A reader decided to consult the oracle ChatGPT on the question of what a board should do, faced with an OpenAI board v. Sam Altman fact set. Too bad the board was not willing to eat its own cooking. Even without this checklist, it beggars belief that any board with a modicum of experience didn’t call outside counsel, which would have led to a considerably different set of actions. Instead, per the Financial Times lead story, OpenAI says Sam Altman to return as chief executive under new board. The subhead tells us: Former Salesforce chief Bret Taylor and former US Treasury secretary Larry Summers to join as directors.
I am forced to hoist from a 2013 post, Why Larry Summers Should Not Be Permitted to Run Anything More Important than a Dog Pound. Readers objected to the idea of dogs being subjected to Summers’ maladminstration, so we’ve revised our conclusion in the headline above. From that post:
The big problem with Summers is not his record on deregulation (although that’s bad enough) or his foot-in-mouth remarks about women in math, or for suggesting that African countries would make for good toxic waste dumps. No, it’s his appalling record the one time he was in an executive position, as president of Harvard. Summers was unquestionably the worst leader in Harvard’s history.
Summers, unduly impressed with his own economic credentials, overruled two successive presidents of Harvard Management Corporation (the in-house fund management operation chock full of well qualified and paid money managers that invest the Harvard endowment). Not content to let the pros have all the fun, Summers insisted on gambling with the university’s operating funds, which are the monies that come in every year (tuition and board payments, government grants, the payments out of the endowment allotted to the annual budget). His risk-taking left the University with over $2 billion in losses and unwind costs and forced wide-spread budget cuts, even down to getting rid of hot breakfasts…
Now Harvard had put some of its large operating budget at risk in speculative investments starting in the 1980s, but Summers ramped it up to a completely new level…
Without overburdening you with detail on the swaps that blew up Summers’ piggy bank (see this Bloomberg story for the particulars) let there be no doubt that Summers signed up to be a chump to Wall Street. As Epicurean Dealmaker remarked when the Bloomberg expose came out (emphasis ours):
Now forward swaps, or forward start swaps—which behave like normal swaps except the offsetting fixed and floating rate payments are scheduled to start at a date certain in the future—by themselves count as little more than rank interest rate speculation, specifically in this instance as a bet that short-term interest rates will rise in the future. They can make a great deal of sense when an issuer intends to sell bonds in the relatively near future and when the issuer wants to hedge against budgetary uncertainty by converting floating rate obligations into fixed rate debt. That being said, I have rarely encountered a corporate client who feels confident enough about both their absolute funding needs and current and impending market conditions to enter into a forward swap starting more than nine months into the future. Entering into a forward start swap for debt you do not intend to issue up to 20 years in the future sounds like either rank hubris or free money for Wall Street swap desks.
So Summers couldn’t keep his ego out of the way, bullied the people around him, ignored the advice of not one but two presidents of Harvard Management, and left a smoldering pile of losses in his wake….
Summers’ second big problem is the scandal that led to his ouster at Harvard, which was NOT his infamous “women suck at elite math and sciences” remarks. The university has conveniently let that be assumed to be the proximate cause.
In fact, it was Summers’ long-standing relationship with and protection of Andrei Shleifer, a Harvard economics professor, who was at the heart of a corruption scandal where he used his influential role on a Harvard contract advising on Russian privatization to enrich himself and his wife, his chief lieutenant Jonathan Hay, and other cronies. The US government sued Harvard for breach of contract and Shleifer and Hay for fraud and won. This section comes from a terrifically well reported account in Institutional Investor by David McClintick:
The judge determined that Shleifer and Hay were subject to the conflict-of-interest rules and had tried to circumvent them; that Shleifer engaged in apparent self-dealing; that Hay attempted to “launder” $400,000 through his father and girlfriend; that Hay knew the claims he caused to be submitted to AID were false; and that Shleifer and Hay conspired to defraud the U.S. government by submitting false claims.
On August 3, 2005, the parties announced a settlement under which Harvard was required to pay $26.5 million to the U.S. government, Shleifer $2 million and Hay between $1 million and $2 million, depending on his earnings over the next decade. Shleifer was barred from participating in any AID project for two years and Hay for five years. Shleifer and Zimmerman were required by terms of the settlement to take out a $2 million mortgage on their Newton house. None of the defendants acknowledged any liability under the settlement. (Forum Financial also settled its lawsuit against Harvard, Shleifer and Hay under undisclosed terms.
