Behind a big shake-up

A day after OpenAI announced major updates to its ChatGPT chatbot, the company said its chief scientist and co-founder was leaving.

There were signs that Ilya Sutskever would quit, six months after he helped lead the rebellion that briefly ousted Sam Altman as OpenAI’s C.E.O. (He hasn’t been spotted in the office since that episode.) But it also raises questions about the future of a leading developer of generative A.I.

“OpenAI would not exist without him and certainly was shaped by him,” Altman told The Times about Sutskever. It’s hard to understate Sutskever’s importance to OpenAI: He helped found it in 2015 along with Altman and others including Elon Musk, and his stature as a leading researcher in neural networks gave the fledgling company instant credibility.

But Sutskever’s presence at OpenAI may have become untenable. In November, when he was a board member, Sutskever teamed up with other directors to fire Altman, accusing him of not being “consistently candid in his communications.” After a slew of OpenAI employees resigned in protest, he had a change of heart, effectively stepping down from the board and supporting Altman’s return.

After Altman’s reinstatement, Sutskever has stayed quiet publicly — though he did spearhead the creation of a so-called Super Alignment team to help ensure that OpenAI’s products didn’t harm humanity. (Jan Leike, who ran that team with Sutskever, also resigned on Tuesday and will be replaced by another company co-founder, John Schulman.) Meanwhile, OpenAI had already effectively elevated Jakub Pachocki as chief scientist.

Sutskever’s exit is another sign that Altman is in the driver’s seat. While OpenAI is expanding its board after last year’s turmoil, Altman remains the company’s most prominent figure. (Pachocki and Schulman are regarded as his allies.)

While Sutskever has worried about A.I.’s apocalyptic potential, his statement on Tuesday said he was confident that the company would build artificial general intelligence — A.I. as sophisticated as the human brain — “that is both safe and beneficial.” That’s in some ways a validation of Altman’s approach of speedy innovations and commercialization.

Where will Sutskever go? “I am excited for what comes next — a project that is very personally meaningful to me about which I will share details in due time,” Sutskever said in his statement, without providing details.

One possibility some have raised is joining Musk, who’s credited with recruiting Sutskever to OpenAI. Musk has defended Sutskever’s initial effort to oust Altman, and in December he offered his former colleague a job at his xAI start-up.

That said, Sutskever co-signed an OpenAI blog post that rebutted Musk’s breach-of-contract lawsuit against the company, suggesting a break between the two.

HERE’S WHAT’S HAPPENING

The S&P 500 approaches a record as investors await key inflation data. The Consumer Price Index report comes out at 8:30 a.m. Eastern (as does retail sales data), with economists forecasting that inflation moderated slightly last month. A hotter-than-expected report could set up a volatile trading day given warnings by Jay Powell, the Fed chair, that stubborn inflation may force the central bank to keep interest rates higher for longer.

Boeing violated a settlement over the 737 Max, the Justice Department says. The agency accused the plane maker of failing to “design, implement and enforce” a compliance and ethics program to prevent and detect violations of U.S. fraud laws in its operations, a key condition of a 2021 settlement deal struck after two deadly 737 Max plane crashes. Boeing said it believed that it was in compliance with the agreement.

Vanguard names a former BlackRock executive as its new C.E.O. Salim Ramji, who ran BlackRock’s exchange-traded funds business, will succeed Tim Buckley, who is set to retire from the $9.3 trillion fund manager. Ramji was once considered a potential successor to BlackRock’s chief executive, Larry Fink.

As A.I. search ramps up, publishers worry

Search is a cash cow for Google’s parent, Alphabet, helping propel the company into a $2 trillion giant. This dominance is at the heart of one of the biggest antitrust cases in a generation, and the company’s lock on the market has long bedeviled web publishers’ ad-focused business model.

Artificial intelligence is now being added to the mix.

Google this week will make a significant upgrade to its $175 billion search business. It’s introducing a product called AI Overviews that uses generative A.I. to supercharge its search results. The move comes as the Big Tech arms race to commercialize the technology — especially through search — goes into overdrive.

Publishers are worried about the fallout. AI Overviews will give more prominence to A.I.-generated results, essentially pushing website links farther down the page, and potentially depriving those non-Google sites of traffic. “Some people are going to just get bludgeoned,” Ross Hudgens, the C.E.O. of Siege Media, a search engine optimization consulting company, told The Washington Post.

One much-cited statistic: Tweaks like this could cut search engine traffic by 25 percent by 2026.

Google has downplayed the concerns. Liz Reid, its vice president of search, wrote in a blog post that so far it had found that “the links included in A.I. Overviews get more clicks.” The company did not say, however, whether the change would translate to more traffic for publishers, The Times’s Kevin Roose notes.

