And? They don't own the non profit part of Open AI, they have not invested anything into it.

Why he thinks that he has authority to dictate how the non profit should be structured? I don't think he has.

Okay. That’s a cute fiction. But what do you think happens to OpenAI if they have to pay market rates for compute?

Like a company, a nonprofit should be willing to cease operations if that will further its mission more than not doing so.

And you really think that’s going to happen? How many non profits have you seen that are just as if not more power hungry than for profits — ie every religious organization.

Yeah, maybe it's not going to happen, and that's sad.

What happens to all the MS product based on GPT?

They continue building them with the perpetual license to the artifacts they have?

In theory, no. In practice, Microsoft wields influence through OpenAI's employees, who the board answers to in addition to the charter.

They aren't a non-profit, haven't been since 2019. They may market themselves as non-profit but they are in fact a for-profit corporation with a 100x return cap. Microsoft is currently their largest investor. Profit capped at 100x means microsoft expecting to get $1.3 trillion back on their $13 billion investment. The board ultimately answers to its investor and employee stakeholders since it isn't a non-profit.

Microsoft literally built the 5th fastest supercomputer for OpenAI to train its GPT3 back in 2020 as part of the 1B investment

Well, it still doesn't give him authority to dictate what the non profit should do or do not.

The power literally comes from Microsoft’s ability to single handedly put OpenAI out of business by not giving them a discount on compute.

Microsoft already has a perpetual license to all of OpenAIs IP and could easily hire every single one of thier employees without blinking

They don't have such a license...Stratechery didn't read his own source.

https://www.wsj.com/articles/microsoft-and-openai-forge-awkw...

I don't see how that makes your case. The license comes with restrictions per the WSJ.

Per anonymous sources? (And yes I read the entire article via my paid subscription to Apple News)

Don't like the WSJ? The blog post only indicates some kind of exclusive license to GPT-3, not the all-encompassing claim to OpenAI IP you suggest. Microsoft has never indicated such to my knowledge.

Okay let’s take your argument at face value. What do you think a trillion dollar market cap company can do with a license and by extending offers to all of OpenAI’s disaffected employees?

Think of what Apple can do with a license to ARM and now compare that to what MS could do with a license to GPT 3?

Do you really think any company would depend on another companies technology the way that MS is dependent on OpenAI without having a favorable license?

I’ve dealt with something similar on a very minute scale on both sides - being a dev lead at a startup where our largest customer accounted for 70% of our revenue and being the dev lead where the company I was working for accounted for 70% of a vendors revenue.

Each time, I saw how much power the customer yielded. It involves lawyers, licensing, contingencies, etc. and in both of the cases above - escrowing of code where the customer got the rights in certain conditions.

I’m 100% sure that MS has better lawyers than I encountered.

Let's assume Microsoft can freely use present-day ChatGPT in its products. If Microsoft wanted to further develop ChatGPT in-house, I imagine the effort would resemble Apple's in-house modem struggles due to tiptoeing around Qualcomm's patents.

You can't compare a hostile OpenAI with a cooperative ARM. Even with a cooperative OpenAI, Microsoft restricts internal researcher access to the source code, so the license appears less favorable than you think.

Now let’s assume that Apple could hire 90% of Qualcomm’s engineers and not have to worry about patent lawsuits…

Again I’m 100% sure that Microsoft wouldn’t base its entire technology line on another company’s IP without having very favorable licenses. That’s just not how these things work.

They've hired a bunch. Tech giants pass everything through legal—too big not to. IP & patents remain a PITA regardless of market cap.

Licensing ChatGPT versions developed by OpenAI seems favorable enough to me. The question boils down to what happens if OpenAI stops development. I highly doubt the bright minds at OpenAI gave away their IP for widely available compute credits.

No matter how bright they are, I am sure I read somewhere that the employees had all succumb to an addiction to food and shelter early in life and haven’t overcome that addiction.

Unless they are a gang of thieves, they are all exchanging labor for money to support their addiction. Who do you really think has the negotiating power in this relationship?

Not Microsoft? Otherwise people would've jumped ship long ago. None of this letter writing and PR campaign.

The smaller OpenAI that signed the Microsoft agreement had plenty of sustenance. Compute remains fungible unlike LLMs.

