3 lessons from the Binance, OpenAI CEO sagas

This week has seen two separate high-profile companies engulfed in high-stakes drama involving their respective CEOs.

In case you missed it, here’s a recap:

• Sam Altman makes stunning return as OpenAI CEO

Just last Friday, November 17th, Altman was publicly fired by the then-board of Open AI – one of the world’s most valuable startups.

This turn of events shocked the AI world and the broader tech industry.

After all, OpenAI, under Altman’s helm, had launched its ChatGPT late last year that sparked the global AI frenzy as companies feverishly ramped up their artificial intelligence offerings.

Since that shocker less than a week ago, there has been some very public wrangling involving Microsoft – OpenAI’s largest shareholder – as well as the threat by existing OpenAI employees to walk out on their employers.

Today, it was announced that Altman will return as CEO of OpenAI, accompanied by a complete overhaul of the company’s board.

 

• CZ steps down as Binance CEO

Changpeng Zhao a.k.a. CZ, and Binance both pleaded guilty to criminal charges for violations against anti-money laundering and US sanctions measures.

This brings an end to what had been a multi-year investigation by US government agencies (though a separate lawsuit by the Securities and Exchange Commission remains ongoing).

As part of the settlement:

• CZ will step down as Binance CEO, replaced by Richard Teng.
   
• CZ will pay US$ 50 million in fines and is set to face prison time.
   
• Binance will pay US$ 4.3 billion to the DOJ, CFTC, and the Treasury Department.
  US Attorney General Merrick Garland has described this as “one of the largest corporate penalties in U.S. history”.

 

 

What can traders/investors learn from the Binance, OpenAI CEO sagas?

1) Guard your investments

Microsoft had already ploughed $13 billion into OpenAI.

Hence, when Microsoft was blindsided by Altman’s dismissal, OpenAI’s largest shareholder was not going to take things lying down.

Microsoft immediately offered to hire Altman, while assuring other OpenAI employees that they had a place at their Redmond, Washington base.

Besides some public comments made by Microsoft CEO Satya Nadella, news report also mentioned that OpenAI’s investors (including Microsoft, Thrive Capital, and Tiger Global Management) banded together to reinstate Altman at the helm.

Similarly, investors and traders must remain proactive in safeguarding their positions and investments.

Often, markets can blindside its participants with shocking news, such as a global pandemic or a war.

And the last thing investors/traders would want is to lose everything when things go belly up.

Hence, in pre-empting the unexpected, traders and investors need to:

• monitor open positions
   
• adopt proper risk management
   
• have the willingness, agility, and capital to react accordingly

 

And that brings us to lesson #2 …

 

2) Know when to cut losses

The world’s largest crypto exchange could have extended their battles with the regulators and US authorities for much longer.

Instead, Binance and CZ pleaded guilty, and copped the fines.

These decisions now allow Binance to live to see another day, while according some relief for the broader crypto industry that’s still attempting to move on from the crypto winter that began in 2022 (which featured the implosion of FTX – another high-profile crypto exchange).

CZ himself told the US court, “I want to close the issue, I want to take responsibility and close this chapter of my life”.

Similarly, OpenAI’s board knew when to throw in the towel after making the apparently wrong decision (at least in the eyes of OpenAI’s investors and employees) to remove Altman as CEO.

Traders and investors need to know when to get out of a losing position.

As the legendary economist John Maynard Keynes famously said, “the markets can remain irrational longer than you can remain solvent.”

Investors and traders need to know when to decide to pull the plug and get out, based on sound judgement, rather than risk catching a falling knife and sustaining even-greater losses …

… so as to live to see another day in the markets.

 

3) Learn from mistakes, and move on

Mistakes are bound to happen, be it life, or in financial markets.

The more important lesson is to gleam learnings to avoid such missteps in the future.

Binance will surely be undergoing reviews so as not to run afoul of regulators again, putting fresh safeguards in place for itself and the broader crypto community.

OpenAI will be conducting an internal investigation into its own public embarrassment.

OpenAI and Binance must and will learn to move on from this ugly episode. Their future successes are likely to enrich the broader AI and crypto communities as well.

Traders and investors must remain humble enough to conduct continuous learnings – a key criteria for achieving sustainable success.

Any journey through financial markets will only be enhanced, perhaps made even more durable, as traders and investors learn from their mistakes along the way.

 

 

Safe to say, recent days have produced a frenzy of news headlines, social-media jostling (and memes), as well as internal angst at OpenAI and Binance.

It would perhaps be remiss if this opportunity passes us by to pause for some self-reflection.

From chaos comes learnings, especially for traders and investors.

 

TRADING BASICS Cryptocurrency artificial intelligence