What the OpenAI saga tells us about how to lead and manage organisations

No dramatised account was required for OpenAI in 2023.

I don’t know about you, but I’m longing for the latest episode of a new soap opera I’m calling Succession: Silicon Valley. I am not the only one who has been transfixed by the saga of OpenAI’s boardroom coup-turned-volte-face, which saw arguably the biggest AI unicorn in history cast aside the working assumption that what happens inside the corridors of tech power stays well hidden from view.

Famous boardroom coups have happened before, but not as publicly or in real-time. When Steve Jobs was ousted from Apple in 1985, it wasn’t until Walter Isaacson’s biography in 2011 that we got anything like the inside story from the horse’s mouth, recreated in the 2015 Aaron Sorkin script for the eponymous movie.

ADVERTISEMENT CONTINUE READING BELOW

No dramatised account was required for OpenAI in 2023. This has been a simply jaw-dropping corporate infotainment of the highest order. For one, the principals themselves were singing like canaries.

The action was unfolding in real time on X, formerly Twitter. Sam Altman, for example, posted a whimsical image of himself holding a visitor’s pass with the caption “first and last time I wear one of these” in between his ouster and reinstatement. He also  retweeted  — complete with three bright read hearts no less — an agonized post by his former friend and mentor Ilya Sutskever saying, “I deeply regret my participation in the board’s actions…I will do everything I can to reunite the company.”

Whatever happened seems to boil down to one of two theories: money or ethics.

On the former, Bloomberg’s Matt Levine put it well: “OpenAI’s board members are not venture capitalists, don’t own equity at all, are not motivated by hopes of a trillion-dollar valuation, and were in fact adverse to its venture capitalist investors…They took a very long and grandiose view of the importance of their product and its ability to change the world, while the employees would like to see some cash now.”

As for the second — ethics —  I asked Richard Straub of the Global Peter Drucker Forum, the management conference, a simple question: What would the management guru Peter Drucker say about what has happened at Open AI?

“Drucker would have been critical about the confusion between for-profit goals and the nonprofit mission as we see it at OpenAI,” Straub said. “Drucker wouldn’t reject the development or the use of Artificial General Intelligence  (AGI)…He would support its usefulness as long as humans stay in charge.”

The precise definition of AGI remains a topic of debate but is considered to be some version of AI that surpasses human’s intellectual abilities.

But the third and most important issue is board governance and leadership.

Barbara Kellerman, a fellow at the Harvard Kennedy School’s Center for Public Leadership, has identified seven types of bad leadership:   incompetent, intemperate, callous, rigid, corrupt, insular and evil.

“The board of OpenAI definitely fell into the categories of being incompetent, intemperate and insular: They failed completely to take into account the AI superhero status of Sam Altman or the power of their biggest client Microsoft CEO Satya Nadella,” she told me. “But above all, the drama was driven by the approximately 700 (out of 770) Open AI employees who threatened to walk unless Altman came back.”

ADVERTISEMENT CONTINUE READING BELOW

Above all then, Kellerman said, this was a story about “follower power,” in which “people without obvious sources of power” exert it at scale.

In all of this, what has surfaced is a story of how boards work — or should work — in the face of balancing risks in industries with high-stakes ethical issues where they try to do the right thing against that age-old lure: the charismatic founder deemed to be indispensable.

The last time we saw charisma get in the way of governance publicly was Sam Bankman-Fried, now convicted of epic fraud  at FTX, who managed to hoodwink the good and great. The case prompted me to call for a Chief Critical Officer to join boards that might be dazzled by founders.

Boards don’t yet have CCOs, but they do have clear responsibilities. History will judge whether the actions of OpenAI were more than clumsiness. Of the key mandates of any board, “one is to provide oversight of strategy, the second is to hire, and in some cases, fire the CEO,” Dambisa Moyo, who sits on the board of Chevron Corp., told me recently.

What she didn’t know at the time was that in OpenAI’s case they rehired Altman. The next questions are what the new strategy will be and whether it can create profit without drama.

Next episode please!

© 2023 Bloomberg