A crazy week in Silicon Valley, the biggest winner in the OpenAI battle is not Altman

The first season of the OpenAI Palace Battle has come to an end, and Microsoft has achieved the most ideal results without any danger.

Microsoft CEO Nadella was just an audience member at first, knowing the news of Altman's dismissal a few minutes in advance, but then he stepped onto the stage and played an important supporting role in promoting the plot: welcoming Altman to Microsoft.

This news protected Microsoft's stock price and increased Altman's leverage to return as CEO. In Altman's return statement, he specifically thanked Nadella.

During these five crazy days in Silicon Valley, Nadella responded with ease. Suddenly looking back, behind the star company OpenAI stands Microsoft, a low-key winner.

Complementary "match made in heaven"

The cooperation between OpenAI and Microsoft is often regarded as a good story in the history of technology.

At OpenAI's first developer conference, Nadella appeared as a key guest. Altman introduced him enthusiastically, and Nadella also expressed his appreciation for OpenAI.

Under the surface of mountains and rivers, there is the business logic of everyone getting what they need.

Since 2019, Microsoft has invested US$3 billion in OpenAI. When ChatGPT was launched at the end of 2022, it added an additional US$10 billion in early 2023.

OpenAI received Microsoft's computing power and money to train the model. Microsoft became OpenAI's only cloud computing provider. It developed products and services based on OpenAI's model and owned 49% of OpenAI's shares, avoiding the minefield of antitrust laws.

Many media have asked Nadella how he defines the partnership between Microsoft and OpenAI. Nadella's answer has never deviated from the central idea: "interdependence."

OpenAI cannot do without Microsoft's resources, and Microsoft cannot do without OpenAI's technology. AI powers or gives new life to products like GitHub, Bing, and Office Desktop.

After antitrust battles and missing out on the smartphone revolution since its heyday in the 1990s, Microsoft is once again considered a leader in historic technological change.

As for why Microsoft does not develop its own large language model, Nadella mentioned in the interview that they are also developing a model code-named "Turing" internally, but they do not want to train multiple different basic models, but let one model play the role of the platform Effect, OpenAI and their goals are the same.

OpenAI relies on us to build the best systems, and we rely on OpenAI to build the best models and then enter the market together.

As Nadella thinks, the tight integration between Microsoft cloud platform and OpenAI model is a grasshopper tied on a rope, and it has also become a selling point of Microsoft products and services.

On the one hand, Microsoft already has commercial AI products, such as the popular programming assistance tool GitHub Copilot and the $30 per month but still fledgling Microsoft 365.

On the other hand, in addition to productivity products, Microsoft also provides Azure-based GPT access to other AI companies.

Therefore, countless products that seem to be incomparable to Microsoft are actually bringing a steady stream of revenue to Microsoft and running invisible and extremely lethal game rules.

▲ Azure’s OpenAI service.

Some customers even prefer to use OpenAI's models through Microsoft rather than directly because they trust Microsoft more. If you choose a technology giant, your functions are guaranteed, and you don’t have to worry about privacy, compliance, and security.

Of course, the relationship is not without its cracks, and that's where the unexpected happens.

Microsoft does not have a seat on the board of directors, so it suffered a dumb loss in this palace battle. As the largest "funder", the news of Altman's dismissal was only known to the world a few minutes in advance, and it had no say in the way OpenAI operates.

At least, after Altman returned as CEO, cooperation returned to its original point, and Microsoft also had the possibility of getting a board seat.

On the contrary, if Altman "brings his family" to Microsoft to rebuild OpenAI internally, funding, lagging speed, and different corporate culture will all be challenges, and may also arouse the vigilance of regulatory agencies.

Whether Microsoft can get a board seat is still up in the air, but the giant, prepared for a rainy day, has begun to reduce its dependence on OpenAI, and OpenAI is no longer their only option.

▲Ignite Conference.

On November 16, Nadella gave a keynote speech at the Microsoft Ignite conference and officially announced many AI developer tools.

One of them is Azure AI Studio, where developers can choose between models from companies such as Microsoft, Meta, OpenAI and Hugging Face, practicing the concept of "model as a service".

Although it lags behind OpenAI and Google in the big language model race, Microsoft continues to develop its own models.

On November 20, Microsoft released the small language model Orca 2. In tests of complex reasoning tasks, it was even better than large language models such as Meta's Llama-2.

In addition, Microsoft is still cultivating its internal skills and making a good shovel for mining gold mines, including using hollow fiber optic technology to increase the speed of cloud computing and building its own custom chips to compete with its partner Nvidia.

Although OpenAI is powerful, it cannot be controlled. Microsoft has a clear mind and may as well "cooperate with others and compete with others."

Opportunities are reserved for those who are prepared

The cooperation between OpenAI and Microsoft, the investment in 2019 is only an official announcement, but in fact it is just a matter of thousands of miles.

Nadella was born in Hyderabad, India. He came to the United States to study computer science at the age of 21. He joined Microsoft in 1992 and flew across the country to promote the Windows NT operating system. In 2009, he ran the search engine Bing, and in 2011 he led the cloud computing platform Azure.

