OpenAI to become for-profit company

1346 pointsposted a year ago
by jspann

225 Comments

throwup238

a year ago

I’m confused by this news story and the response here. No one seems to understand OpenAI’s corporate structure or non profits at all.

My understanding: OpenAI follows the same model Mozilla does. The nonprofit has owned a for-profit corporation called OpenAI Global, LLC that pays taxes on any revenue that isn’t directly in service of their mission (in a very narrow sense based on judicial precedent) since 2019 [1]. In Mozilla’s case that’s the revenue they make from making Google the default search engine and in OpenAI’s case that’s all their ChatGPT and API revenue. The vast majority (all?) engineers work for the for-profit and always have. The vast majority (all?) revenue goes through the for-profit which pays taxes on that revenue minus the usual business deductions. The only money that goes to the nonprofit tax-free are donations. Everything else is taxed at least once at the for-profit corporation. Almost every nonprofit that raises revenue outside of donations has to be structured more or less this way to pay taxes. They don’t get to just take any taxable revenue stream and declare it tax free.

All OpenAI is doing here is decoupling ownership of the for-profit entity from the nonprofit. They’re allowing the for profit to create more shares and distribute them to entities other than the non-profit. Or am I completely misinformed?

[1] https://en.wikipedia.org/wiki/OpenAI#2019:_Transition_from_n...

throwaway314155

a year ago

It's about the narrative they tried to create. The spin. It doesn't matter much if they were technically behaving as a for-profit entity previously. What matters is that they wanted the public (and likely, their talent) to _think_ that they weren't even interested in making a profit as this would be a philosophical threat to the notion of any sort of impartial or even hopefully benevolent originator of AGI (a goal which is laid plainly in their mission statement).

As you've realized, this should have been (and was) obvious for a long time. But that doesn't make it any less hypocritical or headline worthy.

halJordan

a year ago

It isnt a tax thing or a money thing, its a control and governance thing.

The board of the non-profit fired Altman and then Altman (& MS) rebelled, retook control, & gutted the non-profit board. Then, they stacked the new non-profit board with Altman/MS loyalists and now they're discharging the non-profit.

It's entirely about control. The board has a legally enforceable duty to its charter. That charter is the problem Altman is solving.

burnte

a year ago

The problem is that OpenAI calls itself OpenAI when it's completely sealed off, and calls itself a non-profit when, as you say, almost everything about is for profit. Basically they're whitewashing their image as an organization with noble goals when it's simply yet another profit motivated company. It's fine if that's what they are and want to be, but the lies are bothersome.

joe_the_user

a year ago

There's a now-quintessential HN post format, "Poster criticizing X don't seem to under [spray of random details about X that don't refute the criticism - just cast posts as ignorant]".

In this case, Mozilla as a non-profit owning a for-profit manages to more or less fulfill the non-profit's mission (maintaining an open, alternative browser). OpenAI has been in a hurry to abandon it's non-profit mission for a while and the complex details of its structure doesn't change this.

seizethecheese

a year ago

“Decoupling” is such a strange euphemism for removing an asset worth north of $100b from a nonprofit.

nfw2

a year ago

> "All OpenAI is doing here is decoupling ownership of the for-profit entity from the nonprofit."

Yes, but going from being controlled by a nonprofit to being controlled by a typical board of shareholders seems like a pretty big change to me.

mr_toad

a year ago

> All OpenAI is doing here is decoupling ownership of the for-profit

All? As far as I know this is unprecedented.

hackernewds

a year ago

How is it possible to make tax free "donations" for profit making applications? You seem to imply there is nothing nefarious about the setup. Except the non-profit designation doesn't actually perform no social services, instead stand as a business structure to skirt taxation. Change my mind

bbor

a year ago

Good questions!

Right now, OpenAI, Inc. (California non-profit, lets say the charity) is the sole controlling shareholder of OpenAI Global LLC (Delaware for-profit, lets say the company). So, just to start off with the big picture: the whole enterprise was ultimately under the sole control of the non-profit board, who in turn was obligated to operate in furtherance of "charitable public benefit". This is what the linked article means by "significant governance changes happening behind the scenes," which should hopefully convince you that I'm not making this part up.

To get really specific, this change would mean that they'd no longer be obligated to comply with these CA laws:

https://leginfo.legislature.ca.gov/faces/codes_displayText.x...

https://oag.ca.gov/system/files/media/registration-reporting...

And, a little less importantly, comply with the guidelines for "Public Charities" covered by federal code 501(c)(3) (https://www.law.cornell.edu/uscode/text/26/501) covered by this set of articles: https://www.irs.gov/charities-non-profits/charitable-organiz... . The important bits are:

  The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.
  ... The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual.
I'm personally dubious about the specific claims you made about revenue, but that's hard to find info on, and not the core issue. The core issue was that they were obligated (not just, like, promising) to direct all of their actions towards the public good, and they're abandoning that to instead profit a few shareholders, taking the fruit of their financial and social status with them. They've been making some money for some investors (or losses...), but the non-profit was, legally speaking, only allowed to permit that as a means to an end.

Naturally, this makes it very hard to explain how the nonprofit could give up basically all of its control without breaking its obligations.