There are only two other companies with the amount of compute available that OpenAI needs - AWS and GCP. And GCP is a non starter and a distant third in cloud.

And if you think a migration at that scale is “easy” you haven’t been involved with mass migrations. Besides, Microsoft’s enterprise customers aren’t going to jump ship to another cloud provider and follow OpenAI.

Before I was giving anecdotes from n-6 job working at a startup and my n-3 job when I was on the other side of the table as a vendor’s largest customer.

This part of knowing how the cloud industry and migrations work comes from my n-1 job working in the Professional Services Department at AWS when I was involved with large migrations and saw how sticky enterprises were when it came to dealing with Microsoft.

And what does OpenAI have to offer another company with Microsoft already having 49% equity?

First, I meant people would've already jumped ship to Microsoft en masse without bothering with the OpenAI board fiasco if Microsoft truly held all the cards. I suspect they do not.

Second, I meant the OpenAI that signed the initial agreement with Microsoft years ago already had ample resources and funding. In those negotiations, OpenAI would have had little incentive to hand over all their IP regardless of the offer on hand.

We are witnessing right now that most of OpenAIs employees are ready to jump ship now that Altman is leaving. The facts on the ground changed.

Also, it’s standard in many contracts that you can’t actively poach a partner’s employees. That doesn’t mean that if the employees actively reach out to you, you can’t hire them. I saw that at AWS.

If they had so much funding why were they willing to give up 49% of the company to Microsoft? Does that read like a company that could be picky?

The fact that Sam and the employees have waged this PR campaign suggests the board still sits on something of value. I guess we'll see who flinches first.

OpenAI gave up 49% equity because they thought Microsoft gave a fair valuation and terms, among other possible reasons. OpenAI wanted to scale up their LLM research so they signed the agreement. I don't think OpenAI negotiated from a position of weakness.

Interesting. So you are saying that this power might come from contracts that were biased in favor to Microsoft by someone that might be or might be not hired by Microsoft? People should have learned more carefully from the Nokia case if this is true.

What's really interesting is that OpenAI has been maneuvered into a really bad strategic position. Theoretically, they could jump into the arms of any other FAANG and get the compute and funding they need. However, Microsoft remains a 49% equity holder so they don't have much to offer to this new corporate savior. Microsoft effectively licked the OpenAI cookie once they bought such a large stake in the company.

The only strategic play left to OpenAI is spite. They can choose to burn down Chat GPT which will lead to a scattering of their talent across competitors (although Microsoft will likely just pick up most). This will slow down Microsoft by a couple of months but will be nothing more than a bump on their way to AI dominance.

A strategic play is to release the models - the nuclear option. Go full OpenAI. Even if Microsoft has an exclusive license, leaks and breaches happen.

The board should have led with this as an implied threat behind closed doors and given both Altman and Nadella a face-saving public retreat. Altman goes off to start GPTSoft with equity, a license to GPT4 and access to Microsoft's cloud compute. Everyone gets to call this a win. Public humiliation was a mistake.

> The power literally comes from Microsoft’s ability to single handedly put OpenAI out of business by not giving them a discount on compute.

That's not a problem for the non-profit board. If the mission is best served by the non-profit ceasing to exist, they should make it cease to exist.

They aren't a non-profit, haven't been since 2019. They are a for-profit corporation with a 100x cap. Microsoft being their largest investor actually do have significant authority here. The board ultimately answers to their investor and employee stakeholders since they are not a non-profit.

Microsoft own OpenAI equity. Technically he has the authority to do so. At this point he cant do Elon firing as they need to preserve the stock price. You can say in a way the existing board turn rogue and hold him hostage. Once this settle, you will see near 100% board changes. If this not happening, half the OpenAI staff will be gone before next year 4th of July. At that point, their equity will worth significantly less. The crux of OpenAI is not their chatgpt but gpu. They are like Apple and Amazon big enough to make their own gpu. Sam wants to secure gpu access by founding a 2nd NVIDIA. Even if not, they can still be kingmaker. Whoever gpu being used, you will see that stock price shoot up....yes if Intel Arc. The board members arent that smart and thought he try to circumvent them. It is basically ego power play. They never realize how powerful and influential Sam is. At this point it is too late for those board members. Expect them to get shunt by evety investors in SV. As for Quora....hahaha...pretty much another Evernote fate.