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OpenAI has declared it won’t actually be ditching its non-profit roots to create a for-profit company. But to understand what that really means, we need to dig into the background.
When OpenAI was founded in December 2015 – yes, it’s not even ten years old – it was a non-profit organisation. In 2019, OpenAI created a for-profit subsidiary, a “capped profit” that only offered returns up to 100 times of what was invested; that allowed investors to get involved without making the project entirely about profit. And, crucially, the non-profit OpenAI kept control.
At the end of last year, OpenAI planned to restructure the for-profit arm into what’s known as a public benefit corporation (PBC). The idea: to allow for equity investments and profits while still keeping a stated commitment to the greater good.
That would leave a non-profit version of OpenAI and a for-profit version of OpenAI. The non-profit would hold shares in the for-profit and have some oversight, but not have full control – in other words, OpenAI would no longer have to answer to a non-profit.
A year on, and OpenAI has announced that last year’s plan is being tweaked: the PBC will still happen, but would remain under the full control of the non-profit arm.
“The for-profit LLC under the non-profit will transition to a Public Benefit Corporation (PBC) with the same mission,” CEO Sam Altman said in a post on the OpenAI website.
“PBCs have become the standard for-profit structure for other AGI labs like Anthropic and X.ai, as well as many purpose driven companies like Patagonia. We think it makes sense for us, too.”
“Instead of our current complex capped-profit structure – which made sense when it looked like there might be one dominant AGI effort but doesn’t in a world of many great AGI companies – we are moving to a normal capital structure where everyone has stock,” he added. “This is not a sale, but a change of structure to something simpler.”
Why the change? “We made the decision for the non-profit to retain control of OpenAI after hearing from civic leaders and engaging in constructive dialogue with the offices of the Attorney General of Delaware and the Attorney General of California,” said Bret Taylor, OpenAI chairman, in a post on the website.
That said, most reports suggest a much more widely spread backlash to the suggested changes, including former employees, academics and even rival AI companies, as well as Geoffery Hinton who raised concerns about the move at the time it was announced and in an open letter to the Attorneys General.
Attorneys General aside, there has indeed been another source of pressure on OpenAI’s restructuring process: Elon Musk.
Alongside his side hustle failing to cut trillions from the US government budget, Musk has also filed a lawsuit against OpenAI, a company he helped co-found with a bit of funding.
Musk has taken aim at OpenAI in the years since his own departure in 2018, but in this instance the concern appears to centre on the non-profit mission being deprioritised in the name of profit. Beyond that, Musk appears concerned that the for-profit arm paying $30 billion for the non-profit’s technology is undervaluing its worth.
Mostly, perhaps, Musk and Altman don’t seem to like each other very much.
Musk filed a suit asking OpenAI to block the reorganisation plans, which didn’t happen, though a suit was allowed to continue with a trial scheduled for next year. Musk also offered $97 billion to buy OpenAI, a bid that was quickly refused.
Last year, Musk’s lawyer Marc Toberoff said the aim of the suit was to ensure the charity was “fairly compensated for what its leadership is taking away from it: control over the most transformative technology of our time”.
Are the recent changes enough to end the dispute? You won’t be surprised to hear that it does not.
Toberoff said in a statement that the latest structure changes nothing: “OpenAI’s announcement is a transparent dodge that fails to address the core issues: charitable assets have been and still will be transferred for the benefit of private persons, including Altman, his investors and Microsoft.”
Will this move satiate OpenAI’s critics beyond Musk? Possibly not. Page Hedley, OpenAI’s former ethics advisor, said that questions remain – notably the balance between commercial and charitable, and which aspect will own any newly developed OpenAI tech, beyond other details.
“We’re glad that OpenAI is listening to concerns from civil society leaders … but crucial questions remain,” he added.
OpenAI suggested it would flesh out more details following further chats with the Attorneys General and those civic-minded critics. “We look forward to advancing the details of this plan in continued conversation with them, Microsoft, and our newly appointed nonprofit commissioners,” Altman added.
But Altman did suggest one person he wasn’t keen on hearing from, saying the decision to keep control with the non-profit had nothing to do with external pressure from a certain someone: “We’re all obsessed with our mission. You’re all obsessed with Elon.”