All the above covers "why does it feel unfair for a non-profit entity to gift its assets to a for-profit", but I'll briefly cover the more specific issue of "why does it feel unfair for OpenAI in particular to abandon their founding mission". The answer is simple: they explicitly warned us that for-profit pursuit of AGI is dangerous, potentially leading to catastrophic tragedies involving unrelated members of the global public. We're talking "mass casualty event"-level stuff here, and it's really troubling to see the exact same organization change their mind now that they're in a dominant position. Here's the relevant quotes from their founding documents:

  OpenAI is a non-profit artificial intelligence research company. Our goal is to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return. Since our research is free from financial obligations, we can better focus on a positive human impact... 
  It’s hard to fathom how much human-level AI could benefit society, and it’s equally hard to imagine how much it could damage society if built or used incorrectly. Because of AI’s surprising history, it’s hard to predict when human-level AI might come within reach. When it does, it’ll be important to have a leading research institution which can prioritize a good outcome for all over its own self-interest.
From their 2015 founding post: https://openai.com/index/introducing-openai/

  We commit to use any influence we obtain over AGI’s deployment to ensure it is used for the benefit of all, and to avoid enabling uses of AI or AGI that harm humanity or unduly concentrate power. Our primary fiduciary duty is to humanity...
  We are concerned about late-stage AGI development becoming a competitive race without time for adequate safety precautions. Therefore, if a value-aligned, safety-conscious project comes close to building AGI before we do, we commit to stop competing with and start assisting this project. We will work out specifics in case-by-case agreements, but a typical triggering condition might be “a better-than-even chance of success in the next two years.”
From their 2018 charter: https://web.archive.org/web/20230714043611/https://openai.co...

Sorry for the long reply, and I appreciate the polite + well-researched question! As you can probably guess, this move makes me a little offended and very anxious. For more, look at the posts from the leaders who quit in protest yesterday, namely their CTO.

simantel

a year ago

> Almost every nonprofit that raises revenue outside of donations has to be structured more or less this way to pay taxes.

I don't think that's true? A non-profit can sell products or services, it just can't pay out dividends.

wubrr

a year ago

What leverage does Sam Altman have to get equity now? Does he personally have control over that decision?

user

a year ago

[deleted]

kweingar

a year ago

Can anybody explain how this actually works? What happens to all of the non-profit's assets? They can't just give it away for investors to own.

The non-profit could maybe sell its assets to investors, but then what would it do with the money?

I'm sure OpenAI has an explanation, but I really want to hear more details. In the most simple analysis of "non-profit becomes for-profit", there's really no way to square it other than non-profit assets (generated through donations) just being handed to somebody for private ownership.

lolinder

a year ago

If the assets were sold to the for profit at a fair price I could see this being legal (even if it shouldn't be). At least in that case the value generated by the non-profit tax free would stay locked up in non-profit land.

The biggest problem with this is that there's basically no chance that the sale price of the non-profit assets is going to be $150 billion, which means that whatever the gap is between the valuation of the assets and the valuation of the company is pure profit derived from the gutting of the non-profit.

If this is allowed, every startup founded from now on should rationally do the same thing. No taxes while growing, then convert to for profit right before you exit.

tomp

a year ago

exactly.

If that's how it works, why wouldn't you start every startup as a non-profit?

Investment is tax deductible, no tax on profits...

Then turn it into a for-profit if/when it becomes successful!

SkyPuncher

a year ago

I've actually worked through a similar situation for a prior startup. We were initially funded by a large, hospital system (non-profit) who wanted to foster innovation and a startup mentality. After getting started, it became clear that it was effectively impossible for us to operate like a startup under a non-profit. Namely, traditional funding routes were neigh impossible and the hospital didn't want direct ownership.

It's been many years, but the plan was essentially this:

* The original, non-profit would still exist

* A new, for-profit venture would be created, with the hospital having a board seat and 5% ownership. Can't remember the exact reason behind 5%. I think it was a threshold for certain things becoming a liability for the hospital as they'd be considered "active" owners above 5%. I think this was a healthcare specific issue and unlikely to affect non-profits in other fields.

* The for-profit venture would seek, traditional VC funding. Though, the target investors were primarily in the healthcare space.

* As part of funding, the non-profit would grant exclusive, irrevocable rights of it's IP to that for-profit venture.

* Everyone working for the "startup" would need to sign a new employment contract with the for-profit.

* Viola! You've converted a non-profit into a for-profit business.

I'm fuzzy on a lot of details, but that was the high level architecture of the setup. It's one of those things where the lawyers earn a BOAT LOAD of money to make sure every technicality is accounted for, but everything is just a technicality. The practical outcome is you've converted a non-profit to a for-profit business.

Obviously, this can't happen without the non-profit's approval. From the outside, it seems that Sam has been working internally to align leadership and the board with this outcome.

-----

What will be interesting is how the employees are treated. These types of maneuvers are often an opportunity for companies to drop employees, renegotiate more favorable terms, and reset vesting schedules.

n2d4

a year ago

After the non-profit sells its assets, it would either donate the proceeds in a way that would be aligned with the original mission, or continue to exist as a bag of cash, basically.

winternett

a year ago

>Can anybody explain how this actually works?

Every answer moving forward now will contain embedded ads for Sephora, or something completely unrelated to your prompt...

That money will go into the pockets of a small group of people that claim they own shares in the company... Then the company will pull more people in who invest in it, and they'll all get profits based on continually rising monthly membership fees, for an app that stole content from social media posts and historical documents others have written without issuing credit nor compensating them.

blackeyeblitzar

a year ago

Maybe it’s a hint that the tax rate for small and medium companies should be reduced (or other non tax laws modified based on company size), to copy the advantages of this nonprofit to profit conversion, while taxes for large companies should be increased. It would maybe help make competition more fair and make survival easier for startups.

jdavdc

a year ago

My expertise is in NFP hospitals. Generally, when they convert for for-profit part of that deal is the creation of a foundation funded with assets that are ostensibly to advance the original not for profit mission.

baking

a year ago

The nonprofit gives all its ownership rights to the for-profit in return for equity. The nonprofit is free to hold the equity and maintain control or sell the equity and use the proceeds for actual charitable purposes.

As long as the money doesn't go into someone's pocket, it's all good (except that Sam Altman is also getting equity but I assume they found a way to justify that.)

OpenAI will eventually be forced to convert from a public charity to a private foundation and will be forced to give away a certain percentage of their assets every year so this solves that problem also.

addedlovely

a year ago

In that case, where can I apply for my licensing fee for my content they have scraped and trained on.

List of crawlers for those who now want to block: https://platform.openai.com/docs/bots

cdchn

a year ago

I wonder how the AI/copyright arguments will play out in court.

