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Sam Altman, CEO of ChatGPT maker OpenAI, arrives for a bipartisan Artificial Intelligence (AI) Insight Forum for all U.S. senators hosted by Senate Majority Leader Chuck Schumer (D-NY) at the U.S. Capitol in Washington, U.S., September 13, 2023. 

Leah Millis | Reuters

OpenAI’s unusual company structure weakened Sam Altman’s position as CEO and left him open to surprise on Friday when he was quickly ousted from the company.

It’s rare to see founders forced out of a firm they helped co-found. At Uber, for example, founder Travis Kalanick was forced out only after a series of reports on privacy issues and allegations of discrimination and sexual harassment at the ride-sharing company. 

But Altman and co-founder Greg Brockman, who also left OpenAI Friday, didn’t have the power that Kalanick had.

“I have no equity in OpenAI,” Altman said in a May Senate hearing on A.I. Senator John Kennedy’s reaction offered some foreshadowing.

“You need a lawyer or an agent,” Kennedy said in a now-prescient joke.

The structure of the company helps explain how he was left in a vulnerable position that, as he said on Saturday, left him feeling “a little screwed.”

OpenAI’s capped profit structure

The easiest way to think of OpenAI’s structure is to picture a waterfall. The board of directors sits at the top. OpenAI Global, the capped-profit company in which Microsoft invested billions and of which Sam Altman had become the global face, sits at the bottom. There’s some stuff in the middle.

So let’s start at the very top of the waterfall. OpenAI’s board of directors – the ultimate decision body and the group responsible for pushing Altman out – controls OpenAI’s 501(c)(3) charity, OpenAI Inc. That charity is the nonprofit of which you may be aware. It was established to “ensure that safe artificial general intelligence is developed and benefits all of humanity.”

The company’s website says the nonprofit’s charter takes “precedence over any obligation to generate a profit.” In other words, the nonprofit is the priority, while the capped-profit Open AI Global subsidiary is not.

There’s a holding company and another LLC called OpenAI GP, which both give the board ownership or control over OpenAI Global. Again, that’s the company Microsoft invested in. It’s the one you hear about in the news when Altman talks about ChatGPT developments and whatnot. What’s important here is that OpenAI Global had no control. It was the one controlled or owned by all of the other entities in various ways.

So now you’re probably wondering — why have a for-profit company at the bottom of a corporate structure if everything’s just going to be run by a nonprofit? There’s a reason for that, too.

Limited returns

OpenAI added its capped profit OpenAI Global subsidiary in 2019. The shift was prompted by several things, including a desire to attract top employees and investors with “startup-like equity.”

Remember, if your ultimate goal is to ensure the safe use of AI, you’re going to want to bring on some really smart people. And that’s tough when every big company on the market is willing to pay them top dollar to work. So if you’re OpenAI, you need incentives.

Part of that shift to a for-profit model meant reassessing how OpenAI rewarded those employees and investors who gambled on the company. The company settled on a capped-profit approach. It limited the “multiple” that investors could make by sending cash OpenAI’s way.

At the time, the profit cap was set at 100x of a first-round backer’s investment. In plain language, if investors put in $1, even if OpenAI was making billions of dollars in profit, that investor would be limited to $100 in total direct profit. It would still be a sizeable return, but not unlimited.

But remember, the core mission of the nonprofit is to control the development of artificial general intelligence. And all investors and employees are subject to that mission above anything else, including the for-profit company.

OK, so we have a nonprofit with a business that makes profits in order to attract top talent. How does Altman fit in here and how’d he get ousted?

Sam Altman’s missing equity

Altman had a board seat and was the best-known OpenAI personality. Aside from a small investment through a YCombinator fund (Altman was formerly its president), he doesn’t have any equity in the company. And that meant he didn’t have much control if anything turned against him.

He even joked about it Friday evening: “If I start going off, the OpenAI board should go after me for the full value of my shares.”

In fact, it reportedly worried some investors that Altman didn’t have ownership in the company he helped co-found, despite Altman’s public pronouncements that he was committed to OpenAI because he loved the work.

