Sam Altman’s Knack for Dodging Bullets—With a Little Help From Bigshot Friends

OpenAI CEO Sam Altman at the company’s office in San Francisco.
OpenAI CEO Sam Altman at the company’s office in San Francisco.

Summary

The OpenAI CEO lost the confidence of top leaders in the three organizations he has directed, yet each time he’s rebounded to greater heights.

Minutes after the board of OpenAI fired CEO Sam Altman, saying he failed to be truthful, he exchanged texts with Brian Chesky, the billionaire chief executive of Airbnb.

“So brutal," Altman wrote to his friend. Later that day, Chesky told Microsoft’s CEO Satya Nadella, OpenAI’s biggest partner, “Sam has the support of the Valley." It was no exaggeration.

Over the weekend, Altman rallied some of Silicon Valley’s most influential CEOs and investors to his side, including Vinod Khosla, co-founder of Sun Microsystems and the founder of Khosla Ventures, OpenAI’s first venture-capital investor; Ron Conway, an early investor in Google and Facebook; and Nadella. Days later, Altman returned as OpenAI’s chief executive.

Altman’s firing and swift reversal of fortune followed a pattern in his career, which began when he dropped out of Stanford University in 2005 and gained the reputation as a Silicon Valley visionary. Over the past two decades, Altman has lost the confidence of several top leaders in the three organizations he has directed. At every crisis point, Altman, 38 years old, not only rebounded but climbed to more powerful roles with the help of an expanding network of powerful allies.

A group of senior employees at Altman’s first startup, a location-based social-media network started in the flip-phone era, Loopt, twice urged board members to fire him as CEO over what they described as deceptive and chaotic behavior, said people familiar with the matter. But the board, with support from investors at venture-capital firm Sequoia, kept Altman until Loopt was sold in 2012.

Two years later, Altman was a surprise pick to head Y Combinator, the startup incubator that helped launch Airbnb and Dropbox, by its co-founder Paul Graham. Graham had once compared Altman with Steve Jobs and said he was one of the “few people with such force of will that they’re going to get what they want."

Altman’s job as president of the incubator put him at the center of power in Silicon Valley. It was there he counseled Chesky through Airbnb’s spectacular ascent and helped make grand sums for tech moguls by pointing out promising startups.

In 2019, Altman was asked to resign from Y Combinator after partners alleged he had put personal projects, including OpenAI, ahead of his duties as president, said people familiar with the matter.

This fall, Altman also faced a crisis of trust at OpenAI, the company he navigated to the front of the artificial-intelligence field. In early October, OpenAI’s chief scientist approached some fellow board members to recommend Altman be fired, citing roughly 20 examples of when he believed Altman misled OpenAI executives over the years. That set off weeks of closed-door talks, ending with Altman’s surprise ouster days before Thanksgiving.

Altman’s gifts as a deal-maker, talent scout and pitchman helped turn OpenAI into a business some investors now value at $86 billion. The loyalty he engendered through his success mobilized high-profile supporters after his firing and inspired employees to threaten a mass exit.

“A big secret is that you can bend the world to your will a surprising percentage of the time," Altman wrote in his personal blog two months before his exit from Y Combinator.

Over his career, Altman has shown skill in bending circumstances to his favor. His ability to bounce back will be tested once again. Scrutiny of his management is expected in coming months. OpenAI’s two new board members have commissioned an outside investigation into the causes of the company’s recent turmoil, conducted by Washington litigation firm WilmerHale, including Altman’s performance as CEO and the board’s reasons for firing him.

“The senior leadership team was unanimous in asking for Sam’s return as CEO and for the board’s resignation, actions backed by an open letter signed by over 95% of our employees. The strong support from his team underscores that he is an effective CEO," said an OpenAI spokeswoman.

This article is based on interviews with dozens of executives, engineers, current and former employees and friend’s of Altman’s, as well as investors.

Center stage

Altman was a 19-year-old Stanford sophomore studying computer science when he stepped into the limelight at a campus entrepreneur event in 2005. He stood onstage, held up a flip phone and said he had just learned all cellphones would soon have a Global Positioning System, now commonly known as GPS.