"If I read your book and I have a photographic memory and can recall any paragraph do I need to pay you a licensing fee?"

"If I go through your library and count all the times that 'the' is adjacent to 'end' do I need to get your permission to then tell that number to other people?"

zingerlio

a year ago

We are booing Altman because his bait and switch feels unethical, but many of us saw it coming from a mile away, how does he make this transition to take advantage of the financial system so smoothly? Is there no legal guard for such maneuver, or is he just an insanely good player to circumvent all of them in plain view?

joe_the_user

a year ago

Just cobbling together articles I've read... Once the board failed to fire Altman, this transition was a done-deal, it was just a matter of when. Before the board fired Altman, he had been engaging in a more covert effort to take control - putting together personal attacks on various board members intended to drive them out and hiring people with a similar attitude to and loyalty to himself. When the board fired him, they didn't give any clear reasons and that's most mysterious part of the situation. Apparently they were all concerned about his campaign to take control of the board but they each had slightly different reasons for agreeing. I'd further speculate that the board thought in lawyer-advice terms - say as little as possible to avoid a retaliatory lawsuit.

But the board's lack of communication apparently allowed Altman to demonstrate he was more important to the organization than the formal/legal structure, 90% signed intents to quit and the board backed down. It seemed that Altman simply represented the attitude of the many Silicon Valley tech-people - once you have a chance of money, don't hold back, do everything you can to make it.

hackernewds

a year ago

It has been running on an honor code, that someone pulling off something so slimy as to funnel money meant for non-profits would just get shunned by society and business. Yet here we are.

Ironically the one person with resources fighting it in a tangible way, even if for spite, is Elon Musk.

user

a year ago

[deleted]

HeralFacker

a year ago

Converting to a for-profit changes the tax status of donations. It also voids plausibility for Fair Use exemptions.

I can see large copyright holders lining up with takedowns demanding they revise their originating datasets since there will now be a clear-cut commercial use without license.

zmgsabst

a year ago

I hope I can join in, as a consumer, because there’s a difference between using the IP I contribute to conversations for a non-profit and a commercial enterprise.

shakna

a year ago

A non-profit entity will continue to exist. Likely for the reasons you stated.

lewhoo

a year ago

> It also voids plausibility for Fair Use exemptions. I can see large copyright holders lining up with takedowns

I thought so for a moment but then again Meta, Anthropic (I just checked and they have a "for profit and public benefit" status whatever that means), Google or that Musk's thing aren't non-profits, are they ? There are lawsuits in motion for sure but with how it stands today I think ai gets off the hook.

neilv

a year ago

The incremental transformation from non-profit to for-profit... does anyone have legal standing to sue?

Early hires, who were lured there by the mission?

Donors?

People who were supposed to be served by the non-profit (everyone)?

Some government regulator?

bbor

a year ago

This is the most important question, IMO! ChatGPT says that employees and donors would have to show that they were defrauded (lied to), which IMO wouldn’t exactly be hard given the founding documents. But the real power falls to the government, both state (Delaware presumably…?) and federal. It mentions the IRS, but AFAIU the DoJ itself could easily bring litigation based on defrauding the government. Hell, maybe throw the SEC in there!

In a normal situation, the primary people with standing to prevent such a move would be the board members of the non-profit, which makes sense. Luckily for Sam, the employees helped kick out all the dissenters a long time ago.

nialv7

a year ago

Well I heard someone named Elon did try.

lenerdenator

a year ago

Everyone has legal standing to sue at any time for anything.

Whether the case is any good is another matter.

fourseventy

a year ago

So are they going to give elon equity? He donated millions to the non profit and now they are going to turn around and turn the company into a for-profit based on the work done with that capital.

wmf

a year ago

Elon has allegedly refused equity in OpenAI. He seems to want it to go back to its original mission (which isn't going to happen) or die (which isn't going to happen).

LeafItAlone

a year ago

Given that Musk was already worried about this and has a legal team the size of a small army, one would expect that any conditions he wanted applied to the donation would have been made at the time.

kanbara

a year ago

he doesn’t need the money, for one. he missed out and didn’t control it, and now he’s jealous that it took off. oh well, world’s richest man and smallest violin.

georgeplusplus

a year ago

I never understood why people take non profit companies as more altruistic than for profit companies. The non profit doesnt mean no profits at all they still have to be profitable. It's just boils down to how the profits are distributed. There are plenty of sleezy institutions that are non profit like the NCAA.

Foundations and charitable organizations that pubically get their funding are a different story but I'm talking about non profit companies.

I even had one fellow say that the green bay packers were less corrupt than the other for profit nfl teams , which sounds ridiculous.

hedora

a year ago

Regarding the Packers: At least (unlike literally every other NFL team), they’re not using city tax revenue to build a franchise that can move across the country at the drop of a hat.

The NFL’s non-profit status is a farce though. Similarly, their misuse of copyright (“you cannot discuss this broadcast”) and the trademark “Super Bowl” (“cannot be used in factual statements regarding the actual Super Bowl”) should have their ownership of that ip revoked, if only because it causes massive confusion about the underlying law with a big chunk of the US population.

ayakang31415

a year ago

About a year ago (I believe), Sam Altman touted his mission to promote safe AI with claims that he has no equity in OpenAI and was never interested in getting any. Look where we are now, well played Sam.

upwardbound

a year ago

Does that amount to making a false forward-looking financial statement? (Specifically his claim that he wasn’t interested in getting equity in the future.)

This claim he made was likely helpful in ensuring the OpenAI team’s willingness to bring him back after he was temporarily ousted by the board last year for alleged governance issues. (Basically: “don’t worry about me guys, I’m in this for the mission, not personal enrichment”)

Since his claim likely helped him get re-hired, he can’t claim it was immaterial.

