Microsoft Prepared $25 Billion Plan to Absorb OpenAI Leadership After Altman Firing

Microsoft CEO Satya Nadella revealed in court that Microsoft quickly prepared to absorb OpenAI’s top leadership after Sam Altman was fired on November 17, 2023. Nadella testified during the Elon Musk vs OpenAI trial in Oakland, California, highlighting OpenAI’s importance to Microsoft’s artificial intelligence strategy. He explained that Microsoft acted within 24 hours to protect its interests during the leadership crisis.

Key Highlights

• Microsoft prepared a $25 billion plan to hire OpenAI leadership after Sam Altman was fired.
• Microsoft created a new subsidiary within 24 hours to absorb OpenAI talent if needed.
• Satya Nadella testified that Microsoft had no formal control over OpenAI’s board decisions.
• Microsoft objected to board candidates with ties to competitors like Google and Amazon.
• OpenAI’s board considered a merger with Anthropic during the leadership crisis.

Microsoft’s Rapid Response to OpenAI Crisis

Nadella stated that Microsoft completed legal paperwork for a new subsidiary within a day. This entity was designed to hire Sam Altman, Greg Brockman, and potentially many OpenAI employees if they decided to leave. The urgency showed how critical OpenAI was for Microsoft’s AI ambitions.

Compensation in the AI sector often relies on equity and future company value. To attract OpenAI employees, Microsoft estimated it would need to spend about $25 billion. This amount would match salaries, stock compensation, and equity held or expected by OpenAI staff. The plan was never implemented because Altman was reinstated as OpenAI CEO, and most employees remained at OpenAI.

Details of Board Power Struggle

Nadella described the firing of Altman as “amateurish” and said Microsoft was not given a clear reason for the decision. Despite being OpenAI’s largest investor and business partner, Microsoft received no detailed explanation from the board. Nadella’s immediate concern was whether serious issues such as financial misconduct or security risks were involved, but he received no clear answers. The only public statement from OpenAI’s board cited Altman’s lack of candor, which many found vague.

After Altman’s return, OpenAI planned to rebuild its board of directors. Microsoft suggested 13 to 14 candidates for the new board but none were selected. Nadella admitted that Microsoft had no formal authority to force the nonprofit OpenAI board to accept its recommendations. When asked what Microsoft could do if ignored, Nadella replied, “None,” indicating Microsoft’s lack of direct control despite its investment.

Microsoft did try to influence board composition by objecting to certain candidates. Nadella opposed Diane Greene due to her ties to Google and Bing Gordon because of his links to Amazon. This showed Microsoft’s concern about competitors gaining influence within OpenAI. Elon Musk’s legal team argued that Microsoft tried to shape OpenAI’s governance to benefit its own interests.

Other Testimonies and Backup Plans

Ilya Sutskever, OpenAI co-founder and former chief scientist, testified that the board considered drastic backup options during the crisis. One option involved discussions with Anthropic, a rival AI startup, about a possible merger or partnership. Sutskever said he was not in favor of combining with Anthropic.

Other Microsoft executives also testified about the company’s investment in OpenAI, further illustrating the high stakes and complex relationships between the two organizations.