When Steve Jobs was fired from Apple in 1985, startling the technology world, he described it as like being ‘hit in the head with a brick’. The firing of Sam Altman, the now former CEO of OpenAI, the company behind ChatGPT on Friday evening sent a similarly sized shockwave across the technology industry.
To hold a company whose product has been available for only a year in the same light as Apple, the most valuable public company in the world may seem like hyperbole, but the comparison is not entirely unfair. ChatGPT is perhaps the fastest growing software product of all time. While it took Netflix 3.5 years to get to 100 million users, and Facebook 10 months, it took just 5 days from its release for ChatGPT to reach that milestone - with OpenAI’s revenues rumoured to have surpassed $1 Billion in its first year since commercial launch.
Despite this success, OpenAI’s board, which includes no financial investors, but instead the CEO of the Q&A website Quora, a University researcher and a robotics entrepreneur - claimed ‘he was not consistently candid in his communications with the board’ and has thus relieved him of his duties. Not one of these board members has been a founder or a board member of a hugely successful company before.
Another co-founder and the Chairman, Greg Brockman, was also asked to step down from his role but remain in the company. He has seemingly refused and announced he was quitting the company, along with a number of their engineers, in a post on X last night - kicking off a feverish discussion with support for Sam Altman coming thick and fast from the likes of Eric Schmidt, the former CEO of Google.
What is beyond any doubt is that OpenAI’s board did not scale as the company did
With its rapid rise, OpenAI has had some growing pains. Earlier this week the company announced that it would pause sign-up users to ChatGPTPlus, one of its main income streams. And shortly after firing Sam Altman on Friday evening, tens of thousands of customers, including myself, received an email requesting we pay for OpenAI services up front, using pre-paid credits, rather than settling our bill at the end of the month.
These recent moves suggest either that the company is in financial dire straits and had to pull back on offering services with steep operating costs, or worse, that there were security concerns about their ChatGPT plus product, which utilises its latest turbo models. The company lost $540M in 2022, and it's unclear if they could continue to operate without further financing from investors.
What is beyond any doubt though is that OpenAI’s board did not scale as the company did. The five-person board seems not to have even informed Microsoft, with whom it has a $10 billion deal, ahead of Sam’s firing.
Compare this to the early board of Facebook, which even in its infancy included the likes of Peter Thiel, one of the world’s greatest technology entrepreneurs, and Jim Breyer, a fabled venture capitalist with experience of many corporate successes and failures.
This latest drama reiterates a lesson that much of the technology world has overlooked in the last few years - that good governance and boards matter. Whether it was the board members at Theranos, the blood-testing company who lacked scientific expertise or the complete lack of any independent board at FTX, the cryptocurrency exchange whose founder was in court for securities fraud, many fast-growing technology companies would be better off with board members who were both properly incentivised to see the business succeed, and capable of providing scrutiny of the management. Shockingly for some, having seasoned investors and operators on your board can be a good thing.
The firing of Sam Altman, and the way the board did it, will also give more ammunition to people who think the development of artificial intelligence needs more oversight. Whether it be through increased monitoring of AI model capabilities or outright regulatory control on who can access them, there’s been growing demand for government involvement. But such regulations may, ironically, have meant start-ups like Deepmind and OpenAI would never have got started in the first place.
As I argue in my book Start-Up Century, which is released this week, technological and cultural shifts are only increasing the number of us becoming entrepreneurs. As the traditional firm dies out, and the power of Start-Ups increases, we will need to make sure proper governance adapts to this new way of working as well.
As for Mr. Altman, he will have no shortage of opportunities and can perhaps take some comfort in Steve Jobs on reflections. ‘I didn't see it then,’ he said, ‘but it turned out that getting fired from Apple was the best thing that could have ever happened to me’.
James Wise is a venture capitalist at Balderton Capital, and author of Start-Up Century.