OpenAI Board Should Resign

What happened at OpenAI was crazy on many levels. While I am an outsider to OpenAI's inner workings, I will go out on a limb and say that the people who made the decision to oust Sam Altman probably do not have the right experience for making this type of decisions for OpenAI. I am sure that the non-founder individuals on the board are extremely talented and accomplished in many ways, but from the outside, the way with which they managed the sudden termination of Sam Altman as CEO and the aftermath show a lack of experience in this arena, miscalculation, and, frankly, misunderstanding of their duties as board directors of OpenAI.

OpenAI is not just another startup or upstart. While I have written about its nonprofit and capped-profit structure and query the long-term business model, OpenAI is a dominant player representing a new generation of transformative innovation enabled by advancement in high performance and large scale compute as well as transformer-based algorithm development. What OpenAI has built is unprecedented in many ways - the democratization and consumerization of AI, rapid iteration and launch, and partnership and ecosystem building. Forget about AGI for a moment, just with what OpenAI has built, the board should understand its responsibility in propelling and managing a massive technology innovation movement not just for the technology industry but for all industries.

This is part of the problem. I don't think this board understands its responsibility and the impact of their actions. They are not board members of a company that is looking or product market fit or raising growth equity. They are board members of OpenAI. They have ENORMOUS responsibility beyond their fiduciary duty.

From the cryptic nature of the rationale for firing Sam Altman to the rumored discussion in bringing Sam Altman back to senior staff leaving to whatever else is happening as the aftermath, all this reflects an inexperienced board in not just managing a CEO out (if for the right reasons which we don't know) but also communicating with stakeholders (employees, partners, investors, developers, customers...). Huge mess to say the least. If I were an investor or large customer, I would be beyond furious in the way things transpired.

As an investor, I have been involved in a number of CEO transitions, and it is the most challenging decision for the board and investors. It is a decision that requires significant consideration and meticulous planning on all levels - discussion with the current CEO, buy-in to find a new CEO to ensure successful transition, all-hands with employees with outgoing and incoming CEO, governance matters, onboarding of new CEO, communication to stakeholders, and board alignment. CEO transition is a not a philosophical, tactical, or an ego play. CEO transition is always strategic and done in the best interest of the company and shareholders. Sudden termination of CEO is never successful for the company and for the new CEO as well as the next phase of the company because there is no buy-in.

OpenAI is at a critical moment in its growth. Same with other generative AI companies. Beyond the GenAI technology advancement itself, the entire community is confronted with discourse around the sustained adoption of this technology, ecosystem strategy, partnership model, data use, business models, education, regulation, and national security.

OpenAI board should consider their resignation after communicating to the community (developers, educators, partners, customers) building on OpenAI technology what happened. I personally have lost trust and faith of this board shepherding OpenAI into a complex phase of enterprise technology adoption and company governance after so much momentum that the OpenAI has built with developers, partners, customers, and educators.

When the OpenAI news broke on Friday, I told my students at Berkeley that I am afraid of spillover effect of people who don't understand this business of startups and say:"hey, look, startups are unstable and volatile, and if this can happen to OpenAI, it can happen to other startups." This whole thing has done a potentially massive disservice to a startup and technology community.

The new OpenAI board should be structured to the following:

2 founding members

2 investor director

5 independent directors with relevant experience and representing diverse voices in technology, governance, and AI to help shepherding the organization into the next phase.

Given the complexity of the matters that will be confronted by OpenAI on company structure, governance, product, data, commercialization, regulation, and other matters, I suggest that OpenAI has at least two tier-1 law firms as counsel so the board is equipped with various inputs for consideration.

I don't think any strategic investor should get a board director seat but it would okay for large strategic investor to receive a board observer seat. It is important for OpenAI to remain independent and has the degrees of freedom to navigate the complex landscape ahead.

If OpenAI is looking for new independent directors, I am ready to take the call because I know I will do much better than the current directors.

P.S. While I don't know Sam Altman personally, and no one is perfect, I know that Sam Altman has made a profound impact on technology innovation. If you haven't read some of his prior writings (from his Y-Combinator days), you should. His writings has influenced how I think making an impact in the world.

My writing reflects my own opinion and should not be taken as investment advice.

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