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The implications of Sam Altman’s return to OpenAI

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He’s back.

Overnight, OpenAI announced it had an “agreement in principle” to reinstall Sam Altman as CEO while the board members who pushed him out leave. The news was greeted enthusiastically by the ChatGPT maker’s employees, most of whom had threatened to quit and join Altman at Microsoft.

The move ended five days of drama that had gripped Silicon Valley and beyond. Altman and those who focused more on commercializing the technology were ahead of those concerned about its apocalyptic potential. But the episode raises questions about what comes next.

The OpenAI board will be updated. Gone are Tasha McCauley, Helen Toner and Ilya Sutskever, three of the four directors who ousted Altman. An “interim” board will take over, led by Bret Taylor, the former co-CEO of Salesforce, and including Larry Summers, the former Treasury Secretary, and Adam D’Angelo, the CEO of Quora and a holdover from the previous administration.

That board will help select one larger permanent ones, according to The Verge, possibly including representation from Microsoft, OpenAI’s largest investor. Microsoft CEO Satya Nadella called the development “an essential first step toward more stable, informed and effective governance.” It is not clear what other changes are coming.

Business interests gained ground thanks to so-called doomerism. An investigation in Altman’s behavior and why he was fired seems likely, especially since the board reportedly could not provide specific examples that he is not candid.

But Altman’s reinstatement, along with potential board representation from Microsoft and other investors, undeniably elevates those pushing for rapid innovation and commercialization. The outgoing board was concerned that OpenAI was moving too quickly to advance AI without considering potentially disastrous consequences for humanity.

That is not to say that the new administration will not be concerned about safety – a primary principle in the company’s charter – but the profit motive may have a bigger voice.

But a Pandora’s box of consequences may have been opened. The European Union and governments in countries like the US and Britain have been weighing how to curb the fast-growing technology limit damage. A close-up look at the inherently unstable governance of an industry leader – and how close Microsoft came building an internal super AI group overnight – could lead to tougher action.

There’s also the possibility of this drama repeating itself, as OpenAI is reportedly going to do just that retains its now infamously complicated structure, according to The Information. (On that note, now that commercial interests have a greater say in OpenAI, will the IRS and California, where the organization is based, still consider the company a nonprofit?)

And there is the question of whether companies should be run according to the philosophy of effective altruism, of which D’Angelo, McCauley and Toner are adherents. (Jaan Tallinn, the Skype co-founder who promoted the philosophy is among the skeptics.)

Israel and Hamas agree to a ceasefire and the release of some hostages. At least 50 people captured in Hamas’ attack last month will be freed, and Israel will release 150 Palestinian prisoners held in Israel, said Qatar, which helped lead the negotiations. The start of the ceasefire will be announced within the next 24 hours and will last at least four days.

The Fed does not see any interest rate cuts in the near term. The minutes of the November meeting of the central bank’s Federal Open Market Committee published on Tuesday show that the bank is keen to keep interest rates stable for the rest of the year with inflation well above the 2 percent target. In the futures market, the Fed sees rates unchanged this morning at its December meeting.

The US has reportedly foiled a plot to assassinate a Sikh separatist on US soil. The authorities thwarted a plot to kill Gurpatwant Singh Pannun, a US and Canadian citizen, and warned the Indian government about this, according to The Financial Times. Washington told some allies about the apparent plan after the Canadian government linked the Indian government to the killing of a Sikh separatist there in September.

One of the big questions raised by the OpenAI ordeal is why venture capital firms are doing this again money poured into a company with extremely weak corporate governance. Consider that ChatGPT’s creator could be valued at around $86 billion in a potential stock sale, but investors (so far) have zero seats on the board.

The near implosion of OpenAI and the collapse of FTX last year have reawakened investors to the need for more control over how companies are governed, venture capitalists told DealBook. But there are limits to how far that goes.

For years, many venture capitalists have tried to appease start-ups, hoping for an opportunity to invest in the next blockbuster. Companies would call themselves “founder-friendly” by supporting multi-class share structures that gave entrepreneurs outsized control, by taking common stock without special voting rights or, in the case of FTX and OpenAI, by not taking a board seat.

But the end of the recent startup boom may prompt investors to take a stand. “You’ll see more and more attention to traditional corporate governance in the future,” says Michael Brown, partner at Battery Ventures. (He is not involved with FTX or OpenAI.) “There will be more attention to traditional boards and the way these companies operate.”