In 2014, Nadella became the third Microsoft CEO after Bill Gates and Steve Ballmer. He deeply understood the value of cloud computing and AI, and his decisions were proven by his results.

Microsoft shares have risen nearly tenfold since Nadella took the helm, while the S&P 500 has only doubled in value during the same period. Azure is now the growth engine for the entire company, directly affecting the rise and fall of Microsoft's stock.

▲ Nadella in 2004.

Nadella, who is an engineer but studied for a master's degree in business, has also promoted several large-scale acquisitions, including GitHub, LinkedIn, and Activision Blizzard. He has a "higher emotional intelligence" than his predecessor and attaches great importance to maintenance and cooperation with Amazon, Google, etc. Other giants are both friends and foes.

Nadella's layout of cloud computing is very successful. Generative AI is his second bet, and it is also closely related to cloud computing.

Nadella mentioned at Microsoft's annual Build developer conference this year that what seems to be an inflection point has actually been brewing for a long time. "What happened in the past five months is the work of the past ten years."

▲Build 2023 Conference.

In 1991, Microsoft established Microsoft Research and officially entered AI. However, early research was always criticized for being insufficiently implemented and unable to translate laboratory research into reality.

Nadella realized early on that conversational intelligence is the ultimate human-machine interface, and proposed in his speech at the Build conference in 2016: "Bots are the new apps."

At the same time, he hopes to transform AI research into useful product features. "The beauty of our industry is that it is not who has the ability, but who can actually use the ability and transform it into tangible products."

The concept of large language models gave Nadella's vision of conversational intelligence a new dimension.

In 2018, Nadella and Altman met at the Allen & Co. conference in Sun Valley, Idaho. This was the beginning of their partnership and allowed Nadella to understand what OpenAI was doing.

As the Wall Street Journal said of Nadella, he is a leader who recognizes his own limitations and is willing to delegate power to others.

At this time, Nadella was deeply excited, but he did not rush to propose cooperation. He asked Chief Technology Officer Kevin Scott to visit OpenAI to confirm whether GPT could enhance Microsoft's products. The chief technology officer is now also the driving force behind Microsoft's AI strategy.

When everything was ready, in July 2019, Microsoft committed its first investment in OpenAI: US$1 billion.

In June 2020, OpenAI launched GPT-3. Compared with the current ChatGPT, GPT-3 has more problems, but it can already output code in various programming languages.

Nadella's "eureka" moment came.

When upgrading from GPT 2.5 to GPT-3, he saw with his own eyes that AI is good at coding and predicted the scale effect. The moonlight in the mirror became real. Nadella has since become a believer in AIGC, "Wow, this It’s really begun."

▲ GitHub Copilot.

Opportunities come to those who are prepared. Microsoft has a large number of developer customers and a leading developer platform, GitHub, which stores massive lines of open source code. Based on GPT-3, OpenAI and GitHub collaborated to launch the AI ​​code assistant "Copilot" in June 2021.

Although it makes mistakes and can only complete some basic tasks, it understands both programming and human language, which has left a deep impression on many developers, just like when we first saw ChatGPT.

human co-pilot

Nadella, who broke into OpenAI, always realized the changes in the world earlier than we did.

Nadella first saw GPT-4 in the summer of 2022. He tried to use it to translate Persian poetry, and was pleasantly surprised to find that GPT-4 did more than just machine translation, but crossed the boundaries between two languages. The subtlety of poetry is retained.

Generative AI spans more than just language. Nadella believes that what it brings is "a huge platform change."

The last time such a transformation occurred was in the mobile era, when services and consumption became ubiquitous.

This time, creation has become ubiquitous. More natural language AI tools have emerged, and anyone can easily generate new things, including code. "When you enter the prompt word, you are programming a large language model."

▲The renamed Bing Chat.

"Copilot" literally translates as "co-pilot" and was first used to name GitHub's code assistant. The co-pilot is Nadella's metaphor, pointing to the "people-centered" nature.

In mid-November, Microsoft carried out a "rebranding", and the chat interfaces of Bing, Edge and Windows 11 all used the name "Copilot".

At the recent Ignite conference, Nadella also mentioned: "Our vision is very simple: we are a Copilot company. We believe that in the future, everyone and everything you do will have a Copilot."

However, does more creation also mean more destruction? Nadella's answer is "yes", jobs may be replaced, people may have to undergo transformations, AI may learn biases, but more people will also benefit, and he gave several examples.

When word processors came on the scene, the situation for typists changed dramatically, but at the same time, a billion people could type in word processors and create and share documents.

A large language model released on the West Coast of the United States will allow developers in India to write programs that make it easier for local farmers to fill out spreadsheets.

However, this is still the rhetoric of "disruptive innovation". Different perspectives may lead to different scenery. No one can guarantee that he is not a typist.

In the OpenAI coup, Microsoft came ashore without any danger, but we also see that in this historic AI battle, few people have a say, even Microsoft at the beginning.

This is as Nadella said, "AI is already everywhere, this is a black box, you and I are just targets." But as a CEO, he believes the more important question is who has done something useful and who is really helping the world move forward.

It is as sharp as autumn frost and can ward off evil disasters. Work email: [email protected]

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