is a form of steward-ownership — with room for potential in bringing stewardship to life and significant opportunity for development when looking at governance, investor relationships and incentive structures. While many different factors have played a role in the events in November 2023, at the heart of it lie “money, power and ego” [1] and the clash between visions of AI safety research and the ambition to create viable AI products, also expressed in an internal dichotomy between a nonprofit and for-profit culture.
While we are discussing the case of OpenAI specifically, this analysis extends beyond the singular example. On a bigger scale, the case showcases like no other the relevance of challenging the conventional notions on corporate ownership and entrepreneurship and of finding new answers — particularly in fields as game-changing as artificial intelligence. Here, steward-ownership presents a viable solution. At the same time, OpenAI’s experiences serve as a testament to the imperative of not just a visionary and aligned ownership model but also the need for bringing stewardship to life and combining it with aligned governance, stakeholder-relationships, incentives, and a profound profit-for-purpose culture.
Our perspective
We, that is the Purpose Foundation. Founded in 2015 to explore models of corporate ownership healthy for people, society and planet, we have since coined the term steward-ownership and supported actors worldwide in learning more about, transitioning and financing companies in steward-ownership.
Steward-ownership enshrines two principles in the legal structure of the company:
- Self-governance: The control over the company — i.e. the majority of the voting rights — is always held by people who are closely connected to the company, its operation, purpose and values. Voting rights are neither automatically inherited nor can they be speculated with and sold for financial gain of the shareholders. They are passed on from generation to generation of stewards not based on genetic relation or wealth but based on aligned abilities, values and familiarity with the company.
- Capital lock/ Purpose-orientation: The company’s value as well as its profits cannot be extracted by the shareholders. Instead, profits serve the purpose of the company and are either reinvested in the company, stakeholders, used to cover capital costs and give investors risk-adequate returns or donated. The company is no longer an asset with the main purpose to create wealth for its shareholders (legally speaking) but is serving a purpose. Profits are not an end in itself, but a means to this purpose.
So why should we look at OpenAI in the context of steward-ownership?
AI is too important to get ownership wrong
As Marissa Mayer, former CEO of Yahoo, put it “AI is too important to get this [ownership and governance] wrong” [2].
The field of AI and development of artificial general intelligence (AGI) has been compared to the development of nuclear energy or the internet, with indisputable game-changing implications for humanity and civilization [3]. In the face of this potential, good and bad, the relevance of finding new answers to the question of “who has power, why?” and “who benefits from the financial value created, why?” is hardly disputable. It is apparent to most: the conventional path that whoever puts the most money on the table receives power over this crucial technology, lastly resulting in power ending up with the shareholders at large corporations and investment funds, can not be the answer here [4]. Ted Chiang brings this to the point stating that in his opinion, “most fears about AI are best understood as fears about capitalism” [5]. Meaning: it is not fears in the technology itself, but rather fears of AI-development driven by financial incentives in a shareholder value maximizing way [6].
This fear is also reflected in OpenAI’s founding origin and structure up to this point. They were founded as a counterweight to shareholder value-driven corporations as “AI was too powerful a technology to be controlled by profit-seeking corporations or power-seeking states” [7]. This deeply influenced their choice of legal structure first as a nonprofit and later, when looking for investment capital, as a steward-owned or “capped-profit” business to withstand the forces of shareholder value capitalism. As Sam Altman puts it:
“We have to find some ways to play on the field of capitalism. But I don’t think [money] will ever be our primary motivator. (…) I like capitalism. I think it has huge flaws, but relative to any other system the world has tried I think it is still the best thing we came up with. But that doesn’t mean we shouldn’t still strive to do better.” [8]
Steward-ownership challenging “corporate physics”
Steward-ownership is a way to play on the field of capitalism while shifting power dynamics and incentives in a way that the purpose of the company remains in focus in the long run: Profits as a means to an end, not a goal in itself. In that sense, it moves beyond the dichotomy of state-ownership or shareholder value-driven private ownership, beyond nonprofit or for-profit, leveraging the positive power of private entrepreneurship for the benefits of people, society and planet. And linking back to OpenAI: Leveraging the positive power of AI for the benefit of humanity.
OpenAI’s steward-ownership structure is in line with a proven history of steward-ownership in Europe and all over the world. But when events were on the loose this November, OpenAI was regarded as a standalone case by media, press and experts. Anything that had gone wrong there was immediately put on the known unknown — the ownership structure — without wondering what was working better in the many successful cases of steward-owned or similarly structured businesses. (Perceived) learnings were generalized and reflected on alternative ownership and financing structures in general. OpenAI is described as “an example of why stakeholder structures fail” [9], as pointing to the “naivety of the founders” [10] and conclusions are drawn such as “I’d imagine that they [investors] ’ll be more careful in backing startups with unusual governance structures” [11].
