A Shift in the AI Power Dynamic? (Premium)

Everyone reading Thurrott.com is familiar with the classic scene in The Empire Strikes Back in which Darth Vader reneges on his deal with the bounty hunter Boba Fett and Bespin administrator Lando Calrissian, later exclaiming to the latter, "I am altering the deal, pray I don't alter it any further." Even as a child of just 13 years old at the time, I immediately understood two things from this altercation. Even bad guys--Vader and Boba Fett, at least, were clearly bad guys--can't trust a bad guy. And though this was inherently a partnership of sorts, Vader was exercising a power dynamic in which he was fully in control.

On that note, it's difficult not to view the secretive Microsoft and OpenAI partnership in this same light all these years later. These two firms are both objectively evil in how they push AI in unethical ways, and their partnership was specifically designed to prevent any regulatory oversight and be as secretive as possible. But it's never been clear which company was in the driver's seat. That is, partnerships like this are ideally a win-win, meaning that both companies benefit in ways that are meaningful to each and further their respective corporate strategies. But business deals are rarely equally beneficial to all parties, with one perhaps operating from a position of weakness. And so the debate rages here. Which is Vader and which is Boba Fett, Microsoft or OpenAI?

Early on, it appeared that OpenAI had the upper hand: Microsoft's AI strategy of 2023 was solely based on taking whatever OpenAI could give it and repackaging it for its consumer and commercial partners. Indeed, Yusuf Mehdi once described what was then called Bing Chat as a combination of OpenAI's ChatGPT (GPT-4) and Microsoft's "secret sauce," which he then incorrectly described as its Prometheus model plus the Bing search algorithms and relevancy ranker. But that's not the case: Prometheus is/was the secret sauce. That is, Prometheus is/was a model that Microsoft created by combining ChatGPT with Bing index, ranking, and answers. Put another way, Bing is the secret sauce.

And you can see the problem there: Bing is terrible. Terrible as a product and terrible as a brand, and it was only a matter of weeks before Microsoft starting backing away from the Bing-centric branding for its AI offerings. More to the point, OpenAI was free to release its own AI offerings and did so. And ChatGPT exploded in popularity, quickly eclipsing Bing from a usage perspective, in a major embarrassment to Microsoft. There are contradictory numbers out there, but the latest figures I could find place ChatGPT users in the hundreds of million and traffic at over 2 billion visits per year. (ChatGPT had over 200 million weekly active users as of last August.) ChatGPT is like Microsoft AI, hold the secret sauce.

But then November 2023 happened. When OpenAI CEO Sam Altman was unexpectedly fired in a boardroom coup, Microsoft CEO Satya Nadella exercised his own power dynamic...