I really hope someone from the SEC scrutinizes him someday. The Singularity is too important to let it be run by someone with questionable ethics.

truculent

a year ago

> well played Sam

Is it well played if you simply decide to lie brazenly? Anyone can win at monopoly if they decide to steal from the bank.

onelesd

a year ago

Sam and all the others. At this point, there should be required courses in college to teach this seemingly required skill to future corporate USA.

user

a year ago

[deleted]

phito

a year ago

I know nothing about companies (esp. in the US), but I find it weird that a company can go from non-profit to for-profit? Surely this would be taken advantage of. Can someone explain me how this work?

Havoc

a year ago

That was the point musk was complaining about.

In practice it’s doable though. You can just create a new legal entity and move stuff and/or do future value creating activity in the new co. IF everyone is on board with the plan on both sides of the move then that’s totally doable with enough lawyers and accountants

moralestapia

a year ago

It's not weird, it's illegal.

There's a lot of jurisdiction around preventing this sort of abuse of the non-profit concept.

The reason why the people involved are not on trial right now is a bit of a mystery to me, but could be a combination of:

* Still too soon, all of this really took shape in the past year or two.

* Only Musk has sued them, so far, and that happened last month.

* There's some favoritism from the government to the leading AI company in the world.

* There's some favoritism from the government to a big company from YC and Sam Altman.

I do believe Musk's lawsuit will go through. The last two points are worth less and less with time as AI is being commoditized. Dismantling OpenAI is actually a business strategy for many other players now. This is not good for OpenAI.

xwowsersx

a year ago

At first, I thought, “Wow, if companies can start as nonprofits and later switch to for-profit, they’ll exploit the system.” But the more I learned about the chaos at OpenAI, the more I realized the opposite is true. Companies will steer clear of this kind of mess. The OpenAI story seems more like a warning than a blueprint. Why would any future company want to go down this path?

blackeyeblitzar

a year ago

It is going to be taken advantage of. Musk and others have criticized this “novel” method of building a company. If it is legal then it is a puzzling loophole. But another way to look at it is it gives small and vulnerable companies a chance to survive (with different laws and taxes applying to the initial nonprofit). If you look at it as enabling competition against the big players it looks more reasonable.

csomar

a year ago

I am not a tax specialist but from my understanding a non-profit is a for-profit that doesn't pay dividends. Why would the government care?

m3kw9

a year ago

The NFL used to be a nonprofit and now for profit. OpenAI can use similar routes

srvmshr

a year ago

It seemed only a matter of time, so it isn't very surprising. Capped profit company running expensive resources on Internet scale, and headed by Altman wasn't going to last forever in that state. That, or getting gobbled by Microsoft.

Interesting timing of the news since Murati left today, gdb is 'inactive' and Sutskevar has left to start his own company. Also seeing few OpenAI folks announcing their future plans today on X/Twitter

thesurlydev

a year ago

I can't help but wonder if things would be different if Sam Altman wasn't allowed to come back to OpenAI. Instead, the safeguards are gone, challengers have left the company, and the bottom line is now the new priority. All in opposition to ushering in AI advancement with the caution and respect it deserves.

elAhmo

a year ago

Similar example can be seen with the demise of Twitter under the new owner, which has no safeguards or guardrails - anyone who opposed him is gone and we can see in what state it is now.

wonnage

a year ago

Maybe my expectations were too high but they seem to have run out of juice. Every major announcement since the original ChatGPT release has been kind of a dud - I know there have been improvements, but it's mostly the same hallucinatory experience as it was on release day. A lot of the interesting work is now happening elsewhere. It seems like for a lot of products, the LLM part is just an API layer you can swap out if you think e.g Claude does a better job.

lyu07282

a year ago

It was always a bit too optimistic to think we will be cautiously developing AGI, in a way it's not so bad that this happened so soon rather than later after it progressed much further. (I mean in theory we could understand to do something about it now.)

Although I guess it doesn't really matter. What if we all understood climate change earlier? wouldn't really have made a difference anyway

IAmNotACellist

a year ago

What else would you expect from a skeevy backstabber who got kicked out of Kenya for refusing to stop scanning people's eyes in exchange for shitcoin crypto? He was building a global surveillance database with Worldcoin.

Altman was fucking with OpenAI for long before the board left in protest, since about the time Elon Musk had to leave due to Tesla's AI posing a conflict of interest. He got more and more brazen with the whole fake-altruism shit, up to and including contradicting every point in their mission statement and promise to investors in the "charity."

surfingdino

a year ago

Things would be different for sure. I wonder if people leaving OpenAI has something to do with the prosaic comparison of what they are getting (a salary) and what he's getting (a cool $10B at the current valuation).

matt3210

a year ago

The bottom line was always the priority.

DebtDeflation

a year ago

Wouldn't surprise me if this was the actual cause of the revolt that led to Altman's short-lived ouster, they just couldn't publicly admit to it so made up a bunch of other nonsensical explanations.

gklitz

a year ago

You have cause and effect flipped. The non-profit didn’t try to oust Sam because he was getting the non-profit to disengage from OpenAIs capped profit entity, that makes no sense and he can’t do that, he can’t stear the hand of the non-profit board. What is happening is that he’s detangling the non-profit from what will be the for-profit in order to not have people trying to throw him overboard. It was obviously going to happen the second the non-profit board thought they could just fire him and take control.

code51

a year ago

Are the previous investments counting as "donations" still? Elon must have something to say...

Maledictus

a year ago

And the tax office! If this works, many companies will be founded as non-profit first in the future.

Mistletoe

a year ago

Feels like when Napoleon declared himself emperor, and other countless times when humans succumbed to power and greed when they were finally in the position to make that decision. I guess I’m stupid for holding on hope that Sam would be different.

>Beethoven's reaction to Napoleon Bonaparte's declaration of himself as Emperor of France in May 1804 was to violently tear Napoleon's name out of the title page of his symphony, Bonaparte, and rename it Sinfonia Eroica

>Beethoven was furious and exclaimed that Napoleon was "a common mortal" who would "become a tyrant"

game_the0ry

a year ago

OpenAI founded as non-profit. Sam Altman goes on Joe Rogan Podcast and says he does not really care about money. Sam gets caught driving around Napa in a $4M exotic car. OpenAI turns into for-profit. 3/4 of founding team dips out.

