First of all, I think obviously the board, they didn't have a clear vision. They're just amateur or they just don't have experience with how boards and how these things kind of go politically. And I think they probably had good intentions or it's hard to know exactly their intention, but it sounded like they're basically like "We just don't agree with the kind of the way he's doing things, and we don't trust him, and we have to do this for the betterment of humanity. And it's all about this noble goal. And he doesn't seem aligned with that goal. So if we don't do something now, it's going to be too late later. And so we got to take drastic action."
But they weren't aware of how things really work and all the other the soft pressure that people put on and then what turns into hard pressure, especially with all of the workers threatening to leave.
So it just created a lot more it was just way bigger and more complex than they could have imagined because they just don't have the experience.
This would go along if I was thinking, why would we talk about this? We talk about it in the context of leadership and inspiring people and that there's three different ways that you can three core ways you can inspire people to want to do the best work of their life.
One is inspiring leadership, and that can come in many forms.
And then there's the vision, mission, values, being aligned with what the company is doing and the impact in the world. And then there's also being aligned with or creating alignment through ownership and the ownership mindset.
Why is leadership important?
We could talk about why the Vision-Mission values is important and why that kind of identity is important.
But now the only question I have here is how do we connect that to ownership mindset?
And we could talk about how it gets confused when there gets to be comes confusing when people on the nonprofit board because there's a nonprofit and a for profit and the nonprofit controls the for profit.
And in theory, all the people on the nonprofit board don't have any financial incentive because they're not allowed to with the way charities work, they don't have any financial incentive in the for profit, so they don't get paid for it, nothing.
So that starts to create misalignment. It can create misalignment between people that are there to see certain kinds of impacts.
It could be from a worker perspective, it could be at people on the board, and then you have different strategies for how to get there.
And then also different amounts of safety concerns and also existential concerns, like, well if we don't do this and we don't stay out ahead and cut some corners to stay out ahead, we're not going to be relevant. So our whole take on the world is not going to be valuable.
And then it brings into them offering to merge with Claude in theory, because Claude has better safety, a lot better safety, although it's just a lot less usable.
So there's all of that. But I think that one thing is Sam Altman has really strong leadership, at least regardless of what some people might say that know him or maybe have worked with him on the board.
And some people may or may not trust him.
But overall, if you look at the bigger picture, he is holding the leadership cards, he is providing leadership, he's getting people inspired, he's connecting people to the Vision-Mission.
I think, I don't know that for sure, but I think versus where the other board members were not doing that as well or as much.
Is there a deeper reason that made them do it?
Everybody in the company had an ownership mindset and you could almost say there's a difference between people who didn't have an ownership mindset and the people who did. And the people who were threatening to quit were because they were thinking, well, we're going to go on and I'm going to own something that's going to be less valuable. I'm going to go on and own something.
I'm less excited or proud that I don't believe in leadership to lead us into somewhere that is valuable or we're going to be acquired by Claude and then all of my equity is a lot less valuable or maybe the company is going to die.
I think the company a lot of people thought without Sam and his abilities to lead and understand the whole big picture and ecosystem, because he does have a lot of experience and it's unique and he is definitely compared.
To everybody else. He definitely really knows what he's doing because there's a lot of different plates to spin and different energies or different stakeholders.
I guess you'd say that you have to bring together to make it all happen in a certain timely manner and tell the right narrative and share the right story and share the right success metrics and it's quite a dance and not everybody, very few people are good at that.
And so that's leadership.
You can see how when leadership could be really powerful and then how it can rally people and make people believe that without if they don't see an equally competent leader able to step in, then they, oh, here's another piece and then trust.
To build trust, you need transparency.
And that can come in various forms.
It can come in transparency of leadership and strategy, it can come in transparency in impact and metrics on finances and it can also come in transparency on financial incentives, alignment on financial incentives.
What happens to the workers' equity if they will be transferred to another company?
I'm imagining workers were thinking if Sam is off the board and is just going to go away and go somewhere else and do something else and maybe compete with us, and the outside world is maybe not going to trust, or they'll be more skeptical, or we might just start to fade and people might start jumping ship.
People will start going elsewhere and the band will fall apart and they see the band falling apart and then being kind of sold off or acquired by other kind of what they probably consider are lesser competitors as either embarrassing or not the inspiring path that they were thinking of.