Most founders at later-stage companies take advantage of a dual-class share structure. Two tiers of shares are created — a set of shares for venture investors and the general public, if the company makes it to an IPO, and a more powerful set of shares reserved for founders or, in some cases, major investors.

CEOs and founders use dual-class share structures to protect themselves from losing control of their company. The rights assigned to these shareholders vary, but they often include outsize voting power, guaranteed board seats, or other governance provisions that make it hard for a board to topple them even if a company goes public. Some companies, like Google, even have three classes of shares, for its founders, employees, and investors.

Altman didn’t have those protections. Brockman, the former OpenAI president, said that Altman found out he was “being fired” in a virtual meeting Friday noon. Altman’s only heads up, Brockman said on X, the social media platform formerly known as Twitter, was a text from OpenAI chief scientist Ilya Sutskever a day before.

Investors like to back visionary founders. Some, like Peter Thiel’s Founders Fund, have centered their investment theses around the idea. Not having equity in the company could have been perceived as reducing Altman’s “skin in the game,” so to speak. But it also meant that Altman, lacking those protections, was open to a boardroom coup.

At Uber, five major investors demanded Kalanick’s departure immediately, including one of the company’s largest shareholders Benchmark, after months of negative reports on workplace culture and other controversies. OpenAI, by contrast, hasn’t seen a similar storyline emerge. Altman is a divisive figure, and many critics have worried about the impact OpenAI’s ultimate goal — artificial general intelligence, or AGI — would have for humanity. 

OpenAI’s small board lacks the experience that would be expected from a company of its size and importance. None of its largest backers, not even Microsoft, have board seats. Until Altman and Brockman’s departure, it was composed of three outside directors and three OpenAI executives. 

Brockman wasn’t involved in Altman’s firing, meaning that every outside director and Sutskever would have had to all vote to fire Altman. With no allies on the six-person board, it was a mathematical impossibility that Altman could win. 

It isn’t clear what comes next for Altman or OpenAI. Litigation is possible, given the apparently swift nature of his departure. Some of Silicon Valley’s most influential law firms have represented OpenAI or its investors in various deals, and any courthouse proceedings will likely be closely watched.

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Crypto execs says the bull run is underway and could lead to $100,000 bitcoin in 2024




Crypto execs says the bull run is underway and could lead to 0,000 bitcoin in 2024

Yuichiro Chino | Moment | Getty Images

Executives in the cryptocurrency industry called the start of a new bull run with a growing number of voices calling for fresh all-time highs for bitcoin in 2024 above $100,000.

Bitcoin has rallied more than 120% this year, with many optimistic about the surge continuing into 2024.

“It feels that [2023]was a year to get ready for the bull run that is yet to come. But the sentiment is very hopeful for [2024] and 25,” Pascal Gauthier, CEO of Ledger, told CNBC last week in an interview.

The digital currency’s last record high of nearly $69,00 was hit in November 2021.

Since then, the crypto industry has been hit with a litany of issues from the collapse of coins and projects to bankruptcies and criminal trials. FTX, once one of the world’s biggest exchanges, collapsed with its founder Sam Bankman-Fried facing over 100 years in prison after he was found guilty on seven counts of criminal fraud.

Meanwhile, Binance chief Changpeng Zhao pleaded guilty to criminal charges and stepped down as the company’s CEO as part of a $4.3 billion settlement with the U.S. Department of Justice.

Many in the industry see the two cases concluding as a line being drawn under issues that have plagued the crypto market.

“I think that once you get the speculative phase out of the way, which I think we’re almost done with, probably not yet completely done, then you can get real builders focusing on the technology and the problems that can solve in the world, rather than just having a giant digital casino for people to trade,” David Marcus, CEO of Lightspark, told CNBC last week in an interview.

Marcus, the former leader of Facebook’s failed Diem stablecoin project, is now working on technology to improve bitcoin as a payments network.

Crypto sector nearing end of 'speculative phase,' Lightspark CEO says

Now that those issues are out the way, investors are focused on what the industry sees as positive developments. The first is the growing excitement that a bitcoin exchange-traded fund, or ETF, might be approved soon. This could bring in larger traditional investors who previously did not want to touch crypto.

