OpenAI's brain drain isn't a great look for Sam Altman

• OpenAI is losing key members, including cofounder John Schulman, who left for Anthropic.
• Despite leading the market with ChatGPT, OpenAI faces big challenges in the fledgling AI world.

OpenAI is losing key members during a pivotal time in the artificial intelligence market, and it's not a good look.

On Monday, cofounder John Schulman announced that he would be leaving OpenAI to work at rival Anthropic. He joins two other high-level executives — though president Greg Brockman said he's taking an extended leave of absence — and several former employees in what appears to be an exodus from the ChatGPT maker helmed by Sam Altman.

"It's not good at all for OpenAI," said tech analyst Jacob Bourne at Emarketer, a sister company to Business Insider.

Although OpenAI got ahead in the AI arms race when it released its chatbot in a surprise move in November 2022, being the first may not be enough to keep it at the top of the leaderboard as other, bigger companies build and release their own AI and key executives depart.

"OpenAI has no 'moat,'" Mike Gualtieri, vice president and principal analyst at Forrester, said.

In business, a moat refers to a significant advantage that keeps a company more or less untouchable from its rivals and helps it maintain its market share.

Gualtieri told BI that Big Tech companies, Google and Meta in particular, already had generative AI tech at the same time as OpenAI.

"They were just afraid to release because hallucinations, etc, could impact their reputation and business," Gualtieri said.

Just last week, Meta released a statement addressing a hallucination that prompted its MetaAI chatbot to say that the July 13 assassination attempt of former President Donald Trump didn't happen. The story drew a lot of attention and criticism.

"I think we're going to see more of this kind of scrutiny, and it's not going to be just directed at OpenAI," Bourne said.

OpenAI — and Sam Altman — are also under a lot of other scrutiny. On July 1, whistleblowers at OpenAI contacted the Securities and Exchange Commission, calling for it to investigate the company for rule violations around NDAs. Weeks before that, nine current and former OpenAI employees signed an open letter pointing out the risks of generative AI. And the company's management has been seen to be split between pressing ahead with AI development and having a more cautious approach.

"I decided to leave OpenAI because I lost hope that they would act responsibly, particularly as they pursue artificial general intelligence," Daniel Kokotajlo, a former OpenAI employee who signed the letter, previously said in a statement.

Tech companies are spending heavily on AI endeavors, but trust remains one of the key factors in how much their investments will pay off.

Emarketer's Bourne said, "It's kind of this perfect storm for the emergence of this kind of concern around profits over safety that we're seeing."

And, Bourne said, as a young company with an "unusual government structure," OpenAI will continue to be under a magnifying glass — possibly even more than well-established rivals.

Meantime, it looks like OpenAI's brain drain to competitors could put the company at a further disadvantage despite its first-mover advantage and Apple partnership.