On an even larger scale, Nathan Benaich, AI investor at Air Street Capital, sees the corporate structure of OpenAI as “an experiment to defy the laws of corporate physics, and it appears that physics won out” [12]. This is a chance for us and the whole steward-ownership ecosystem to show: No, this paradigm behind “corporate physics” does not hold up. Let’s not kid ourselves: shareholder value maximization is not gravity.
Our contribution to the discussion
We will be looking at the OpenAI structure and happenings in November 2023 from a steward-ownership perspective and the questions of money and power. We will draw on our experience in thinking about steward-ownership, supporting companies in transitioning into steward-ownership and investing in a steward-ownership aligned way.
We are not going to be the ones who talk a) about the dangers or potentials of artificial intelligence and the necessary regulative guardrails or regulative structures by states for this or b) about internal happenings at OpenAI besides what one can gather as avid readers. Everything in these articles is based on available information online. We are also not going to comment on any personal conflicts or questions of ego that were probably also involved.
In order to provide the best possible understanding to navigate these complex questions, we split our results into two separate articles.
In our first article, “OpenAI in the context of Steward-Ownership”, we will briefly outline OpenAI’s origin and history and describe how it led to the ownership structure it has today. We will then evaluate this ownership structure in the context of steward-ownership.
With that in the back of our mind, our second article “Bringing Steward-Ownership to Life While Playing on the Field of Capitalism” will look at the events around Sam Altman’s ousting in November 2023 and how the structure and stewardship of the people in charge came to life. We will then draw learnings from the case as related to steward-ownership and aligned financing structures.
We hope you enjoy our perspective on OpenAI in the context of steward-ownership.
→ Blog Post 1: OpenAI in the context of Steward-Ownership
→ Blog Post 2: Bringing Steward-ownership to Life While Playing on the Field of Capitalism
This content is Creative Commons “CC BY-ND 4.0” licensed. For more information, please visit our website here.
Sources
[1] Metz, C. (2023): Inside the Coup at OpenAI. The Daily. Accessed 27.11.2023
[2] Knight, W. & Levy S. (2023): How OpenAI’s Bizarre Structure Gave 4 People the Power to Fire Sam Altman. Wired.com. Accessed 20.11.2023
[3] Gordon, C. (2023): How General AI will eventually reshape everything. Forbes. Accessed 02.12.2023
Wroe, D. (2023): Artificial intelligence and the future of humanity. ASPI. Accessed 05.12.2023
Altman, S. (2023): Interview with Sam Altman. What now? with Trevor Noah. Accessed 18.12.2023
[4] O’Connor, K., Thompson , D., Austin, G. (2023): Part 1: Jaylen Brown’s Crucial Season, an OpenAI Rebellion, and KC’s WR Shortage.The Bill Simmons Podcast. Accessed 18.12.2023
[5] see Klein, E. (2023): The Imminent Danger of A.I. Is One We’re Not Talking About. The New York Times. Accessed 27.11.2023 and Levine, M. (2023): Who Controls OpenAI?. Bloomberg.com. Accessed 22.11.2023
[6] Klein, E. (2023): The Imminent Danger of A.I. Is One We’re Not Talking About. The New York Times. Accessed 27.11.2023
Levine, M. (2023): Who Controls OpenAI?. Bloomberg.com. Accessed 22.11.2023
[7] Klein, E. (2023): The unsettling lesson of the OpenAI Mess. New York Times, accessed 27.11.2023
[8] Altman, S. (2023): Interview with Sam Altman. What now? with Trevor Noah. Accessed 18.12.2023
[9] Boyle, P. (2023): Sam Altman and OpenAI. What went wrong?. On Finance. Accessed 25.11.2023
[10] Fulterer, R. (2023): Ringen um Sam Altman: Open AI wollte selbstlos dem Wohle der Menschheit dienen. Diese Illusion musste zerplatzen. Neue Zürcher Zeitung. Accessed 22.11.2023
[11] Palazzolo , S. (2023): The Unknowns Left in the OpenAI Saga; A Silver Lining in Nvidia’s Blowout Earnings. The Information. Accessed 28.11.2023
[12] Dave, P. (2023): How OpenAI’s Bizarre Structure Gave 4 People the Power to Fire Sam Altman. Wired. Accessed 19.11.2023
