Microsoft Is Happy Being The Co-Pilot On The OpenAI Rocket Ship

(Bloomberg Businessweek) -- Until Nov. 17, the conventional wisdom in Silicon Valley was that Microsoft Corp.’s partnership with OpenAI was an enviable success. The investment boosted Microsoft’s cloud computing business, gave the company access to OpenAI’s most advanced technology, reinvigorated its Bing search engine and helped streamline a sprawling artificial intelligence research effort. And because Microsoft owned less than 50% of OpenAI’s equity, the company avoided the sort of antitrust scrutiny that has followed it since the 1990s..But one of the drawbacks of outsourcing key technology to a startup—even one that many people have begun to regard as a de facto subsidiary—is that it can blow itself up without so much as a friendly warning. Microsoft found out about the ouster of OpenAI Chief Executive Officer Sam Altman only minutes before the news was announced publicly, sending executives scrambling and the company’s stock price sinking..Soon enough, Microsoft CEO Satya Nadella and his deputies helped engineer a dramatic countercoup, restoring Altman to his job and securing the ouster of the board members who were least aligned with Microsoft’s interests. This move both calmed the stock market and reset the OpenAI-Microsoft relationship on terms that appear to be much friendlier to Nadella. “He was playing three-dimensional consultative chess,” says Sheila Gulati, a longtime Microsoft manager who’s now a managing director at Tola Capital, a venture capital firm. On Nov. 29, OpenAI announced that Microsoft would join the board as a nonvoting observer..The coup and the quick reversal underscore why, even now, Microsoft’s lead over its primary rivals in AI remains uncertain. OpenAI’s newly reconstituted board is planning an investigation into Altman, which, in theory, could reignite the controversy around him. At the same time, Google, Facebook, Anthropic and other competitors appear to be catching up. And it remains unclear whether chatbots—still the primary application for OpenAI’s large language model—can be operated profitably enough to justify the $13 billion Microsoft has invested in the company so far..When it put its first billion into OpenAI in 2019, Microsoft received none of the traditional protections that outside investors usually get. The startup’s for-profit arm sat inside a nonprofit that was ostensibly dedicated to advancing AI software while protecting humanity from any danger should AI development get out of control. It had no fiduciary duty to protect Microsoft’s interests..Altman often bragged that this board—on which Microsoft didn’t have a seat—would shut down OpenAI if its corporate expansion ever got out of hand. During an interview with earlier this year, he joked about “this internet meme that I carry around a button to blow explosive bolts into the data center.” The meme was false, he said, but the general sentiment behind it was true. OpenAI’s board would gladly ignore Microsoft’s wishes in a disagreement over AI safety..But this idea understated Microsoft’s leverage in any potential dispute. As OpenAI’s primary investor, Microsoft had the right to resell OpenAI’s tech to its corporate customers and held an expansive license to use the startup’s AI models. Microsoft’s Azure cloud computing division also built and houses the supercomputer OpenAI uses to train its models, a critical piece of infrastructure that Microsoft, rather than OpenAI, owns. Microsoft had everything it needed, in other words, to quickly spin up a credible OpenAI clone if things went sideways..This possibility seemed remote when Nadella appeared onstage with Altman in early November and declared, “We love you guys.” But in the weekend after the firing, Nadella transformed it into a credible threat, announcing that Microsoft had hired Altman and OpenAI President Greg Brockman to start a new AI division within the company. Nadella also signaled that Microsoft would hire any OpenAI engineers who chose to defect unless OpenAI wanted to reverse course. Nadella's tactics constituted a “master move,” says Gulati, the venture capitalist. This option instantly made every OpenAI employee a flight risk and helped bring on the mass resignation threat that eventually led to Altman’s reinstatement..The result allows Microsoft to more or less go back to business as usual: aggressively adding AI assistants, which Microsoft calls Copilots, to all its software offerings. The effort has been so comprehensive that at times it’s taken on a comic quality. At Microsoft’s annual developer conference, Ignite, which was wrapping up as the coup started, the company unveiled something called Copilot Studio, a program that lets customers make their own AI assistants. Of course, this program comes with its own AI assistant, a Copilot Studio co-pilot..These AI assistants don’t come cheap. Any business that wants one for Word and Excel, for example, will pay an additional $30 per user per month, roughly doubling what a typical corporate customer pays for Microsoft’s office suite. At the same time, free and open-source AI assistants are widely available. Microsoft is banking on customers being willing to pay for the productivity gains from Copilot and the convenience of having it baked into such a wide array of software..“It’s going to show up across all your experiences,” says Rajesh Jha, the executive vice president who oversees the product teams the office suite, Windows, and search. Microsoft, he continues, wants to “be the Copilot company.” In a way, the product name is apt. Microsoft is betting its future on an uncertain technology, even though it’s not clear who—Nadella or OpenAI’s board—has the controls..More stories like this are available on bloomberg.com.©2023 Bloomberg L.P.

Microsoft Is Happy Being The Co-Pilot On The OpenAI Rocket Ship

Post the Altman vs OpenAI fiasco Microsoft has gone back to business as usual: aggressively adding AI assistants, which Microsoft calls Copilots, to all its software offerings.

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Microsoft Is Happy Being The Co-Pilot On The OpenAI Rocket Ship

Post the Altman vs OpenAI fiasco Microsoft has gone back to business as usual: aggressively adding AI assistants, which Microsoft calls Copilots, to all its software offerings.

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