Altman asked anyone interested to join him to figure out how best to pair the technologies. He and his co-founders decided on a flip-phone app that would let people track their friends on a map, which Altman would later pitch as a remedy for loneliness.

During a later entrepreneurship competition, Altman impressed Patrick Chung, who had just joined New Enterprise Associates, a venture-capital firm, and was one of the event’s judges. NEA teamed up with Sequoia and offered Altman and his team $5 million to pursue their idea.

Altman dropped out of school and Loopt was born. An early investor was Y Combinator, a startup incubator founded by Paul Graham and his-then girlfriend now-wife, Jessica Livingston. Altman soon became a favorite of Graham’s.

A few years after the company’s launch, some Loopt executives voiced frustration with Altman’s management. There were complaints about Altman pursuing side projects, at one point diverting engineers to work on a gay dating app, which they felt came at the expense of the company’s main work.

Senior executives approached the board with concerns that Altman at times failed to tell the truth—sometimes about matters so insignificant one person described them as paper cuts. At one point, they threatened to leave the company if he wasn’t removed as CEO, according to people familiar with the matter. The board backed Altman.

“If he imagines something to be true, it sort of becomes true in his head," said Mark Jacobstein, co-founder of Jimini Health who served as Loopt’s chief operating officer. “That is an extraordinary trait for entrepreneurs who want to do super ambitious things. It may or may not lead one to stretch, and that can make people uncomfortable."

Altman doesn’t recall employee complaints beyond the normal annual CEO review process, according to people familiar with his thinking.

Among the most important relationships that Altman made at Loopt was with Sequoia, whose partner, Greg McAdoo, served on Loopt’s board and led the firm’s investment in Y Combinator around that time. Altman also became a scout for Sequoia while at Loopt, and helped the firm make its first investment in the payments firm Stripe—now one of the most valuable U.S. startups.

Michael Moritz, who led Sequoia, personally advised Altman. When Loopt struggled to find buyers, Moritz helped engineer an acquisition by another Sequoia-backed company, the financial technology firm Green Dot.

“I saw in a 19-year-old Sam Altman the same thing that I see now: an intensely focused and brilliant person whom I was willing to bet big on," said Chung, now managing general partner of Xfund, a venture-capital firm.

Man versus machine

Graham’s selection of Altman to lead Y Combinator in 2014 surprised many in Silicon Valley, given that Altman had never run a successful startup. Altman nonetheless set a high goal—to expand the family run operation into a business empire.

He made as many as 20 introductions a day, helping connect people in Y Combinator’s orbit. He helped Greg Brockman, the former chief technology officer of Stripe, make a mint selling his shares in the successful payments company to buyers including Y Combinator. Brockman co-founded OpenAI in 2015 and became its president.

Altman turned Y Combinator into an investing powerhouse. While serving as the president, he kept his own venture-capital firm, Hydrazine, which he launched in 2012. He caused tensions after barring other partners at Y Combinator from running their own funds, including the current chief executive, Garry Tan, and Reddit co-founder Alexis Ohanian. Tan and Ohanian didn’t respond to requests for comment

Altman also expanded Y Combinator through a nonprofit he created called YC Research, which served as an incubator for Altman’s own projects, including OpenAI. From its founding in 2015, YC Research operated without the involvement of the firm’s longtime partners, fueling their concern that Altman was straying too far from running the firm’s core business.

Altman believed OpenAI was primed for AI breakthroughs, including artificial general intelligence—an AI system capable of performing intellectual tasks as well as or better than humans. Altman helped recruit Ilya Sutskever from Google to OpenAI in 2015, which attracted many of the world’s best AI researchers.

By early 2018, Altman was barely present at Y Combinator’s headquarters in Mountain View, Calif., spending more time at OpenAI, at the time a small research nonprofit, according to people familiar with the matter.

The increasing amount of time Altman spent at OpenAI riled longtime partners at Y Combinator, who began losing faith in him as a leader. The firm’s leaders asked him to resign, and he left as president in March 2019.

