Open AI leadership shuffle, new diffusion models, and starting the cult of Q*

**Sarah** (0:05)
Hi, No Priors listeners. Time for a host-only episode. This week, Elad and I are going to talk about what's going on at OpenAI, of course. Video, Q-Star, what might be next in research, and some predictions. Okay, Elad, we have to start with the saga from this past week. What is your take on the outcome and the second order effects?

**Elad Gil** (0:28)
From a second order effect perspective, this seems like overall positive news for everybody involved. So it looks like on the OpenAI side, they're back to being in a really positive stable situation. I think they still have the leading model in GPT-4.
They've reworked the board, which seems like a positive thing. So imagine if this had happened two years from now, three years from now, et cetera. So it seems like it would net increase the stability of the company and governance and a few things like that, or the nonprofit and the company and governance. So as an external viewer seemed like a painful thing to go through, but the flip side of it is, it seems like they're moving forward and moving ahead in a positive way.
And then in parallel, I think it may have ramifications to other areas that we can talk about if useful. Like what are the second order aspects of this? But it'd be great to hear what you think.

**Sarah** (1:15)
Yeah, I think the first obvious lesson is that governance matters, right? And this isn't an area where I think most companies are that experimental, but I think a lot of entrepreneurs are likely to think twice about placing their destiny in the hands of groups with explicitly mixed incentives now. I'd say generally nonprofit governance is not every organization, but as a class known to be kind of abysmal, right? Because performance is hard to measure objectively, and so it often ends up more about politics and specific relationships and status games than outcomes.
The clarity around how much any board matters was kind of a wake up call for people. The second lesson that a lot of people will take away or I think should from this whole saga is that money matters, right? The factors of production are labor and capital and compute is the AI specific form of capital.
Microsoft holds the compute here and that clearly matters. This is amazingly well managed and supported by Sai and Kevin and then the class of really special labor here, the team rebelled and the board obviously underestimated the level of support that Sam and Greg had from them. And then I think one thing that is often unsaid because it's a little bit less idealistic is that a lot of OpenAI people were very upset this last week about not just the destruction of the mission which I think was absolutely genuine, but also destruction of the value they'd built and been promised a piece of with the $86 billion tender offer. It's just a reminder that labor and capital are leveraged, they're stakeholders, and there's no free lunch or control without skin in the game in it. I think there likely shouldn't be from the view of many of the people involved in this.

**Elad Gil** (3:09)
Yeah, I think you're raising an important meta point, which is basically what are the incentives that different organizations have in place and ignoring OpenAI. I think there's a lot of boards which added board members for reasons that were politically motivated or motivated by different regulations getting passed that force certain board changes, et cetera. And you also see that in executive teams.
And I think it's really important for people to go back and rethink, okay, who should be on my board and why? What are they representing relative to the board? What expertise do they provide? Or what insights are they bringing? Or what strategic views are they bringing? Same with your executive team. And also what are their incentives?
And there's this view that's kind of been moving around Silicon Valley in terms of the professional managerial class, right? People who have alliance not to the organizations they work at, but external incentives.
And those external incentives could be speaking at TED or going to Davos or getting kudos or an award from a specific organization versus doing what's actually their duty as a representative of the very shareholders of a company in the context of a corporation.
And so there are these fiduciary duties that may be being breached by other incentives for different actors who've been added over the last five, 10 years to boards, to executive teams, et cetera. And I think it's really worth rethinking, like, who do I want on board and why? And it also comes back to some of the companies that have been resetting things relative to politics. I think Shopify did a great job, for example, of saying we're performance-based culture, we're focused on a very specific mission, we don't want that mission to creep, we're about, we're not a family, you know? Like, if your uncle shows up drunk and does something bad, you forgive him. If a board member shows up and does that, then you don't want them on your board, right? They're being irresponsible. There's also that broader context of, how do you want to think about alignment, incentives, culture, motivations, and is this a good moment in time to sort of pause and rethink some of those things relative to your own company?