Sketchy.

This whole silicon valley attitude of fake effective altruism, "I do it for the good of humanity, not for the money (but I actually want a lot of money)" fake bullshit is so transparent and off-putting.

@sama, for the record - I am not saying making is a bad thing. Labor and talent markets should be efficient. But when you pretend to be altruistic when you are obviously not, then you come off hypocritical instead of altruistic. Sell out.

moozilla

a year ago

Couldn't find the JRE clip, but here's a recent one where he says "I don't really need more money." This is how I always understood it, he's already worth billions from past ventures, what difference does a stake in OpenAI make?

https://www.youtube.com/watch?v=PScOZzzXnDA

peanuty1

a year ago

Regarding the 4 million dollar car, Sam already made a ton of money from Reddit and being President of YC.

klabb3

a year ago

I swear the reason why we have so many sociopaths is because how goddamn easy it is to fool people, it’s like stealing candy from kids. Just put on the pseudo intellectual mask and say that you care deeply about grandeur issue X, and people will just believe you at face value, despite your entire track record showing you care only about power, money and status.

mtlmtlmtlmtl

a year ago

The most surprising thing to me in this is that the non-profit will still exist. Not sure what the point of it is anymore. Taken as a whole, OpenAI is now just a for-profit entity beholden to investors and Sam Altman as a shareholder. The non-profit is really just vestigial.

I guess technically it's supposed to play some role in making sure OpenAI "benefits humanity". But as we've seen multiple times, whenever that goal clashes with the interests of investors, the latter wins out.

bayindirh

a year ago

> The most surprising thing to me in this is that the non-profit will still exist.

That entity will scrape the internet and train the models and claim that "it's just research" to be able to claim that all is fair-use.

At this point it's not even funny anymore.

mdgrech23

a year ago

The non-profit side is just there to attract talent and encourage them to work harder b/c it's for humanity. Obviously people sniffed out the facts, realized it was all for profit and that lead to an exodus.

rdtsc

a year ago

> The most surprising thing to me in this is that the non-profit will still exist. Not sure what the point of it is anymore.

As a moral fig leaf. They can always point to it when the press calls -- "see it is a non-profit".

allie1

a year ago

We haven't even heard about who gets voting shares, and what voting power will be like. Based on their character, I expect them to remain consistent in this regard.

htk

a year ago

The non-profit will probably freeze the value of the assets accumulated so far, with new revenue going to the for-profit, to avoid the tax impact. Otherwise that'd be a great way to start companies, as non-profit and then after growth you flip the switch.

bbor

a year ago

Totally agree that it’s “vestigial”, so it’s just like the nonprofits all the other companies run: it exists for PR, along with maybe a bit of alternative fundraising (aka pursuing grants for buying your own stuff and giving it to the needy). A common example that comes to mind is fast food chains that do fundraising campaigns for children’s health causes.

zo1

a year ago

This is 85% of what the Mozilla foundation and it's group of companies did. It may not be exact, but to me it rubs me the exact same way in terms of being a bait and switch, and the greater internet being 100% powerless to do anything about it.

elpakal

a year ago

> I guess technically it's supposed to play some role in making sure OpenAI "benefits humanity". But as we've seen multiple times, whenever that goal clashes with the interests of investors, the latter wins out.

A tale as old as time. Some of us could see it, from afar <says while scratching gray, dusty beard>. Lack of upvotes and excitement does not mean support, but how to account for that in these times? <goes away>

nerdponx

a year ago

It's just a tax avoidance scheme.

bastardoperator

a year ago

The whole "safety" and "benefits humanity" thing always felt like marketing anyways.

1oooqooq

a year ago

why wouldn't they keep it?

the well known scammer successfully scammed everyone twice. obviously he's keeping it around for the third (and forth...) time

fxbois

a year ago

Can anyone trust the next "non-profit" startup ? So easy to attract appeal with a lie and turn around as soon as you are in a dominant position.

int_19h

a year ago

The trust problem here isn't with non-profits in general, it's specifically with Sam Altman. So no, you probably shouldn't trust the next non-profit he is involved with. But also, people have warned about Altman in advance.

bbor

a year ago

Yes, you should still trust cooperatives and syndicates. I am surprised they’re attempting such a brazenly disrespectful move, but in general, the people who started this company were self-avowed capitalists through-and-through; the fact that they eventually reverted to seeking personal gain isn’t surprising in itself. That’s basically their world view: whatever I can do to enrich myself is moral because Ethical Egoism/Free Market/etc.

FrustratedMonky

a year ago

Not the only one questioning.

Going for-Profit, and several top exec leaving at same time? Before getting the money?

"""Question: why would key people leave an organization right before it was just about to develop AGI?" asked xAI developer Benjamin De Kraker in a post on X just after Murati's announcement. "This is kind of like quitting NASA months before the moon landing," he wrote in a reply. "Wouldn't you wanna stick around and be part of it?"""

https://arstechnica.com/information-technology/2024/09/opena...

Is this the beginning of the end for OpenAI?

gklitz

a year ago

The point is that OpenAI (the for protists) won’t die from not having invested AGI, they have an extremely profitable opportunity from “just” selling api calls and consultant hours. But that just brings them a successful shovel seller, not the societal transformation that the non-profit is aiming at, so it makes sense to detangle the non-profit and for profit.

Also because you know… the non-profit tried to strangle the for profit to take over control when they tried to oust Sam, so there’s that.

unstruktured

a year ago

I wish they would at least rename the company to "ClosedAI" because that's exactly what it is at this point.

amelius

a year ago

Unfortunately, that's not how trademarks work.

You can name your company "ThisProductWillCureYouFromCancer" and the FDA cannot do a thing about it if you put it on a bottle of herbal pills.

Prkasd

a year ago

That could be the first step towards a complete takeover by Microsoft, possibly followed by more CEO shuffles.