….And while Summers was not responsible for Shleifer getting the contract, he was a booster and later protector of Shleifer…And the protection Shleifer got was considerable:
Knowles tells Institutional Investor that he does not remember Summers’ approaching him about Shleifer… However, not long after Summers says he intervened on the professor’s behalf, Knowles promoted Shleifer from professor of economics to a named chair, the Whipple V.N. Jones professorship.
Shleifer’s legal position changed on June 28, 2004, when Judge Woodlock ruled that he and Hay had conspired to defraud the U.S. government and had violated conflict-of-interest regulations. Still, there was no indication that the Summers administration had initiated disciplinary proceedings. To the contrary, efforts were seemingly made to divert attention from the growing scandal. The message from the top at Harvard was, “No problem — Andrei Shleifer is a star,” says one senior Harvard figure….
But for the faculty, which had already had frictions with Summers, the Russia scandal was the final straw. Copies of the Institutional Investor article were stuffed in the mailbox of every faculty member the morning of the no-confidence vote that forced Summers’ resignation.
And that’s before we get to Summers’ role in the ouster of Brooksley Born over credit default swaps and in supporting the passage of Gramm–Leach–Bliley and the repeal of Glass Steagall (admittedly so shot full of holes at that point as to be close to a dead letter, but still necessary to allow Traveler and Citigroup to merge). Yet Summers has refused to recant any of these actions.
The flip side is those who are leery of AI’s potential to displace workers and further increase crapification (think if nothing else of phone trees), this may be the best thing that could have happened. Perhaps Summers will manage to screw up OpenAI too.
* * * AnonymousI am on the Board of Directors of a software company. Our Board has 6 members. Four of us would like to fire our CEO, but we have concerns about how to handle it. The CEO is one of the founders and is extremely well liked by the executive team and the employees. The CEO has also secured some multibillion dollar investments in the company from outside partners. At this point, no one besides us knows our intent. What would be some good ways to handle our concern that would have the least disruption to the company and its operations?
ChatGPT
Firing a CEO, especially one of the founders who is well-liked and has secured significant investments, is a delicate and challenging process that should be approached with care and consideration. Here are some steps and strategies to handle the situation with minimal disruption to the company and its operations:
- Seek Legal and Professional Advice: Before taking any action, consult with legal and HR professionals who specialize in executive terminations. They can provide guidance on legal requirements, employment contracts, and severance packages, which may help mitigate potential legal challenges.
- Conduct a Thorough Evaluation: Ensure that your concerns about the CEO’s performance are well-founded and substantiated. Collect specific evidence and examples of issues or challenges that justify the need for a change in leadership. Document this information carefully.
- Build Consensus Among Board Members: It’s crucial to have a unified front on the board when making such a significant decision. Engage in open and honest discussions with the other board members to address their concerns and gain their support for the decision to terminate the CEO.
- Consider an Amicable Transition: If possible, approach the CEO with a proposal for an amicable transition. This could involve a mutually agreed-upon departure date and a transition plan. The CEO’s cooperation in this process can help minimize disruption.
- Communicate Clearly and Strategically: Develop a clear communication strategy that outlines how you will inform key stakeholders, including employees, the executive team, investors, and partners. Emphasize the reasons for the decision while also expressing gratitude for the CEO’s contributions.
- Plan for Succession: Identify an interim CEO or an acting CEO who can take over immediately after the departure of the current CEO. This person should be someone who can provide stability during the transition.
- Ensure Employee Support: Prioritize open and transparent communication with employees to alleviate concerns and maintain morale. Reassure them about the company’s commitment to its mission and growth.
- Maintain Investor Relations: Communicate with your investors and outside partners promptly and professionally. Emphasize your commitment to the company’s continued success and provide reassurance regarding the stability of the business.
- Handle Media Relations Carefully: Be prepared for media attention if the CEO’s departure becomes public. Develop a media strategy to manage the narrative and protect the company’s reputation.
- Review and Update Corporate Governance: After this experience, consider reviewing and updating the company’s corporate governance structure to prevent similar issues in the future.
- Monitor the Transition: After the CEO’s departure, closely monitor the transition and its impact on the company’s operations. Make adjustments as necessary to ensure the company remains on track.
- Keep the Company’s Interests in Mind: Throughout the process, prioritize the best interests of the company, its employees, and its stakeholders. Avoid personal conflicts and emotions that could negatively affect the decision-making process.
