The Wizard of O(z)penAI
The Wizard of O(z)penAI
Drawing parallels between the classic parable of The Wizard of Oz and the unraveling of the world’s preeminent AI company, OpenAI.
When Dorothy and her gang of misfits finally meet the Wizard of Oz in the Emerald City, they discover that the mythical figure is just a feeble man operating machinery behind a curtain.
I can’t help but draw parallels between this classic parable and the unraveling of the world’s preeminent AI company, OpenAI.
Several big pieces of news came out from the company this week:
On Monday, the company announced a new funding round that would raise $6.5 billion at a $150 billion valuation
Sam Altman and the board wants to upend its non-profit corporate structure to become a for-profit corporate entity
In the same stroke, Altman is dropping all pretenses of running OpenAI for altruistic reasons and wants a 7% equity stake in the company
On Wednesday, the company’s star CTO Mira Murati suddenly resigned from the company. Two other senior research executives, VP Research Barret Zoph and Chief Research Officer Bob McGrew, joined her in bowing out
To put it lightly, this is turning into an absolute clown show.
Murati’s departure seems abrupt and unexpected by the company’s management and investors. They just announced a new astronomical $150 billion funding round and there seems to be no succession plan for Murati. Having two senior research executives follow her out the door just makes the whole affair look even worse.
At this point, this latest funding round might be in jeopardy, and there would be significant egg on the face of the lead investors who clearly didn’t perform sufficient Due Diligence.
If the deal has already been solidified, then it’s even more disastrous for the lead investors.
How on earth does any respectable money manager with billions of dollars on hand sign off on the largest VC investment deal ever, $6.5 billion at a $150 billion valuation, only for the CTO to walk away just two days after the news breaks?!
You. Can’t. Be. Serious.
Ignoring the sudden high profile departures from the company, this $150 billion deal is just all around a terrible deal for all involved.
Here are some simple reasons why:
OpenAI’s state-of-the-art model (OpenAI O1) is only marginally (+5%) better than Google and Meta’s previous generation models. There is no moat.
No one has found a profitable AI-driven business model so far, besides Nvidia.
This deal will end OpenAI’s access to top talent. How will OpenAI hire any reasonable talent at a $150 billion valuation? Only financially illiterate tech workers would be willing to take illiquid equity at a $150 billion valuation for a salary.
If OpenAI is indeed close to AGI (Artificial General Intelligence), why have so many core co-founders and employees left. Only 2 out of the original 11 co-founders remain at the company. If your company is close to transforming humanity with AGI, wouldn’t you want to stick it out to see it happen, no matter how tough it gets?
I think it’s clear we have a Wizard of Oz situation on our hands.
OpenAI pioneered a brute force, duct-taped, and grotesque representation of a brain that could regurgitate human language, and soon learned that the more they talked in vague terms about AGI, hiding behind complicated (but very mechanical) math, the more mystical and profound they seemed, and the more money and prestige they could get for themselves.
It’s not that different from the behavior of your average greasy suburban car salesperson, except that this particular sales team is armed with bespoke, pedantic, and convoluted linear algebra.
Yet it’s just a grand performance, and the curtains are slowly being pulled back.
