If I am understanding things correctly, OpenAI could leave in the future - but CA can’t retroactively block the conversion in that case.

Seems a little easier than that, though, because there are no supply chains involved (other than for the data centers, but those are already not in SF). Why else would the CA government be worried?

The Texas Stock Exchange launches next year and I predict we will see a lot of tech try to move to launch there given txse claim to have lower compliance and less esg needs.

except developing AI is very much a knowledge exercise with very little dependency on location.

You don't move your manufacturing business out of Shenzhen because the entire hard supply chain from mining, refining, manufacturing, test, ship and trade are all there. You can't move a refinery that easily much less the entire supply chain.

That still doesn't explain the value of Sam Altman's pinky promise.

The location you're physically sitting in doesn't really matter. Saying 'san francisco cause san francisco' is also kinda boring and meaningless.

What are the taxes on an IPO?

It's capital gains, which aren't taxed until the capital (IPO stock) is liquidated. I'm sure some people will liquidate their stock promptly but I expect that most will hold it, expecting further growth, and that the big investors, including Altman, will hold onto it for because of the same reason, because they need to sell optimism (what would people think if Altman or Microsoft sold a significant chunk of stock?), and because OpenAI needs lots of assets to build datacenters and buy power.

We're finally going to get that bullet train.

stocks sold by the company in an IPO aren’t taxable income. Pre-IPO stocks that people liquidate because there is now a liquid market and they want to realize some gains will generate some, but I don’t know how you’d predict the magnitude of that.

OpenAI needs to IPO because they want to access the public capital markets to fund their AI investments, more deep-pocketed investors are wary of investing in a LLC, and for liquidity, etc.

OpenAI needs to convert to a C-corp in order to IPO.

OpenAI needs the CA Attorney General's approval to convert a LLC into a C-Corp because the LLCs is headquartered in CA and incorporated with many CA laws.

So the article is making the point that OpenAI likely got the CA Attorney General's approval for the conversion because they promised to stay in CA (whether or not that's actually true).

(or support journalism and pay to read the article)

> and blindly supporting corporations is seen as pro-economy

These clumsy stereotypes are so pointless.

>Weren't we supposed to be careful with energy use to reduce CO2 emissions?

The Programming has changed get with the times. AI earnings have outweigh ESG scores.

You didn't notice as soon as energy was needed for AI, all the tech companies gave up on green power and reducing emissions?

800m users, 25m paying subscribers

LLMs have been commodified... Why would I pay for chatgpt when I can rotate free accounts on all providers and essentially never run out of tokens?

A capital investment is predicated on there being future profits. I don't understand why they can't be profitable already. If 800M AU is not a critical mass for flipping on the revenue switch, I can't imagine what is.

So what stops them from monetizing those users today? Why would it be any different in the future if they can't?

I say further limit the free tier and more aggressively push those free users to a paid plan. Raise the prices for Business users and API access. An IPO isn't going to raise the trillion they need to keep running off capital.

Once OpenAI reaches the eventual pricing needed to break even, I suspect we'll see that it no longer makes sense for many of their customers to replace humans with AI after all. As it stands now, their investors are essentially paying OpenAI to put employees of other businesses out of jobs by masking the true costs. The sooner they can reach the sustainable pricing phase the better.

OpenAI burns <5B$/year in inference. They're raising that money to hyperscale larger models.

How many of these users will be able to be monitized is an unanswered question as of yet however.

API usage on the other hand has a clear path to monetization and as of right now Anthropic is looking a lot better than OpenAI there.

It hasn't been like that for quite some time. The corpse is sold off to mutual funds and pension plans

Does that seem like what’s happening here?

"OpenAI and Microsoft have made their next move in their attempt to expropriate the OpenAI nonprofit and pull off one of the largest thefts in human history."

https://thezvi.substack.com/p/ai-134-if-anyone-reads-it?open...

But aren't non profits a federal thing with rules dictated by the IRS? Why is California involved?

So they avoid billions of tax on nonprofit status, then magically get to keep it all when they are for-benefit? How about no, fuck you, dissolve?

Mozilla has this same structure (non-profit parent, for-profit subsidiary) because the subsidiary has to pay taxes on the money Google pays to be Firefox's default search engine.

As do many gift shops attached to non-profit museums and art galleries.

A corporation is locked into its nonprofit status due to its articles of incorporation and state law regardless of its federal tax-exempt status.

Because of the unusual history of OpenAI, the Government had far more of a say than normal for a company. Remember, OpenAI was originally created as a California non-profit (a charity doing work to create a better AI future). As a charity, it doesn't have to pay the same taxes as it would as a for-profit company, but in exchange it has more rules it needs to follow. And then it released ChatGPT, it exploded in value, it needed to raise truly absurd amounts of capital in order to get to the next model, and thus the lawyers had to spend a good long time extracting the company from the charity.

For very good reasons, the laws make it hard to go from a charity to a for-profit company- because if you could easily transition between the two you could game tax laws with ease. In the end, being allowed to do this required negotiations, and promising to keep OpenAI in California- where they would be subject to other California regulations and taxes in the future.

