Seen this story time and time again. "Founder of company kicked out of own business they created". Why does this happen so often?
this post was submitted on 18 Nov 2023
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When you go public its not really your company anymore, its shareholders company.
OpenAI is not publicly traded company, but they have of course sold shares to other parties.
It's a little more complicated than that. OpenAI's core business is a non-profit, and nobody has shares in it that generate any kind of returns. Any extra money they make is either reinvested, donated to another non-profit, or just sits in a bank account until they do one of the first two things.
There is a for-profit arm of it, though, and some people do have shares in that.
The board in question runs the non-profit part.
Original comment talked about going public, what they have yet not done.
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That doesn't really answer my question though. Why would anyone kick out the people responsible for creating the business in the first place? The people who imagined and thrust the business into life and massive success? Seems like they would be valuable people to shareholders...
They are invariably, actually, not very valuable at all beyond the fruition. Take a look at any Forbes or FT top 100 list and see how many of those companies are being run by founders.
Companies go through a lifecycle of change before they reach anything resembling stability or a pace of business that isn't completely volatile the people in it. During that time the types of people that the business need to achieve the goals of that lifecycle stage are very different.
Steve Jobs types, on the other hand, are actually extremely rare and the exception rather than the rule.
Take a look at any Forbes or FT top 100 list and see how many of those companies are being run by founders.
This is still not answering my question of "why?"
Because it requires a completely different skill set to run a startup with only yourself and 50 employees to worry about vs a multi-billion dollar, publicly traded company. People that are good at one of those often aren't good at the other, so when their company changes from the former to the latter, they get the boot for someone better at running the new version of the company.
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the types of people that the business need to achieve the goals of that lifecycle stage are very different.
It was this bit
Founders are big thinkers and risk takers. When a company has found success, the owners prefer to focus on scaling that value rather than doubling or tripling down on the next big thing but the founders often want to keep betting it all.
Put another way, if you bet 100 and have turned it into 1,000,000 would you want to get your money out or play roulette?
It's not a matter of reward or punishment. It's a matter of the skills required for continued success.
Early startups require big risk-taking, progressing at an absurd speed, charisma to get investor capital, and really just being a little crazy.
Once the concept is proven to be viable and potentially profitable, the focus needs to shift from proving it can work to making it sustainable. This involves less risk, process improvements to avoid issues like getting sued, better money management, more careful time management to avoid burnout of non-founder employees, and generally just being more rational about things.
It's rare that a person can exhibit both of these sets of behaviors, so companies will often swap out the former for the latter as a company matures. If they didn't, the founders might unintentionally drive the company into the ground by taking unnecessary risks after finding something that already works.
Does that answer your question, or did I miss the mark, still?
Generally the type of people who make good founders have to be dreamers to believe that their crazy idea not only can work but can change the world.
These people do not make good leaders as the company matures, as it now needs certainty for investors and detailed plans and structure instead of moonshot fantasies.
The same traits that make them good founders also make it difficult for them to let go of their position, or recognize that they should transition control to a better suited candidate, so often they must be removed by the board.
Source: Software Engineer in a tech startup
I've worked at tech startups and I've always hated seeing the good founders removed. It feels like such a scummy, sterile move. The board doesn't care that the founder/s did a nearly insurmountable amount of work to elevate the company and would rather have some career CEO take over so they can maximize profits rather than do right by the company. It's a perversion of the company's original values and people all so that some rich assholes can make more money.
Capitalism is all about perverse incentives. It's unavoidable
it now needs certainty for investors and detailed plans and structure instead of moonshot fantasies.
So after the company becomes successful, they need to stop coming up with new ideas? A tech company? Like, I get it but I don't get it. Why do investors want that? Why would anyone want that? You can filter their creative input without indulging their every whim.
It's like the bands that create amazing and unique music and become super popular based on said music, then their next album sounds like every other "pop" band in existence. Like what are people even buying at that point?
I'm by no means saying that they have no further role in the company, and you are absolutely correct that these companies need to continue to innovate. This is why I mentioned transitioning control to a better candidate, because the role of the CEO changes as the company matures.
Smart founders should find a way to continue to play into their strengths instead of clinging to the highest title, otherwise they will always need to be removed.
Basically why Larry Page and Sergey Brin had Eric Schmidt become their CEO. He could do all the business stuff while they focused on doing whatever moonshots they wanted
Erin Schmidt is the one who turned Google into the shitty company that had to remove their “Don’t be evil” policy.
I remember when this scandal came out: https://www.wired.com/2012/05/google-wifi-fcc-investigation/
I watched the press event when Larry Page (obviously not knowing what was going on) promised that they will immediately delete all the sniffed data, then Eric came, took the mic and corrected: “We will delete the data once we receive the court order that forces us to do”.
Once you structure your business so that you have a board of directors, who is the boss is not your decision anymore, as they "work" for the shareholders. In OpenAI's case, the CEO lied to the board so they fired him, and Greg left on his own.
That's why one of the first things Musk did as the majority shareholder was to dissolve the board of directors of Twitter.
I didn't ask "how", I asked "why?" does it happen so often. I understand how BOD works.
Why? Because the people who make money don't like dealing with the founders.
Purely made up example: board of directors decides they can make the mosy money by pivoting and rebranding as "the customer service company". They will throw away all the models built with copyright material, build simpler models based on customer service scripts and interactions from customer businesses, and save a ton on compute while making bank on licensing and professional services. No more free chat, etc.
A founder doesn't like this new direction that is antithetical to their vision for the business so they go around telling shareholders to get rid of the current board and for employees to quit or otherwise not help with this.
Board sees this messing with their genius money printing idea so they fire them.
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In another example, the Zuck maneuvered so that he always kept a majority holding of Facebook which means nobody can kick him out.
This is an interesting move, especially the timing seems funny to me. Microsoft, who run that board let's be real, just finished a big developer's conference called Ignite. Every session was focused on the use of MS "AI" (called Copilot now) in various aspects of development.
A big push was using their studio tools to generate new front ends and capabilities targeted specifically at your customers, and using their "AI" tools to generate content and interactions with customers. It goes far enough that they're basically asking businesses to hand over decision making power to the MS algorithms.
So in that light, MS pushing big to become THE infrastructure that underlies AI-controlled businesses, maybe Altman and co were too mouthy about their idealist directions that AI should go in? Or maybe they oversold the capabilities of their software and now that MS is staking big on it, they want to see results?
According to Brockman's timeline nobody outside of the board knew, including Microsoft. The coup was organized by Ilya, one of the original founders.
To make it even spicier, the first headlines I saw about Altman leaving seemed to indicate that MS was not involved, and in fact didn't know he was going to be fired until literal minutes before the announcement went live. How true this is, of course, is up for debate. But the rumor mill is fun, right?
Delightfully confusing inded! Ah, this is worse than figuring out which way to vote on state amendments! (it's voting day, haha) Well, who knows, but yes the rumor mill is a grand time, one of humanities oldest past times! Certainly a primary reason to hang out online, haha
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How did a CEO get fired? Shareholders?
They have a board and they fired him.
Best time for Apple and Google to poach some talent.
They're not the talent. They're just proven liars. This is like thinking that you can poach Kotick to have him make a video game or poach Musk to make you a rocket launch company. That's not how that works, they just don't play by those same rules.
Maybe they're going to start there own AI in their garages.
Interesting that this headline says leaving and all the others I've seen said fired.
Different co-founder.
Ooooh! I didn't realize. That's kind of a big deal.
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