I wonder though whether Microsoft is still interested. The free Bing Copilot barely gets any resources and gives very bad answers now.

If the above theory is correct (big if!), perhaps Microsoft wants to pivot to the military space. That would be in line with idealist employees leaving or being fired.

ndiddy

a year ago

Microsoft already effectively owns OpenAI. Their investments in OpenAI have granted them a 49% stake in the company, the right to sell any pre-AGI OpenAI products to Microsoft's customers, and access to all pre-AGI product research. Microsoft's $10 billion investment in early 2023 (after ChatGPT's launch massively increased OpenAI's operating expenses) was mainly in Azure compute credits rather than cash and delivered in tranches (as of November 2023 they'd only gotten a fraction of that money). It also gives Microsoft 75% of OpenAI's profits until they make their $10 billion back. All of these deals have effectively made OpenAI into Microsoft's generative AI R&D lab. More information: https://www.wheresyoured.at/to-serve-altman/

HarHarVeryFunny

a year ago

I don't see the point of anyone acquiring OpenAI - especially not Microsoft, Google, Meta, Anthropic, X.ai, all of which have developed the same tech themselves. The real assets are the people, who are leaving ship and potentially hireable. With this much turmoil, its hard to imagine we've seen the last of the high level exits.

baq

a year ago

> CEO shuffles

Yes, I too can see how sama could end up as Microsoft’s CEO as a result of this

dev1ycan

a year ago

Sam altman is just trying to cash out before the crash comes, the new model was nothing more than a glorified recursive gpt 4

causal

a year ago

Considering all the high level departures, this makes the most sense to me. Their valuation largely rests on this mystique they've built that says they alone are destined to unlock AGI. But there's just no reason to believe they have a secret sauce nobody else can reproduce.

Seems more likely that OpenAI's biggest secret is that they have no secrets, and they are desperately trying to come up with a second act as tech companies with more robust product portfolios begin to catch up.

bjornsing

a year ago

The OpenAI saga is a fine illustration of how “AI safety” will work in practice.

Hint: it won’t.

typon

a year ago

AI Safety is a science fiction created by large corporations and useful idiots to distract from working on boring, real AI safety concerns like bias, misinformation, deepfakes, etc.

humansareok1

a year ago

Given what Sam has done by clearing out every single person who went against him in the initial coup and completely gutting every safety related team the entire world should be on notice. If you believe what Sam Altman himself and many other researchers are saying, that AGI and ASI may well be within reach inside this decade, then every possible alarm bell should be blaring. Sam cannot be allowed to be in control of the most important technology ever devised.

lolinder

a year ago

I don't know why anyone would believe anything this guy is saying, though, especially now that we know he's going to receive a 7% stake in the now-for-profit company.

There are two main interpretations of what he's saying:

1) He sincerely believes that AGI is around the corner.

2) He sees that his research team is hitting a plateau of what is possible and is prepping for a very successful exit before the rest of the world notices the plateau.

Given his track record of honesty and the financial incentives involved, I know which interpretation I lean towards.

meowface

a year ago

It's interesting because one of the points Sam emphatically stresses over and over on most podcasts he's gone on in the past 4 years is how crucial it is that a single person or a single company or a collection of companies controlling ASI would be absolutely disastrous and that there needs to be public, democratic control of ASI and the policies surrounding it.

Personally I still believe he thinks that way (in contrast to what ~99% of HN believes) and that he does care deeply about potential existential (and other) risks of ASI. I would bet money/Manifoldbux that if he thought powerful AGI/ASI were anywhere near, he'd hit the brakes and initiate a massive safety overhaul.

I don't know why the promises to the safety team weren't kept (thus triggering their mass resignations), but I don't think it's something as silly as him becoming extremely power hungry or no longer believing there were risks or thinking the risks are acceptable. Perhaps he thought it wasn't the most rational and efficient use of capital at that time given current capabilities.

user

a year ago

[deleted]

zmgsabst

a year ago

So if I contributed IP to ChatGPT on the basis that OpenAI was a non-profit and they relicense can they sell my IP?

That seems like fraud to me.

hakcermani

a year ago

Can they at least change the name to from OpenAI to something else, and leave gutted OpenAI as the non-profit shell..

charles_f

a year ago

I'm wondering what this will change. This is probably naive from me because I'm relatively uneducated on the topic, but it feels like open-ai has never really worked like your typical non profit (eg keeping their stuff mostly closed sourced and seeking a profit)

Flex247A

a year ago

The jokes write themselves!

jwr

a year ago

Can we all agree that the next time a company announces itself (or a product) as "open", we'll just laugh out loud?

I can't think of a single product or company that used the "open" word for something that was actually open in any meaningful way.

imranhou

a year ago

Based on what I've read it is allowed for a non profit to own a for profit asset.

So I'm assuming the game plan here is to adjust the charter of the non profit to basically say we are going to still keep doing "Open AI" (we all know what that means), but through the proceeds it gets by selling chunks of this for-profit entity, so the essence could be the non-profit parent isn't fulfilling its mission by controlling what openai does but how it puts the money to use it gets from openai.

And in this process, Sam gets a chunk (as a payment for growing the assets of the non-profit, like a salary/bonus) and the rest as well....?

insane_dreamer

a year ago

It's worth noting that of OpenAI's 13 original founders, 10 have now left the company and 1 more is on leave, leaving only Sam and Wojciech.

Safe AI, altruistic AI, human-centric AI, are all dead. There is only money-generating AI. Fuck.

refurb

a year ago

The restructuring is designed in part to make OpenAI more attractive to investors

I'm not surprised in the least.

Who is going to give billions to a non-profit with a bizarre structure where you don't actually own a part of it but have some "claim" with a capped profit? Can you imagine bringing that to Delaware courts if there was disagreement over the terms? Investors can risk it if it's a few million, but good luck convincing institutional investors to commit billions with that structure.