If they had a "normal" corporate history- had been founded as a Delaware S Corp from the beginning- then this wouldn't be a thing and they would be free to move as they like(1). But, being a weird charity probably helped them attract talent in the critical beginning phases (before it became a money race with Zuck), and it has consequences now.

1: Just as an example, Palantir moved their corporate headquarters to Denver from Palo Alto years ago without a peep from the CA government.

The entity in question operates in california and is thus subject to california law. California has laws around charitable entities.

One might reasonably claim it's overreach, but in response OpenAI could just leave the state. Which is what they threatened.

Because the company was formed as a non-profit and now wants to cash out? He has to protect the integrity of non-profits as a distinct entity type.

  But who oversees how charities use their assets and ensures that they are used for public benefit?

  That job lies with the Charitable Trusts Section of California’s Office of the Attorney General, which is part of the state’s Department of Justice. Charged with both regulatory and law enforcement responsibilities, the section has a big job.

Yes, blocking a NON-PROFIT from magically IPO-ing as a for profit company and therefore skirting years of taxes is overreach.

Guys, the only state morally bankrupt enough to just allow that is Texas. Why do you think these tech bozos love Texas? It's basically cyberpunk over here. Our government actively hates us.

We struck down paid water breaks in Texas. I once worked a job with no breaks at all. 10 hour days, no lunch. Yes, that's legal here.

Corporations exist at the pleasure of government do they not? They are not some naturally-existing thing.

OpenAI has over 5,000 employees. In addition to their headcount, they are now the highest valued private company in the world.

They're going to have some leverage.

I doubt OpenAI has to try very hard to convince state politicians, especially to the point of bullying. It's usually the complete opposite where they throw money at you to stay.

Imagine if California managed to scare away the hottest company in the world and all the tax revenue it brings...

Corporations are applications of government power and have no natural rights, their legal rights are at best proxies for the rights of natural persons with some interest in them, and at worst a fiction which serves to limit the rights of natural persons.

Also, having a right to do something does not contradict a description of you leveraging power by using a threat of doing it, in the first place.

Maybe its the insane wealth gap that's the problem...

> California does not have the eternal right to OpenAI's taxes and employee base

ehh....

https://www.greenbacktaxservices.com/blog/california-exit-ta...

Skip to the "What California Can Still Tax After You Leave" section

If they do this to people, i am sure they can to corps too

Corporations used to not have that much political power

There is a book written about this topic. SA is the classic manipulator. He talks to each person whatever they want to hear, irrespective of what he really believes. Many of the things he says about AI and OpenAI are clear BS, but he'll sell that to anyone with a different flavor.

His pattern seems to be:

(0) Be exceptionally intelligent and capable of applying that intelligence to people, not just code or math — necessary for everything that follows.

(1) Keep attention diversified as long as possible until the winning path becomes obvious.

(2) Focus on fringe bets, but pursue many simultaneously until one clearly dominates (see (1)).

(3) Extreme social manipulation — people-pleasing, control- and power-seeking, selective transparency, skillful large-scale dishonesty, and a willingness to hurt or betray when it serves (1) and (2) and the relational cost is acceptable.

(2) brought him into the startup ecosystem and the first YC batch in the first place (he had to start somewhere); combined with (3) he made an early fortune from a failed startup. (3) also ingratiated him with PG and others in those years. (1)+(2) ensured he always had exposure to every plausible frontier of the industry; when he was effectively fired from YC for (1)+(3), (2) made the OpenAI pivot the next obvious move — and a better one. (3) almost cost him his career a second time when the board fired him from OpenAI temporarily, but he survived because (3) also ensured he had enough to offer everyone else that he leveraged his way back in.

I can only speculate so take it with a spoon of salt... But people who are really good at sussing out other people's wants can find ways to make more people happy. It's like a maze of interests and I guess he's just really motivated and good at navigating and aligning them (at least among the rich and powerful).

He also seems to understand something about power and perception, in that he takes calculated risks that seem to keep working out.

So in other words, he seems to be an extraordinarily skillful politician (in both the general and the Patrick Lencioni sense).

It's a bit much to say he goes into situations with nothing - he, along with others created OpenAI. It's a decent sized company now and they have sway with governments. All decent sized companies do as employers. This kind of stuff happens all the time and it just doesn't get reported as much.

https://www.newyorker.com/magazine/2016/10/10/sam-altmans-ma...

He has great foresight, which helps a lot in investing and operating OAI.

It's a great question. Here are two Paul Graham (PG) quotes on Sam Altman (Sama) from 2008 and 2009.

Note, PG is the founder of YC, Sam's former boss, and the one who removed Sam from the position of President of YC after first appointing Sam to succeed him as President of YC. (Sama was more focused on OpenAI than on YC at the time, which doesn't work when you're supposed to be leading YC.)

2008 Essay "A Fundraising Survival Guide" https://www.paulgraham.com/fundraising.html

Sam Altman has it. You could parachute him into an island full of cannibals and come back in 5 years and he'd be the king. If you're Sam Altman, you don't have to be profitable to convey to investors that you'll succeed with or without them. (He wasn't, and he did.) Not everyone has Sam's deal-making ability. I myself don't. But if you don't, you can let the numbers speak for you.