Remember that the decision to terminate a CEO should not be taken lightly, and it should be made in the best interest of the company’s long-term success. It’s crucial to approach the situation with empathy, professionalism, and a focus on minimizing disruption while achieving your goals.
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Long time mystery for me: Why did Summers ever want to be president of Harvard rather than say, the World Bank? Or something like the Gates Foundation?
He came up for a new role after the Dems were turfed out by Bush in the 2000 election. No appointments were open to a Democrat then. After his Harvard debacle and the crisis showing his enthusiasm for finance industry deregulation was a very bad idea, he lobbied hard to be appointed Fed chair, then merely to the Fed board, then to head the World Bank. He was too clearly tainted by then for any of those to happen.
While I agree with your characterization of Larry Summers (not) Tenure as president of Harvard, I find it incomplete.
One of the untold stories of his being turfed out is that shortly before the vote of no confidence, to quote the invaluable Math Babe, “An anonymous person got a bunch of copies of the II article and stuck one in every Harvard faculty’s mailbox the morning of the no-confidence vote that got Summers ousted.”
So there were also slam dunk allegations outright criminal fraud that Summers was an accessory to that motivated many of the no confidence voters.
>>one of the untold stories
Didn’t she include that exact anecdote in the post?
I totally forgot about the change in administration. But even then, I am amazed he wanted that gig or that anyone would ever give it to him.
At the time and ever since, he just seemed like such a mismatch. Even though Harvard had already become, under Rudenstein, a hedge fund with a university attached, that attached university was still a big deal, and Summers obviously did not have the right qualities of fundraiser-diplomat-ribbon-cutter-cat-herder.. He tried to paper over that by ingratiating himself with students, especially undergrads, and especially wrt financial aid, and his PR was that the professors were stuffed shirts.
But just the fact that he obviously had strong desires to give opinions on world events meant he couldn’t handle that straitjacket. For instance he also lost a lot of support when he declared that all criticism of Israel was antisemitic
He also got the Harvard Corporation (love that title) to allow him a ‘one day a month’ consulting contract with quant hedge fund giant D.E.Shaw for a palty $5 million per year. The ‘regulatory capture’ that DES got for their money more than paid for the $5 mill. I also will always treasure Larry bemoaning on Twitter in April 2022 his incredulity that no company in America made cotton-tipped swabs. It was so touching and almost believable if one didn’t know Summer’s role in the neo-liberal mafia in the 80s and 90s. We know where some of the bodies are buried. For some of us that’s not just an expression.
P
Suddenly Larry Summers? What?
Great musical reference!
#TheMotels – Suddenly
LarryLast Summers(via YouTube)Which, in turn, was a reference to the 1959 film of the same name, or perhaps the Tennessee Williams play on which the movie was based.
To tell you the truth I have not been following this story that much as there is so much going on elsewhere. But I can say one thing. There are some people that by themselves are touchstones. So if you hear that Tony Blair is involved in something, straight away that sends up the red flags. When I read that this Sam Altman was returning as CEO it sounded like just the usual corporate games. But when I read that Larry Summers is going on that Board, then up goes the red flags. You just know that nothing good will come of it.
The r/slatestarcodex threads are the best. There is one subthread on there that Sam Altman and Sam Bankman-Fried were friends until FTX exploded. Scott is a personal acquaintance of both (the Effective Altruism club is the tie-in) and he writes that he doesn’t have the foggiest idea what could be going on here.
There is a huge fight between rich people with inflated egos is the only thing to be sure of. Has it ever happened in the history of corporations that a guy gets fired and within 24 hours they are offering him more to come back?
I am curious about the favicon on his personal website. Is he still affiliated with Harvard?
He presumably “teaches/ proselytizes” the Neoliberal way…..
He’s been publishing op-Ed’s on taming greedflation by increasing unemployment and controlling wages.
The Neocon is too dangerous to be ignored.
Q: Is Larry Summers still affiliated with Harvard in 2023?
ChatGPT: Yes, Larry Summers is still affiliated with Harvard University as of 2023. He is a Professor at Charles W. Eliot University and President Emeritus at Harvard. Additionally, his contact information is listed on the Harvard Kennedy School website, indicating his active role within the institution.