DealBook also hears that limited partners in these investment firms had begun pushing the funds to adhere to corporate governance to protect their investments.

There are limits to how far venture firms are likely to go. For fast-growing industries where venture capitalists are racing to get a piece of the next big thing: the percentage of U.S. startup investment going into AI activities this year has doubled from last year – the fear of missing out can override caution.

And venture capitalists admit that the big companies hit by corporate governance failures — Sequoia backed FTX and is in OpenAI, along with Andreessen Horowitz, Khosla Ventures and Thrive Capital — are unlikely to see lasting pushback from limited partners during these periods. . After all, these investors also aim for high returns.

Changpeng Zhao, the Binance founder who graced magazine covers as the billionaire entrepreneur with the golden touch, will step down from his crypto empire and pay $50 million after pleading guilty to money laundering and trespassing charges of sanctions.

It’s another blow to an industry already reeling from the demise of Zhao’s business rival and former protege Sam Bankman-Fried of collapsed crypto exchange FTX, as well as increasing regulatory crackdowns.

The Justice Department ordered Binance on Tuesday to pay a $4.3 billion fine. Binance and Zhao, who also goes by CZ, have pleaded guilty to federal charges related to failing to screen suspicious transactions from Hamas, Al Qaeda and ISIS flowing through the world’s largest crypto exchange.

Under the deal, the company has agreed to step up compliance, and an independent regulator will oversee this. Zhao will be barred from any involvement with Binance for three years after the regulator’s appointment. Binance’s token, BNB, fascinated by the news.

The agreement was announced just a few weeks ago after Bankman-Fried’s conviction, who could face more than 100 years in prison. Zhao’s deal delays sentencing by several months; he faces a maximum prison sentence of 10 years. Zhao admitted that he “a bit scaredduring his court appearance in Seattle on Tuesday.

Zhao is a towering figure in crypto. ‘I made mistakes and I have to take responsibility’ Zhao wrote in a post on X to his 8.7 million followers. Born in China and raised in Canada, he started his career in traditional finance before switching to crypto and founding Binance in 2017.

Zhao repeatedly promised that his company would adhere to global rules, but critics, such as economist Nouriel Roubini, warned last year that Binance was a “walking time bomb.”

Binance has been under scrutiny in the US for years. In addition to admitting Tuesday that it had failed to prevent and report suspicious transactions involving terrorist groups, Binance also settled a case with the Commodity Futures Trading Commission. The arrangement is intended to keep Binance going, but the company has suffered as a result $1 billion in outflows after the news broke.

Nvidia shares fell in premarket trading this morning, despite the world’s most valuable chipmaker posting another set of stellar results that tech bulls say justify the sky-high hype around artificial intelligence.

The third-quarter earnings — and the company’s rosy sales outlook — were particularly impressive given the Biden administration’s export restrictions on high-end chip sales to China, analysts said. Still, the company warned that the simmering trade war between Beijing and Washington would inevitably hit its profits.

These are the numbers that stood out:

  • Revenues more than tripled year-over-year to $18.1 billion – $2 billion higher than analysts’ expectations. Bumper sales for Nvidia’s graphics processing units that run AI applications were notable.

  • During the same period, earnings rose nearly fourteenfold to $4.02 per share.

  • Nvidia predicts more growth, with revenue expected to hit $20 billion this quarter.

Nvidia stock has taken the AI ​​buzz to record highs. Its shares are up more than 300 percent in the past year, putting the company in the trillion-dollar valuation club. “The growth in market value since ChatGPT first came on the scene has been astonishing,” Derren Nathan, analyst at Hargreaves Lansdown, wrote in an investor note.

But is its growth sustainable? The company reported a solid quarter for its data center and gaming divisions. However, the Chinese issue threatens to become major.

“Export controls will have a negative impact on our Chinese operations, and we do not have a clear view of the magnitude of that impact even in the long term,” said Colette Kress, the company’s CFO. told analysts. Nvidia is developing new compatible chips for the Chinese market. But the company doesn’t expect to make up for lost revenue in the near future.

Offers

Policy

  • The head of a Chinese online gaming company has been arrested, becoming the latest corporate executive to be imprisoned in the country. (CNN)

  • A special committee will investigate the FDIC’s deteriorating workplace culture. (WSJ)

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