Graham said it was his wife’s doing. “If anyone ‘fired’ Sam, it was Jessica, not me," he said. “But it would be wrong to use the word ‘fired’ because he agreed immediately."

Jessica Livingston said her husband was correct.

To smooth his exit, Altman proposed he move from president to chairman. He pre-emptively published a blog post on the firm’s website announcing the change. But the firm’s partnership had never agreed, and the announcement was later scrubbed from the post.

For years, even some of Altman’s closest associates—including Peter Thiel, Altman’s first backer for Hydrazine—didn’t know the circumstances behind Altman’s departure.

Resurrection

At OpenAI, Altman recruited talent, oversaw major research advances and secured $13 billion in funding from Microsoft. Sutskever, the company’s chief scientist, directed advances in large language models that helped form the technological foundation for ChatGPT—the phenomenally successful AI chatbot. Sequoia was one of OpenAI’s investors.

As the company grew, management complaints about Altman surfaced.

In early fall this year, Sutskever, also a board member, was upset because Altman had elevated another AI researcher, Jakub Pachoki, to director of research, according to people familiar with the matter.

Sutskever told his board colleagues that the episode reflected a long-running pattern of Altman’s tendency to pit employees against one another or promise resources and responsibilities to two different executives at the same time, yielding conflicts, according to people familiar with the matter.

“Ilya has taken responsibility for his participation in the Board’s actions, and has made clear that he believes Sam is the right person to lead OpenAI," Alex Weingarten, a lawyer representing Sutskever, said in a statement. He described as inaccurate some accounts given by people familiar with Sutskever’s actions but didn’t identify any alleged inaccuracies.

Altman has said he runs OpenAI in a “dynamic" fashion, at times giving people temporary leadership roles and later hiring others for the job. He also reallocates computing resources between teams with little warning, according to people familiar with the matter.

Other board members already had concerns about Altman’s management. Tasha McCauley, an adjunct senior management scientist at Rand Corp., tried to cultivate relationships with employees as a board member. Past board members chatted regularly with OpenAI executives without informing Altman. Yet during the pandemic, Altman told McCauley he needed to be told if the board spoke to employees, a request that some on the board viewed as Altman limiting the board’s power, people familiar with the matter said.

Around the time Sutskever aired his complaints, the independent board members heard similar concerns from some senior OpenAI executives, people familiar with the discussions said. Some considered leaving the company over Altman’s leadership, the people said.

Altman also misled board members, leaving the impression with one board member that another wanted board member Helen Toner removed, even though it wasn’t true, according to people familiar with the matter, The Wall Street Journal reported.

The board also felt nervous about Altman’s ability to use his Silicon Valley influence, so when members decided to fire him, they kept it a secret until the end. They gave only minutes notice to Microsoft, OpenAI’s most important partner. The board in a statement said Altman had failed to be “consistently candid" and lost their trust without giving specific details.

Altman retreated to his 9,500 square-foot house, which overlooks San Francisco in the city’s Russian Hill neighborhood.

One of his key allies was Chesky. Shortly after Altman was fired, Chesky hopped on a video call with Altman and Brockman, who had been removed from the board that day and quit the company in solidarity with Altman. Chesky asked why it happened. Altman theorized it might have been about the dust-up with Toner or Sutskever’s complaints.

Satisfied that it wasn’t a criminal matter, Chesky phoned Nadella, the Microsoft CEO.

A small group of Silicon Valley power brokers, including Chesky and Conway, advised Altman and worked the phones, trying to negotiate with the board.

The board named Emmett Shear, an OpenAI outsider, as interim CEO, drawing threats to resign by most of the company’s employees. In another lucky turn of fortune for Altman, Shear was an ally and a mentor of Chesky’s.

Together, Chesky and Shear helped clear a path for Altman’s return.

Jim Oberman, Rolfe Winkler and Tom Dotan contributed to this article.

Write to Deepa Seetharaman at deepa.seetharaman@wsj.com, Keach Hagey at Keach.Hagey@wsj.com, Berber Jin at berber.jin@wsj.com and Kate Linebaugh at Kate.Linebaugh@wsj.com

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