“I think what the ETF means really is that bitcoin is going mainstream, and that’s what people were waiting for,” Gauthier said.

The second development is the bitcoin halving, which takes place every four years and is scheduled for May 2024. Halving is when miners, which are entities who uphold the bitcoin network, see the rewards for their work cut in half. This keeps a cap on the supply of bitcoin — of which there will ever only be 21 million coins — and often is a factor behind a new rally.

“A number of market participants are expecting a bull run some time after the halving, but given the ETF news, we could very well have a run before that leaving most investors on the sidelines. That could cause a massive upward run in the price,” Vijay Ayyar, vice president of international markets at cryptocurrency exchange CoinDCX, told CNBC.

Bitcoin at $100,000?

There have already been some bold calls for bitcoin in 2024.

It began with Standard Chartered last week which reiterated an April price call that bitcoin would hit $100,000 by end of 2024. The bank said this will be driven by the approvals of numerous ETFs.

That would mean a roughly 160% rally from Friday’s price of around $38,413, according to CoinDesk data.

Matrixport, which bills itself as a crypto financial services firm, released a note last week projecting bitcoin would reach $63,140 by April 2024 and $125,000 by the end of next year.

“Based on our inflation model, the macro environment is expected to remain a robust tailwind for crypto. Another decline in inflation is anticipated, prompting the Federal Reserve to likely initiate interest rate cuts,” Matrixport said in its report.

“Combined with geopolitical crosscurrents, this healthy dose of monetary support should push Bitcoin to new highs in 2024.”

The bitcoin bull run has begun, Ledger CEO says

Many commentators see easing monetary policy as supportive for bitcoin which is viewed as a risky asset. Meanwhile, some see bitcoin as a sort of “safe haven” asset to pour money into in times of geopolitical strife.

When asked if bitcoin would hit $100,000 in 2024, Gauthier said “maybe,” but declined to give a price prediction.

“What we see is strong fundamentals,” he said.

Ayyar said that the price of bitcoin is “consolidating” below a “key level” of $38,000, which is bullish for bitcoin. Once this level is broke, bitcoin could rally to between $45,000 and $48,000 next, he said.

However, he warned the rally, which is in large part built on expectations of an ETF approval, could fail if the product is rejected by regulators again.

“An all out ETF rejection could play havoc to this run as well, hence definitely something to be mindful of,” he said.

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Meta’s AI chief doesn’t think AI super intelligence is coming anytime soon, and is skeptical on quantum computing




Meta's AI chief doesn't think AI super intelligence is coming anytime soon, and is skeptical on quantum computing

Yann LeCun, chief AI scientist at Meta, speaks at the Viva Tech conference in Paris, June 13, 2023.

Chesnot | Getty Images News | Getty Images

Meta’s chief scientist and deep learning pioneer Yann LeCun said he believes that current AI systems are decades away from reaching some semblance of sentience, equipped with common sense that can push their abilities beyond merely summarizing mountains of text in creative ways.

His point of view stands in contrast to that of Nvidia CEO Jensen Huang, who recently said AI will be “fairly competitive” with humans in less than five years, besting people at a multitude of mentally intensive tasks.

“I know Jensen,” LeCun said at a recent event highlighting the Facebook parent company’s 10-year anniversary of its Fundamental AI Research team. LeCun said the Nvidia CEO has much to gain from the AI craze. “There is an AI war, and he’s supplying the weapons.”

“[If] you think AGI is in, the more GPUs you have to buy,” LeCun said, about technologists attempting to develop artificial general intelligence, the kind of AI on par with human-level intelligence. As long as researchers at firms such as OpenAI continue their pursuit of AGI, they will need more of Nvidia’s computer chips.

Society is more likely to get “cat-level” or “dog-level” AI years before human-level AI, LeCun said. And the technology industry’s current focus on language models and text data will not be enough to create the kinds of advanced human-like AI systems that researchers have been dreaming about for decades.

“Text is a very poor source of information,” LeCun said, explaining that it would likely take 20,000 years for a human to read the amount of text that has been used to train modern language models. “Train a system on the equivalent of 20,000 years of reading material, and they still don’t understand that if A is the same as B, then B is the same as A.”