Does search needs news? A recent study by researchers at the University of Houston and Columbia University estimated that Google and Meta owed U.S. publishers up to $13.9 billion a year for the value that they bring to search results.

Google has pushed back against the study, arguing that less than 2 percent of all searches are news-related and that the company already sends billions of visitors to publishers’ sites.

A.I. has divided a media industry that’s making huge job cuts and retrenching. Executives and journalists are fearful that the technology could lead to the mass theft of their work. Some publishers have struck licensing agreements with Big Tech, as The Associated Press did with OpenAI.

By contrast, The New York Times and a number of other newspapers, including The New York Daily News and The Chicago Tribune, have sued OpenAI and Microsoft, accusing them of copyright infringement.

The F.D.I.C. chair faces a fight on the Hill

The embattled chair of the Federal Deposit Insurance Corporation can expect a tough ride on Capitol Hill on Wednesday in his first public testimony since a scathing report revealed that sexual harassment and discrimination ran rampant at the agency.

Martin Gruenberg, has rejected calls to quit, but the pressure isn’t letting up on a regulator that’s also facing off with big banks over a proposed new capital requirement rule.

Gruenberg has apologized, but doesn’t seem ready to fall on his sword. Cleary Gottlieb, a law firm, last week lifted the lid on a toxic culture at the agency. The firm was hired after a Wall Street Journal investigation that detailed reports of senior bank examiners and other officials sending junior female employees nude pictures of themselves and taking them to brothels on work trips. Gruenberg plans to say that he took “full responsibility” and was “committed to addressing these issues,” according to prepared remarks.

Top Republicans want him out. Gruenberg, a Democrat, has led the agency for 10 of the past 13 years, and President Biden reappointed him for a second term in 2022. Representative Patrick McHenry, a Republican and the chairman of the Financial Services Committee, wants him to go.

But Representative Maxine Waters, the ranking Democrat on the committee, and Senator Sherrod Brown of Ohio, the chairman of the Senate Banking Committee before which Gruenberg will testify on Thursday, back him.

New banking rules may be one reason for the split. The so-called Basel III endgame rules would force lenders with more than $100 billion in assets to set aside more capital to deal with any shocks, like the regional banking crisis last year. Banks say it would limit competition and crimp their ability to lend; Republicans also oppose the rule.

Removing Gruenberg would mean that Travis Hill, a Republican and the F.D.I.C.’s vice chair, would step up, and Democrats would lose their majority.

Gruenberg can likely thank politics for him keeping his job — for now. “I think it would be very difficult for the C.E.O. of a public company to survive this scandal, particularly because it appears to be pretty widespread and longstanding,” Jonathan Macey, a professor of corporate law at Yale, told The Times.

A legal fight to take on hate

The fights that have erupted over the war in Gaza have forced some in corporate America to reassess their own relationships with universities and their role in a national conversation. Some have withheld donations from Ivy League schools and others have attacked the curriculum.

The law firm Paul, Weiss, Rifkind, Wharton & Garrison is taking a different approach by creating a center to tackle discrimination through litigation.

The Center to Combat Hate came together in the past six months. It was officially introduced last night at an event at Paul Weiss’s office in Midtown. The center will partner with civil right organizations and educational institutions to pursue impact litigation, lawsuits that aim to influence social policy, with a focus on civil rights.

The center will be led by two partners. Daniel Kramer became involved in civil rights litigation after his brother-in-law was killed in an attack at the Tree of Life synagogue. He was part of the team hired by the District of Columbia attorney general to file a civil lawsuit against the Proud Boys and Oath Keepers over the Jan. 6, 2021, attack on the Capitol.

Karen Dunn, a chair of the firm’s litigation department, led the team of lawyers that won $25 million in a civil lawsuit filed against the promoters of the Charlottesville, Va., white power rally. Dunn is also well-known in Democratic politics for being part of debate preparation teams for President Barack Obama and Vice President Kamala Harris.

Many firms are looking to stay out of political fights. But Kramer was confident that Paul Weiss’s clients wouldn’t be put off. “We don’t have any clients that are pro-hate,” Kramer told DealBook, when asked whether he was worried the center would be divisive.

THE SPEED READ

Deals

Policy

• TikTok creators sued the U.S. government over a newly enacted law that would force the video app’s divestment by its Chinese parent. The group’s legal fees are being paid by the company. (NYT)

• Jacob Helberg, an adviser to tech C.E.O.s and the husband of the prominent investor Keith Rabois, has donated $1 million to Donald Trump’s re-election efforts. (WaPo)

Best of the rest

• “Walmart’s Reign as America’s Biggest Retailer Is Under Threat” (WSJ)

• To celebrate Mark Zuckerberg’s birthday, the Meta C.E.O.’s wife recreated key locations like his college dorm room — with a guest appearance by the fellow Harvard dropout Bill Gates. (@Zuck)

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