At that point you might as well just go with a standard for-profit model where ownership is clear, terms are standard and enforceable in court and people don't have to keep saying "explain how it works again?".

conqrr

a year ago

I remember a time when promises meant something. Lots of epics in human time (Greek, Hindu), people would stick to their word and commitment was respected. Written word was much more powerful than spoken. People appreciated depth. Wish we could teach and learn from those times.

uhtred

a year ago

Fund your startup by masquerading as a non profit for a few years and collecting donations, genius!

The stinking peasants will never realize what's happening until it's too late to stop!

redbell

a year ago

It's really hard to stick to your original goals after you achieve unexpected success. It's like a politician making promises before the elections but finding it difficult to keep them once elected.

On March 1st, 2023, a warning was already sounding: OpenAI Is Now Everything It Promised Not to Be: Corporate, Closed-Source, and For-Profit (https://news.ycombinator.com/item?id=34979981)

baradhiren07

a year ago

Value vs Morality. Only time will tell who wins.

thih9

a year ago

I’d guess it would be legally not possible to turn a non-profit into a for-profit company, no matter how confusing the company structure gets. And even (or rather, especially) if the project disrupts the economy on a global level. I’m not surprised that this is happening, but how we got here - I don’t know.

throwaway314155

a year ago

Any reporting on the impact this is having on lower level employees? My understanding is they are all sticking around for their shares to vest (or RSU's I guess).

but still, you'd think some of them would have finally had enough and have enough opportunities elsewhere that they can leave.

seanvelasco

a year ago

the openai team, including the tech community, should've sided with the board, not sam. the fact that ilya had a hand in it should've given it weight and backing.

"openai is nothing without its people." well, the key people left. soon, it will just be sam and his sycophants.

e-clinton

a year ago

So many red flags about Saltman. I have to imagine some of the investors are having second thoughts.

reducesuffering

a year ago

OpenAI couldn't even align their Sam Altman and their people to their non-profit mission. Why should you ever believe they will align AGI to the well being of humanity?

What happened to all the people making fun of Helen Toner for attempting to fire Sama? She and Ilya were right.

xyst

a year ago

Probably one of the many decisions that Mira and other original founders were against.

Sam Altman is a poison pill.

user

a year ago

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rqtwteye

a year ago

When will they start adding ads to the AI output? Seems that's the next logical step.

user

a year ago

[deleted]

user

a year ago

[deleted]

ForHackernews

a year ago

The good thing is, we need to worry about AGI because we already know what it's like in a world populated by soulless inhuman entities pursuing their own selfish aims at the expense of mankind.

EcommerceFlow

a year ago

On what planet would Elon not get a piece of this new for-profit company?

southernplaces7

a year ago

It's hilarious that this should surprise anyone at all, or that Sam Altman is anything but a mendacious, self-serving, compulsive liar of the worst tech world kind. For example, Elon Musk gets lots fo hate for all kinds of things. Some of it is very valid, but much of it also goes to the point of there being derangement syndrome around him, partly (I suspect) because of his openly stated zeitgeist-contrary political beliefs, yet i'd pick his sometimes crude, bullying but fundamental openness about who he is any day over the shiny paint job of platitudes and false correctness found in someone like Altman. Not to mention that the overall value of Musk's companies trumps anything I've seen done by Altman's sludge-pumping AI technology so far. This last is of course not a moral judgement but a practical one.

keepamovin

a year ago

Monday to come after Sunday, in revised push for transparency

user

a year ago

[deleted]

johanneskanybal

a year ago

I'm willing to pair up with fundamentalist christians to derail this with the argument that he/this is satan/the end of the world.

roody15

a year ago

Wait.. Sam Altman also owns (or did own) ycombinator?

germandiago

a year ago

What a surprise!!!! I would have never said so...

wg0

a year ago

For profit it will be when it will be profitable.

djohnston

a year ago

When a company makes such a transition are they liable for any sort of backdated taxes/expenses they avoided as a non-profit?

Sunscratch

a year ago

Should be renamed to NonOpenAI,or MoneyMattersAI

RivieraKid

a year ago

Good, I would do the same because it's a reasonable thing to do. It's easier to succeed as a for-profit.

ein0p

a year ago

Ethics aside, I think there’s a silver lining to all this: at least they believe this can be profitable

user

a year ago

[deleted]

KoolKat23

a year ago

I do wonder if this is why Mira left, as one of the non-profit board members.

enslavedrobot

a year ago

Sounds like a liquidity even to me. Time to pay taxes on 150B in equity.

bossyTeacher

a year ago

There is an post with 500 comments that was posted before this one. Why didn't that post make it to the top? I know Y Combinator used to have Sama has a president but you can't censor this type of big news in this time and age

scubadude

a year ago

Stop believing that these companies and people are benevolent.

surfingdino

a year ago

Let me guess, the talent will be getting screwed on options?

1024core

a year ago

Now we know why people like Ilya, Brockman, Murati, etc. left the company.

anon291

a year ago

Wonder what happens to the employee's equity.

Traubenfuchs

a year ago

Why were they a non-profit in the first case?

kopirgan

a year ago

Guess what they mean is for loss company

user

a year ago

[deleted]

hooverd

a year ago

Will they be rebranding to ClosedAI?

ocodo

a year ago

Oh! You don't say.

unnouinceput

a year ago

That's a lot of words for Micro$oft to say they just love money. Who knew!

msie

a year ago

Quelle surprise.

hyggetrold

a year ago

Reminds me of what my first-year econ professor in college once stated after disabusing myself and some other undergrads of our romantic notions about how life should work.

"Do I shock you? This is capitalism."

skadamat

a year ago

Now the real question is - will they finally drop the "Open" part?

seydor

a year ago

an AGI is showering us with irony

geodel

a year ago

Good. Now it is just a matter of profit-making company.