Like the week before that.
And as a consequence, they thought that all of those new paths seem to lead to failure, have a higher risk, much higher risk of failure. And they've already had this ownership mindset.
They are identified because they own a piece of OpenAI, the for profit, and because they've seen that growing in value and they can imagine what that could be. But even more important, that whatever they own, they identify with, and it becomes part of who they are, their identity.
And they want to improve anything they identify with, avoid any dangers. And they want good things to happen to by, you know, firing Sam.
The way that was really secretive, it broke the trust of all the workers who were like, well, this is my identity. And I've been out there putting my reputation on the line, trying to make this thing work because I believe in it.
And now the board has violated that trust and so how can I go forward with my own beliefs or even my reputation in the community?
Many times this kind of board takeover or board switching and it happens in startups all the time, happens often enough.
But usually people are in the dark, don't feel inspired enough, just think it's like a job. So whatever, just keep paying me my paycheck and that's all that matters. But clearly in this circumstance it's much different.
People are well educated, there's a lot of transparency. They are highly invested from an identity and financial perspective.
So every single person like out of the 700 and something employees over 700 signed the letter saying we want the board to leave and Sam to come back.
That's a high degree, that's an insane degree of awareness.
And people that are identified with OpenAI and OpenAI success as part of their personal identity.
And how do you get that? Well, you get that through a combination of three things inspiring leadership, which is difficult, not everybody has that, but that can be a great one.
You get that through having a powerful vision and mission that people feel inspired and proud to be supporting.
And what differentiates a nonprofit from a for profit is in a nonprofit you can create vision, ownership of mindset.
So you can almost have vision mindset. You can identify yourself with the vision but you can't identify yourself with the ownership.
But whereas in a for profit you can have that identification of being an owner. So in a nonprofit it's more like the identity of being a controller or a contributor and maybe you get the social credit for being a participant or a contributor or something, or a controller or a director or something.
But in a for profit you get that piece where it's the ownership mindset specifically and that's unique.
That's one of the huge benefits to open AI going from a nonprofit which often can be associated with lots of, lots of overhead, lots of distractions around protecting donor financing or donor contributions but are less focused on the impact and less focused on single point of responsibility for impact.
Whereas for profits are highly optimized for this.
And so it was a smart move to make a for profit subsidiary or for profit basically a for profit controlled by the nonprofit because that allowed the company to actually compete in the reality of the AI world.
From a legal standpoint, what does it mean for the workers if the company is transferred?
So if they're going to go to Claude, let's say if Claude was going to merge, then lawyers there has to be a merger agreement, term sheet the works.
And in that term sheet or that agreement, it will spell out how the shares will get merged and who will own what percentage after the merger. And the merger can be based on all kinds of factors, but ultimately at the end of the day, it just has to be the people that control each agreeing to the terms. It could be that after the merger it's usually they compare what's the value of quad, what's the value of OpenAI?
And then they would say, well, if the value of quad is a billion and the value of OpenAI is a billion, well we should do a merger and it's 50 50, that's pretty easy. And so 50% of the value is going to be open AI and 50% of bod and bring it all together. But that's not always the case.
It could be all kinds of different amounts of value or really complex structures of stock mergers.
And it could be that for each share a worker has in the old one they have a half a shares or maybe two shares in the new one.
It just really comes down to the deal that gets struck, which creates a lot of unknowns.
What are the components of a legal document the workers should be looking for if ever there will be a merge?
But it'd be the typical things that you'd consider. You'd want to consider the following:
1. What is the complexity to overhead?
2. Do you have to buy the equity? Can you afford it?
3. Is it a stock option or a double trigger? RSU.
OpenAI as a profit participation unit company
That's separate from equity. That basically says we're going to distribute profits or split profits. And usually the profit participation units are based on the amount of ownership. So if somebody owns 10%, they get 10% of the profits.
It can be whatever way you want to do it. But from my understanding it would not make sense to give everyone the same thing.
Like the CEO gets ten units or $10.
You have to have a way to kind of give people their appropriate fraction or slice.
And the easiest way that's already been kind of precalculated is how much equity, because equity is a pretty good proxy for the value that person has.
And that's usually what in the world of stock stock in public companies they call that a dividend.
So some stock might include a dividend, which is a portion of profits. Often it's correlated or connected to some kind of a profit.
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