the story of Sam Altman, who was never fired from OpenAI

Since November 17, OpenAI, the company that gave the world ChatGPT, has been experiencing what observers call a soap opera. Over the course of five days, OpenAI management went through three CEOs before finally announcing that Sam Altman, who was fired earlier that week, had been reinstated. The rapid development of events created the impression of complete confusion. But in fact, all this is a perfect illustration of Mr. Altman’s managerial resourcefulness.

Sam Altman is a geek. His idol since childhood was Steve Jobs. At the age of eight, Sam was given his first computer – an Apple Macintosh. Like all geeks, he was never sociable. Not out of fear or shyness. It’s just that the vast majority of people are not interesting to him, and he’s not very good at (and doesn’t really strive to) hide it. Typical Sheldon Cooper.

Sam, a child from a wealthy Jewish family, has an almost brilliant education. He graduated from the John Burroughs School, one of the best in the USA. Its graduates included dozens of American celebrities – movie stars, businessmen and athletes. And then Sam went to study at Stanford – the Faculty of Information Technology.

Here is the explanation for the “almost brilliant” education. Like his idol Steve Jobs, Sam decided that he simply did not need a higher education. After studying at Stanford for two years, he left to start his own business.

Mr. Altman’s first project was the mobile application Loopt, which he created in 2005 together with two former classmates. Few people remember about the project, but it can be considered successful. After all, he was one of the first eight startups to receive funding (albeit a modest $6 thousand) from the Y Combinator (YC) accelerator, founded in 2005 by Paul Graham, Jessica Livingston, Robert Tappan Morris and Trevor Blackwell. And that was just the beginning.

In total, Sam Altman’s startup received more than $30 million from investors, and in 2012 the business was purchased by Green Dot Corporation for $43.4 million. Of this, $5 million went to Sam Altman personally. So Sam became a millionaire geek. At 26 years old.

Money technologies

After the successful sale of Loopt, Mr. Altman focused on money. He launched Hydrazine Capital, a venture capital fund apparently inspired by Y Combinator. Sam invested almost all the money he received from the sale of Loopt into it. In addition, Peter Thiel, one of the founders of PayPal, decided to invest in Sam’s new brainchild. In total, Hydrazine raised $21 million in its first investment round.

It is difficult to say how successful the enterprise is. The fund is not required to report, and Sam Altman himself carefully guards information about his wealth. The only thing that is known for sure is that he personally owns several sports cars and a mansion in San Francisco worth $27 million, located on Russian Hill.

A few years ago, Sam Altman said that the fund’s value had increased tenfold by the end of 2016 compared to its original estimate. But Sam never said exactly how much Hydrazine was valued at. And believing his words is not the best idea.

For example, shortly before the sale of Loopt, he said that the service had hundreds of thousands of active users and a total audience of 4 million, while third-party sources spoke of only 500 daily active users.

While working on Loopt, Sam Altman simultaneously worked at Y Combinator and became friends with Paul Graham. He ultimately decided that Sam should become the new president of YC, replacing Paul Graham himself in this post. This is what happened in 2014.

For Sam Altman, this was not only his first job in a large company, but also an opportunity to make acquaintances with all the prominent figures in Silicon Valley. And he took advantage of this opportunity.

Money from the mind

Sam Altman has truly become a great leader at YC. Under him, the company began to expand rapidly. And within a couple of years, Y Combinator became the YC Group, which included the original venture fund, the new YC Continuity fund (focused on more mature companies at the growth stage) and the YC Research laboratory, which was formalized as an NPO.

At the same time, Sam did not even think about limiting himself to working at the YC Group and receiving income from his own fund. Back in 2015, he assembled a truly stellar team of entrepreneurs to create a new company that would study and create advanced artificial intelligence (AI).

The company was named OpenAI. Its founders were Sam Altman, Greg Brockman, Elon Musk, Jessica Livingston, Peter Thiel, as well as Microsoft, Amazon Web Services, Infosys and YC Research. The starting capital of the company, again registered as an NPO, amounted to $1 billion.

Over time, Sam Altman began to pay more and more attention to this particular project and left YC in March 2019.

Back in early 2019, he stated that he “has no idea” how OpenAI could start making money.

But within a couple of months, a large-scale reform of the company followed – as soon as it had its first promising developments. OpenAI LP was created – a commercial structure controlled by the non-profit OpenAI. It was Sam Altman who headed it.

The official reason for creating a commercial structure was the need to raise funds for expensive research in the field of AI. In the four years that Sam Altman has led OpenAI, the company has raised $10 billion from Microsoft alone, which owns 49% of OpenAI LP. The second largest shareholder is the Thrive Capital investment fund. In December, he closes a deal to buy back shares from company employees. After this, the estimated value of OpenAI should soar from the current $27 billion to $86 billion.

All this is the result of the success of ChatGPT, which Mr. Altman began selling to businesses even before the public launch. And over time, he began to offer more and more paid solutions based on developments that were initially provided to a wide audience for free. As a result, the non-profit research laboratory has grown into one of the world’s leading technology corporations with billions in investment and potential billions in revenue.

Such a development could make any board of directors happy. But on November 17, 2023, the OpenAI board announced the resignation of Sam Altman. Almost no explanation.

The unexpected dismissal triggered a series of events that almost led to collapse OpenAI. But just when it seemed the company had no chance of survival, an even more unexpected turn occurred: the board reinstated Sam Altman as CEO.

Not a very great schemer

It seems that we managed to shed light on what happened The Washington Post. It’s not about breakthrough developments, not about the company’s reluctance to earn billions of dollars, but about Sam Altman himself – his character and manner of doing business. Moreover, this has already happened to Mr. Altman. In 2019, the newspaper’s sources say, he did not leave YC Group. He was fired. Paul Graham allegedly flew from Britain to San Francisco to personally throw Sam out of the company.

Why? Mr. Altman, as The Washington Post found out, has character traits that make it easy to hate a business partner.

Ingratitude and infidelity, for example. When Sam came up with OpenAI, he considered the new project the mission of his life and easily “gave up” on the entire YC Group, appearing there from time to time.

And also greed. Sam Altman has always been interested in money. He was interested not just in startups, but in those that could make money quickly. And he wasn’t shy about taking advantage of his position, investing his own money in startups that YC discovered.

Finally, an unquenchable thirst for power and total control. Everywhere he worked, Sam Altman surrounded himself with people who were as devoted and loyal to him personally as possible. And this, according to The Washington Post’s source on the OpenAI board of directors, was the main reason for Mr. Altman’s dismissal.

“The vote was prompted by concerns that he was trying to avoid any scrutiny of his management of the company, as evidenced by his reluctance to accept any board composition that was not heavily skewed in his favor,” one of the sources said.

As for returning Sam Altman to his position, this is not his victory, as it seems at first glance. This is a compromise between the former board of directors and investors, and not with Mr. Altman.

Three board members sacrificed their seats on the board of directors to replace them with those who could control Sam Altman. That is, it will do what the previous lineup failed to do. Hence the retention of a seat on the board by Adam D’Angelo, the man who voted to fire Sam Altman; and Mr. Altman’s agreement to the candidacies of Bret Taylor, the former CEO of Salesforce, and Larry Summers, US Treasury Secretary under President Bill Clinton. Both are henchmen of the old board.

And finally, Sam Altman himself, as a result of the five-day “soap opera,” has so far only lost his place on the board of directors.

Kirill Sarkhanyants