As a founding investor, why did Musk and OpenAI "turn against each other"?
Three years after OpenAI was founded, Elon Musk is ready to ditch the artificial intelligence research company he helped found.
Founded in 2015 as a nonprofit, OpenAI has the backing of billionaire tech luminaries such as Musk and Reid Hoffman, who have collectively invested $1 billion. OpenAI has attracted some of the field's top minds away from big tech companies and academic institutions.
But as early as early 2018, Musk told fellow OpenAI founder Sam Altman that he believed the startup had lagged badly behind Google, people familiar with the matter said.
At the same time, Musk has proposed a possible solution: he will take full charge of OpenAI and run it himself.
Altman and the other founders of OpenAI rejected Musk's proposal. As a result, Musk left the company and backed away from plans for a huge donation. This conflict eventually led to Musk announcing his departure from OpenAI on February 20, 2018. This will reshape an industry that is changing the world, and the outlook for the core companies in it.
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In the public eye, the conflict has also created a rift in the relationship between two of today's tech giants — Musk and Altman. News media company Semafor spoke to eight people familiar with the insider and revealed the details for the first time in "The secret history of Elon Musk, Sam Altman, and OpenAI."
Musk and OpenAI
In 2018, there's no reason to think that the impulsive Musk or the eccentric, reticent Altman will be the central focus of the "Silicon Valley Narrative," even though they've become some of the Valley's most famous figures.
On the one hand, Musk has other headaches, including the difficulty of ramping up Model 3 production capacity and the plummeting stock price, which have threatened the company's future.
On the other hand, OpenAI co-founder Greg Brockman, then chief technology officer, and others at OpenAI, also opposed Musk's takeover. According to people familiar with the matter, there has also been a power struggle within the company for this.
At this point, Altman, who also runs the famous startup incubator YCombinator, stepped in. He added the title of president in 2018 in addition to his directorship, according to tax filings.
Musk subsequently resigned from OpenAI's board. In public, both he and OpenAI have said his departure was due to a conflict of interest. That is, Tesla, which is developing its own artificial intelligence system for autonomous driving, will compete with OpenAI for talent.
There is some truth to this rationale for competition. Tesla has poached one of OpenAI's best minds - Andrej Karpathy. Later, he became the architect of Tesla's self-driving project.
But at OpenAI, few people believe that Musk left because of this. His departure speech before leaving the OpenAI office, blaming his departure primarily on potential conflicts of interest, was not accepted by most employees, who didn't believe the story at all.
The OpenAI announcement said Musk would continue to fund the organization, but according to people familiar with the matter, Musk has not done so. He had pledged to donate about $1 billion to OpenAI over several years (up from a previous $100 million donation), but that endowed him after he left, people familiar with the matter said. That left the nonprofit unable to afford the astronomical costs associated with training AI models on supercomputers.
That fall, it became more apparent to some at OpenAI that the costs of making OpenAI a cutting-edge AI company would rise. Google Brain's "transformer" opens up a new frontier along which AI can improve. But that means feeding it endless amounts of data to train it -- a costly endeavor.
But OpenAI made a big decision to move to these transformer models.
On March 11, 2019, OpenAI announced that it was creating a for-profit entity in order to raise enough capital to build the computing power necessary for large-scale AI models. “We want to increase our ability to raise capital while continuing to fulfill our mission, and no existing corporate structure that we know of can strike the right balance between the two,” the company wrote at the time. OpenAI said it was working on Investor profits are capped, and any excess goes to the original nonprofit.
Altman also made an unusual decision for a tech boss: He won’t take an equity stake in the new for-profit entity, according to people familiar with the matter. Altman, who has invested in several very successful tech startups, is already very wealthy.
He also believes that the company needs to become a commercial company to continue its business, but he told people that the project is not designed to make money. Steering clear of any ownership interest will help him stay true to his mission. But the decision actually put off some of OpenAI's potential investors, who worried that Altman wouldn't see the project's upside.
Less than six months later, OpenAI received a $1 billion investment from Microsoft. Microsoft can provide not only capital, but also infrastructure technology. Together, they built a supercomputer to train the models, eventually creating large models like ChatGPT and the image generator DALL-E.
When ChatGPT launched in November, OpenAI instantly became the hottest new tech startup, forcing Google to scramble to catch up. Musk was furious, according to people familiar with the matter.
In December, a month after ChatGPT launched, Musk shut down OpenAI’s access to Twitter’s “firehose” data — a permission that was allowed under a contract Musk signed before he bought Twitter.
On February 17, he tweeted: "OpenAI was created as an open source, non-profit company (that's why I named it 'Open'AI) as a counter to Google, but Now it has become a closed-source, profit-maximizing for-profit company effectively controlled by Microsoft."
On March 15, he tweeted: "I'm still baffled how a nonprofit to which I donated ~$100 million somehow became a $30 billion for-profit. If this is legal, why doesn't everyone do it?"
OpenAI declined to comment. Musk also did not respond to a request for comment. But then, he tweeted: "I'm sure everything will be alright". He also accompanied the tweet with a meme that read: "I realize that artificial intelligence, the most powerful tool humans have ever created, is now being monopolized by ruthless corporations."
Subsequently, The Information reported that OpenAI board member Shivon Zillis had resigned. Ziris, the AI powerhouse who gave birth to Musk's twins, did not respond to a request for comment.
Musk and Altman battle: money is not the point
The dispute between Musk and OpenAI has little to do with OpenAI's status as a for-profit entity. Instead, OpenAI has put Google on the back foot, and Musk is no longer associated with the hottest things in tech. Although he is known to have played a vital role in the founding of OpenAI, he has since chosen to leave, which only makes it more angry and heartbroken. Musk's goal now is to start his own AI startup, and despite the burden of an expensive and distracting Twitter (not to mention Tesla and SpaceX), he will eventually catch up.
Most founder battles revolve around the money and credit for an idea. And for Musk, who has been the richest man in the world at times, it seems to be more about ego, power and, I believe, a genuine desire to usher in the age of artificial intelligence safely. (He probably thought he was the only one who could.)
For Altman, it's not about the money, either. One of the most surprising things about all of this is that he doesn't own even the slightest stake in OpenAI, underscoring the unusual nature of this company and the AI industry in general.
It’s also personal to him, as his new role as CEO of OpenAI is a comeback story.
He tweeted last month: "I failed terribly on my first startup - too bad! And on my second I did very well. I hope someone fails on the first What I was told at the time was that no one else thinks about your own failures the way you do, and as long as you don’t let yourself down, you can try again.”
Altman won't make any money on his new startup, but he's earned himself a place in history.