“Microsoft Swallows OpenAI’s Core Team—GPU Capacity, Incentive Structure, Intellectual Property, OpenAI Rump State”, 2023-11-20 ():
…Sam Altman and Greg Brockman were considering creating a brand-new startup, but that would have likely caused a >1 year speed bump. Instead, now there is a new subsidiary within Microsoft.
I’m super excited to have you join as CEO of this new group, Sam, setting a new pace for innovation. We’ve learned a lot over the years about how to give founders and innovators space to build independent identities and cultures within Microsoft, including GitHub, Mojang Studios, and LinkedIn, and I’m looking forward to having you do the same.
There is a mass exodus of the core OpenAI team leaving and joining Microsoft. This new organization within Microsoft will get hundreds of technical staff from OpenAI.
Incentive Structures: The OpenAI for-profit subsidiary was about to conduct a secondary at a $80 billion+ valuation. These “Profit Participation Units” (PPUs) were going to be worth $10 million+ for key employees. Suffice it to say that this is not going to happen now, and the OpenAI board has foolishly destroyed the chance of generational wealth for many of the team. Despite this literal fumbling of the bag, key OpenAI employees who leave will be treated extremely well.
Part of Satya’s incredible deal with Sam and Greg is likely that these key OpenAI employees that join Microsoft will have their now worthless PPUs pseudo-refreshed for equity in Microsoft which vest over multiple years. There will be compensation packages that are >$10 million for those who were with OpenAI for multiple years.
There is likely also a huge incentive-based pay for all the huge bets and risks this new team will be making, which will align and incentivize the OpenAI team to do what they do best, accelerate.
The narrative that risk takers chasing generational wealth won’t want to join Microsoft and instead chase the start-up life is quite moot. There is a possibility that this subsidiary may also be allowed to grant its own equity to employees in a form that is not directly Microsoft stock.
…Intellectual Property: Within a few hours of Sam being fired, Satya Nadella minced no words in his tweet “supporting” OpenAI’s new leadership. It was effectively a thinly veiled threat that said “I don’t need you.” (which he doesn’t for Github Copilot deployment)
We have a long-term agreement with OpenAI with full access to everything we need to deliver on our innovation agenda and an exciting product roadmap
Microsoft has full legal rights and access to the weights of the base GPT-4 model as well as the various fine-tuned versions and DALL·E 3.
If the team went down the startup path, they would have had to spend substantial time rebuilding GPT-4. Instead, at Microsoft they will have access to much of the IP they require for future products.
What’s more important to understand is if Microsoft has legal direct access to all the data and code used for pre-training and RL. It is obviously all stored on Azure, but if the new Sam-led internal team can freely access that, they can basically start exactly where they left off without much of a hiccup. If they cannot get it, then we estimate that it could lead to only a 4–6 month delay vs prior. While this small of a delay sounds insane to say… Talent is everything.