“There’s a lot of really basic things about the world that they just don’t get through this kind of training,” LeCun said.

Hence, LeCun and other Meta AI executives have been heavily researching how the so-called transformer models used to create apps such as ChatGPT could be tailored to work with a variety of data, including audio, image and video information. The more these AI systems can discover the likely billions of hidden correlations between these various kinds of data, the more they could potentially perform more fantastical feats, the thinking goes.

Some of Meta’s research includes software that can help teach people how to play tennis better while wearing the company’s Project Aria augmented reality glasses, which blend digital graphics into the real world. Executives showed a demo in which a person wearing the AR glasses while playing tennis was able to see visual cues teaching them how to properly hold their tennis rackets and swing their arms in perfect form. The kinds of AI models needed to power this type of digital tennis assistant require a blend of three-dimensional visual data in addition to text and audio, in case the digital assistant needs to speak.

These so-called multimodal AI systems represent the next frontier, but their development won’t come cheap. And as more companies such as Meta and Google parent Alphabet research more advanced AI models, Nvidia could stand to gain even more of an edge, particularly if no other competition emerges.

The AI hardware of the future

Nvidia has been the biggest benefactor of generative AI, with its pricey graphics processing units becoming the standard tool used to train massive language models. Meta relied on 16,000 Nvidia A100 GPUs to train its Llama AI software.

CNBC asked if the tech industry will need more hardware providers as Meta and other researchers continue their work developing these kinds of sophisticated AI models.   

“It doesn’t require it, but it would be nice,” LeCun said, adding that the GPU technology is still the gold standard when it comes to AI.

Still, the computer chips of the future may not be called GPUs, he said.

“What you’re going to see hopefully emerging are new chips that are not graphical processing units, they are just neural, deep learning accelerators,” LeCun said.

LeCun is also somewhat skeptical about quantum computing, which tech giants such as Microsoft, IBM, and Google have all poured resources into. Many researchers outside Meta believe quantum computing machines could supercharge advancements in data-intensive fields such as drug discovery, as they’re able to perform multiple calculations with so-called quantum bits as opposed to conventional binary bits used in modern computing.

But LeCun has his doubts.

“The number of problems you can solve with quantum computing, you can solve way more efficiently with classical computers,” LeCun said.

“Quantum computing is a fascinating scientific topic,” LeCun said. It’s less clear about the “practical relevance and the possibility of actually fabricating quantum computers that are actually useful.”

Meta senior fellow and former tech chief Mike Schroepfer concurred, saying that he evaluates quantum technology every few years and believes that useful quantum machines “may come at some point, but it’s got such a long time horizon that it’s irrelevant to what we’re doing.”

“The reason we started an AI lab a decade ago was that it was very obvious that this technology is going to be commercializable within the next years’ time frame,” Schroepfer said.

WATCH: Meta on the defensive amid reports of Instagram’s harm

Meta on the defensive amid reports of Instagram's harm

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How $100 billion mining giant Rio Tinto is poised to benefit from the EV boom




How 0 billion mining giant Rio Tinto is poised to benefit from the EV boom

Copper mines like Rio Tinto’s Bingham Canyon mine on the outskirts of Salt Lake City are on the frontline of America’s transition to clean energy.

Global demand for copper, a major component of electric vehicles, is expected to grow from 25 million metric tons to nearly 49 million metric tons by 2035, according to S&P Global.

But miners face a multitude of issues as they ramp up production, including addressing the concerns of local stakeholders, mitigating environmental damage and operating in remote regions of the world.

“There’s going to be a real problem with this transition over the next ten years,” said Tyler Broda, metals and mining analyst for RBC Capital Markets. “It is very, very hard for these companies to even maintain the level of production that they have at the moment.”

Jointly based in Australia and the UK, Rio Tinto is one of the world’s largest mining companies with projects in 35 countries. It has 17 iron ore mines in Western Australia that produce material used in steel, as well as mines that produce aluminum, diamonds, and boron, a component used in smartphones. 

So what is Rio Tinto doing to ramp up production of its critical minerals business? CNBC got a behind the scenes look at Rio Tinto’s Utah operation to find out.

Watch the video to learn more.

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