;^)
Oh, the AI is smarter than me…
The first positions that can be eliminated by AI are the boards of companies, and most the the C-Suite. Feed the key decision points into ChatGPT and you will get more rational decision making than ou brain-damaged elite make.
I don’t know anything about AI. Does it claim to offer long term solutions? Is it flexible over time? How does AI define “intelligence?” What might be the prime directive of AI? Does it have the capacity to evolve; does it keep a record of its own decisions that can be accessed far into the future, like dna? Does AI have multiple definitions and uses for the same word? Does it recognize its own mistakes or is it inherently arrogant? Can it analyze itself? How does it deal with multiple contradictions of varying degrees? Can it recognize pure fantasy? If so, how does it define fantasy? And on ad infinitum. I assume the answer is No to all these kinds of questions. And what would AI say to the disadvantages of putting Larry in charge of overseeing its progress?
The PD of AI is doing away with those pesky, expensive employees.
This list of 10 disappearing jobs is evidence of that intent.
Follow the link, the promise of AI is there in the first paragraph.
It’s no mystery why UBER was working on autonomous cars, their business model relies on screwing their drivers, and ultimately, doing away with them altogether if possible.
Why doesn’t anyone ask who’s going to buy products and services when nobody has a job?
So far, AI has not spawned the iteration that will deliver the immense payday for developers.
So, there’s a lot of fear surrounding AI;
Mostly FOMO.
Everyone, especially the big guys like OpenAI and Microsoft are afraid that some usurper will figure out how to pass them up and get there first, so they want government to institute regulations that they say will protect us from the dangers of AI, but really represent an attempt to protect their investment in development, and raise the price of entry for the newbies.
Then there are those who are afraid someone is going to release a ‘product‘ so bad/dangerous that it damages the image of AI in the ‘marketplace‘.
Then there are the ‘effective altruism‘ folks fears that negative developments on any of these fronts will blow their cover. (As if SBF hasn’t already sunk that ship)
It seems strange amid all this fear that mostly end up being related to FOMO, and greed, that anyone would consider Larry Summers for any role in their organization.
Considering the fact that back on Sept 23 of this year, OpenAI was looking at a projected value of $80-90 Billion, it’s obvious that one of these groups just shot themselves in the foot, possibly costing them Billions in expected profits from their future IPO by firing the man who public believes is indispensable to the company’s success.
Fear can cloud the mind.
Greed too.
It didn’t take two minutes watching my first Sam Altman aw shucks conference call to see the manipulator.
Generative AI outside of protein folding and the like is much like 1800’s snake oil. The alcohol in snake oil probably made the drinker feel ready to rip but it is never known to have cured anything.
There is less information in the information theory sense encoded in all the world’s writings than there is in the body of a hummingbird. Thus generating new combinations from our cultural data bank will be miniscule compared to what nature will show us if we focus there instead.
ChatGPT is just an entertaining way to produce verbiage quickly with a veneer of intelligence behind it stolen from the authors whose verbiage was grazed.
Another perspective on generative AI based on cultural reservoirs which will help put it in perspective is that it has no connection to the universes opened up by psychotropic drugs. These give life a truly additional dimension if not several, to reality. Let’s see OpenAI incorporate those dimensions. Nah, not happening. Boring.
I’ve never dug into how purses and sows’ ears got together as described in “https://www.dictionary.com/browse/can-t-make-a-silk-purse-out-of-a-sow-s-ear” but it resonates.
You can spend billions grooming and putting guardrails around generative cultural AI but it’s never going to impress many people once the novelty of it’s lurching birth wears off.
Much love to you who value the real world and love to see hucksters exposed. It’s coming sure as the sunshine after a hard rain.
And Larry Summers on the board. That’s like a confession in open court. Dare we look for the OpenAI ship to take multiple super scoundrels to their watery grave?
A Boston Globe columnist has discovered the real problem the new board members are all white and male.
(I mean, agreed, but, jeez, the guy from Saw was white and male too but I don’t think that’s why you’d write a column about him.)
I dimply recall that James Watt, Secretary of Interior under Ronald Reagan, had to fill some board, supervisory or advisory, and proudly claimed to a reporter that the board is perfectly diverse, “we got a black woman, a Jew and a cripple”, and after it was published, “the Jew with disability” who was on the board resigned.
BTW, was Larry Summers good at math?
Three weeks after he said that he got he sack-
https://en.wikipedia.org/wiki/James_G._Watt#Resignation