2009 Essay "5 Founders" https://paulgraham.com/5founders.html

5. Sam Altman I was told I shouldn't mention founders of YC-funded companies in this list. But Sam Altman can't be stopped by such flimsy rules. If he wants to be on this list, he's going to be. ... What I learned from meeting Sama is that the doctrine of the elect applies to startups. It applies way less than most people think: startup investing does not consist of trying to pick winners the way you might in a horse race. But there are a few people with such force of will that they're going to get whatever they want.

That's PG's take on Sama.

I would say, looking at a wide range of Sam Altman's more investments https://observer.com/2025/06/sam-altman-startup-investments/

from OpenAI to Helion energy (Fusion), to Retro Biosciences (longevity), Neuralink (brain computer interface), to Reddit

Sama really wants to "build the future," and when some of those investments "hit", like OpenAI did - basically become the first new company with a clear path to a $1T valuation since Facebook or TikTok), you gain immense credibility for "betting the future will happen and getting your organization there first."

If YC's motto is "build something people want," and OpenAI is now serving 800M active users while delivering incredible revenue growth (and investors want to see both). Sama gains power by giving investors what they want, by giving users what they want, and basically authoring an entire new type of software company and a new part of the economy.

A thing to note here is that, being a YC partner and top angel investor from 2011 to 2020, you can argue that Sam himself is "the most successful YC graduate." He saw thousands of companies go through YC. He saw hundreds of 'hard tech companies' go through YC. And in that decade, he could only have learned an immense amount about how VCs/successful CEOs think and make decisions. Certainly, we see the learnings of those experiences in what he's been able to pull off since.

> Is he that skilled an operator, negotiator, or manipulator or something?

He probably has everything every politician has ever asked chatgpt index and ready to be emailed out at any given time?

You might be thinking of Reddit

This is Sam Altman we're talking about, a man with a long track record of conning people. I don't think any benefit of the doubt is warranted here - I'm going to assume guilty unless and until clearly proven innocent because you only get to screw people over so many times.

With cynical people, a cynical take is the right one.

How much?

i.e: it was a complete grift.

If only everyone was as enlightened as you are.

> workers and supporters who were taken by this idealistic vision

The only people who can claim harm are donors and workers who actually left, e.g. Murati. "Supporters" aren't stakeholders in any material sense.

> The workers and supporters who were taken by this idealistic vision

I haven’t heard from any of the workers. Why are people white-knighting for them? My hot take is that they don’t mind being able to afford a house (or more) for their efforts. Where’s the outraged employees in this conversation?

As for “supporters,” what does that mean? People who watch from the sidelines and never actually contributed don’t usually get a say.

What taxes did they not pay? Quick research suggests that they do pay taxes on revenue, and I can't find any articles that definitively show what taxes they avoided by having a non-profit arm.

> oAI is going to be one of the enduring tech consumer brands built in this half of the 21st century

I am curious why you think that, they're early to market but that by no means guarantees them a long term place at the table.

Time will tell. I've been wrong before. Note that I'm not saying that OpenAI will disappear, just that it will end up as a wholly owned subsidiary of Microsoft.

Why do you say so? They’re burning cash and don’t currently have a viable path to profitability. Sure they have millions of MAU but not many paying ones.

An IPO is traditionally thought of as a way to raise capital in amounts that are not available privately, but more recently IPOs are just a way to transfer vast amounts of wealth from speculating retail and institutional investors to stakeholders. The IPO itself is the least interesting thing: if Microsoft wanted they could avoid the IPO and instead offer to buy the shares beforehand.

If the financial future of OpenAI is not as rosy as they say it is then there is a fair chance that post IPO the stock will not rise. There are plenty of signs that this is the case, including the 'erotic' version of ChatGPT slated for release in December, the strong push to monetize even the most inane interactions and the mention of advertising as a possible source of income. All of those combined tell me that OpenAI is seriously worried about their bottom line.

But Microsoft already has a bottom line and AI is the one way in which they could put one over on Google, which they've been dying to do for many years.

So the logical progression to me seems to be:

- do the IPO, everybody associated with OpenAI will be filthy rich (including MS)

- attempt to polish up the financials

- if that fails activate plan B, have Microsoft make an offer to take OpenAI private again

The hype around this IPO increases the chance the stock will drop post IPO.

Spitballing

There is no clear path to the trillion dollars today. By IPOing, the owners (who have a good idea of where it's going) can exchange their ticket to the trillion for cash today.

Seems like a bad deal unless you know the ticket won't get called. Then you've just made bank.

And you might have noticed some form of hype around AI these last few years - arguably this could be to make the trillion dollar seem more realistic and therefore making the owners more money when selling their ticket to it.

Probably predicting either pop of AI bubble like dotcom in 1999 or the OpenAI emperor has no clothes and the marker sees its shrunk hunk.

that would be certifiably insane

> Because this state seems like a very solvable problem: All you have to is not buy it

Your index fund will buy them.

ETFs like VOO will buy it eventually.

It started me wondering if theres an ETF that explicitly avoids the top 20 companies