AI_beffr

a year ago

i remember years ago i saw a video of sam altman interviewing elon musk. it was filmed inside the spacex factory. maybe you know the one? i didnt know who sam was at the time. i remember being very, very put off by the way sam was behaving. he had this bizarre, almost unbelievable expression on his face, almost like he was pantomiming as a child looking up at his parents, adoring them. this weird, fake shy-smile. and i remember immediately having an intense disliking of him. this person seemed extremely fake, manipulative and narcissistic. it was such low-level behavior that i thought it must be some intern or someone way out of their depth. this interview is some kind of fluke. its so unbelievably insane to me that this person, who i disliked so much that i remembered him even without knowing his name or who he was, is now at the helm of one of the most important developments in human history. and the subject of todays headline is no surprise at all... i think everyone should think very carefully about the fact that sam altman will at some point, probably, be the very first person in the world to sit down in front of a console and hold the reigns directly and without supervision to a super-intelligent system that does not bear any of the regulatory or moral restrictions that would stop it from taking over the world. this evil narcissist, liar, money hungry, power grabbing A* hole will hold the most power that any human has ever held. do you really want that?

kidsil

a year ago

And the enshittification process begins.

user

a year ago

[deleted]

Jatwood

a year ago

shocked. shocked! well not that shocked.

throwaway918299

a year ago

Huh? I thought they already had for-profit and non-profit entities? Is the non-profit entity just going away (paywall)? gross.

upwardbound

a year ago

Relatedly, dalant979 found this fascinating bit of history: https://old.reddit.com/r/AskReddit/comments/3cs78i/whats_the...

Yishan Wong describes a series of actions by Yishan and Sam Altman as a "con", and Sam jumps in to brag that it was "child's play for me" with a smiley face. :)

latexr

a year ago

> and Sam jumps in to brag

I never read that as a brag, but as a sarcastic dismissal. That’s why it started with “cool story bro” and “except I could never have predicted”. I see the tone as “this story is convoluted” not as “I’ll admit to my plan now that you can’t do anything about it”.

That’s not to say Sam isn’t a scammer. He is. It just doesn’t seem like that particular post is proof of it. But Worldcoin is.

https://www.buzzfeednews.com/article/richardnieva/worldcoin-...

https://www.technologyreview.com/2022/04/06/1048981/worldcoi...

benterix

a year ago

The board drama part and key people leaving seem oddly familiar.

user

a year ago

[deleted]

user

a year ago

[deleted]

widerporst

a year ago

The fact that this has just disappeared from the front page for me, just like the previous post (https://news.ycombinator.com/item?id=41651548), somehow leaves a bitter taste in my mouth.

nitsuaeekcm

a year ago

Look at the URL. It’s because the original WSJ title was “OpenAI Chief Technology Officer Resigns,” which was a dupe of yesterday’s discussions. WSJ changed the title yesterday evening.

mattcollins

a year ago

I noticed that, too. It does seem 'odd'.

jjulius

a year ago

I found this on the front page an hour after you made this comment.

Davidzheng

a year ago

Yeah hope for some transparency here

aoeusnth1

a year ago

The IRS should get involved. This is a cut and dry case of embezzlement of 501c3 resources.

davesmylie

a year ago

Ahh. What a surprise - no-one could have predicted this

allie1

a year ago

"Shocking!" It's a shame that one of the biggest advancements of our time has come about in as sleazy a way as it has.

Reputationally... the net winner is Zuck. Way to go Meta (never thought I'd think this).

Kim_Bruning

a year ago

I guess this vindicates the (original) OpenAI Board, when they tried to fire Sam Altman.

neilv

a year ago

This post somehow fell off the front page before California wakes up (9:07 ET), but not buried deep like buried posts usually are:

> 57. OpenAI to Become For-Profit Company (wsj.com) 204 points by jspann 4 hours ago | flag | hide | 110 comments

breck

a year ago

This is great. Sam tried the non-profit thing, it turned out not be a good fit for the world, and he's adapting. We all get to benefit from seeing how non-profits are just not the best idea. There are better ways to improve the world than having non-profits (for example, we need to abolish copyright and patent law; that alone would eliminate the need for perhaps the majority of non-profits that exist today, which are all working to combat things that are downstream of the the toxic information environment created by those laws).

piyuv

a year ago

I hope they rename the company soon, it’s a disgrace to call it “open”

croes

a year ago

And suddenly Altman's firing no longer seems so crazy

haliskerbas

a year ago

Woah, the pompous eccentric billionaire(?) is actually not altruistic, never heard this story before!

/s

user

a year ago

[deleted]

user

a year ago

[deleted]

stonethrowaway

a year ago

I’m waiting for pg and others to excuse this all by posting another apologetic penance which reminds us that founders are unicorns and everyone else is a pleb.

user

a year ago

[deleted]

hello_computer

a year ago

another mozilla. it’s time for guillotines. past time.

lenerdenator

a year ago

Are you meaning to tell me that the whole nonprofit thing was just a shtick to get people to think that this generation of SV "founders" was going to save the world, for real this time guys?

I'm shocked. Shocked!

I better stock up on ways of disrupting computational machinery and communications from a distance. They'll build SkyNet if it means more value for shareholders.

whywhywhywhy

a year ago

This is for the best really, I can't even think of a non-profit in tech where over time it hasn't just become a system for non-productives to leech from a successful bit of technology while providing nothing and at times even stunting it's potential and burning money on farcical things.

imdsm

a year ago

Lot of people unhappy about this yet not at all unhappy (or even caring) about the 1,000s of others who started out for profit. And while we're all here hacking away (we're hackers, right?) many of us with startups, what is it we're chasing? Profit, money, time, control. Are we different except in scale? Food for thought.

retskrad

a year ago

Altman and OpenAI deserve their success. They’ve been key to the LLM revolution and the push toward AGI. Without their vision to make a product out of an LLM that hundreds of millions of people now use and have greatly enriched their lives, companies like Microsoft, Apple, Google, and Meta wouldn’t have invested so heavily in AI. While we’ve heard about the questionable ethics of people like Jobs, Musk, and Altman, their work speaks for itself. If they’re advancing humanity, do their personal flaws really matter?