Going fwd, I wonder why they cannot convert the structure to a traditional c-corp. Supposedly: “tax issues”.
Whatever problems OpenAI dealt with last week, the current non-profit structure will continue to cause future problems IMO.
Because, IIRC, when a charity nonprofit like OpenAI, Inc.-- a 501(c)(3), other nonprofits are different -- converts to a for-profit (C-corp or otherwise doesn't matter), all the assets acquired while it was a charity must either remain dedicated to and used exclusively for the charitable purpose, be returned, or be donated to charity (or sold, and then the proceeds treated the same way.) For the charity OpenAI, Inc., this would include its interest in OpenAI, LLC (the wholly owned subsidiary through which it exercises control of OpenAI, LP and OpenAI Global, LLC -- the latter being the for profit entity that actually sells product, etc.), and OpenAI, LP (the holding company which in turn is majority owner of OpenAI Global, LLC).
also OpenAI Inc. for profit doesnt exist, a wholly owned LLC subsidiary does. so they would need to divest of that LLC first (by selling the shares)
the way around the self dealing regulations are to reduce their ownership below 20% - 35% (yes, its that range, for multiple reasons)
good thing here is that most venture backed companies subvert this already by simply share dilution and youre breaking into one the best secrets of Silicon Valley. Non-profits pump the value of startups and launder the reputation of the founders because their ideas get so much “validation” so quickly. (non profits they partially control act as lead investors for startups they control. they both sell shares at higher price, ideally: founders get QSBS tax free treatment, non profit retains tax free capital gains too. nothing wrong with that, you just probably cant do it too)
so open ai for profit llc needs to get rid of the PPU’s and bring in outside investors to dilute ownership enough, but two birds one stone: the outside investors have to get a higher valuation
The for-profit "OpenAI" (OpenAI Global LLC) is not a wholly-owned subsidiary of anything, it is majority owned by a holding company (OpenAI, LP), which in turn is majority owned by the OpenAI charity (OpenAI, Inc.)
There is a wholly owned LLC subsidiary of the charity (OpenAI GP, LLC), but that is the entity through which OpenAI, Inc., exercises control of OpenAI, LP and OpenAI Global, LLC (why it doesn't do so directly for OpenAI, LP, and either directly or via OpenAI, LP, for OpenAI Global, LLC, don't ask me), it is not the for-profit.
Both OpenAI, LP, and OpenAI Global, LLC have other investors (Microsoft being a big one for OpenAI Globla, LLC) already.
one explanation is “blockers”. basically regulations imposed on one kind of entity such as the non profit, fail when there is one degree of separation via a “blocker” entity.
LP’s can have undisclosed silent limited partners, intentionally less flexible than an LLC which can do the same
I read it as both. If OpenAI collapses operationally then the non profit fails at its mission too. That’s the board she is on and that’s the fiduciary duty relevant
(She may also be on the for profit board idk)
Not necessarily true.
"We will attempt to directly build safe and beneficial AGI, but will also consider our mission fulfilled if our work aids others to achieve this outcome [...] 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."
Yeah, that smells like a bullshit threat. Anyone would do well to ignore it.
Great learning opportunity for those that have not taken time to learn and understand non-profit structures in the USA.
this is clearly an opportunity for the uninformed to study the US non-profit system, unique in the world. For example, I recall a delegation from Japan touring the HQ of a non-profit educational group in San Francisco. Like the p-poster here, they apparently had no clue why or how capable people could come together and form stable work culture aside from "hierarchical, profit motive in USD$" (.. and people did actual work, unlike many management level stock manipulators).
[0] https://en.wikipedia.org/wiki/International_Baccalaureate
"In the aftermath of the OpenAI governance battle, the narrative has been dominated by the idea that “the capitalists won.” While this conclusion is catchy, it misses the point.
The real (and bigger) story is: The founders of OpenAI set out to create a nonprofit public institution to ensure that AI’s evolution aligns with the interests of humanity at large. Last month, it became clear that they failed.
What is also clear: Public institutions that prioritize the public good over short-term profits are desperately needed for the AI era."
Fiduciary doesn't mean financial or monetary duty, it means holding something in trust. Violating a fiduciary duty could be financial, social, reputational, or in this case, literally destroying the operation of the company you were entrusted with.