The objectional part would be:
- in 2019, OpenAI created a capped-profit subsidiary in order to attract funding from commercial entities
Particularly if it creates a conflict of interest for anyone making decisions on behalf of the nonprofit
- in 2019, OpenAI created a capped-profit subsidiary in order to attract funding from commercial entities
Particularly if it creates a conflict of interest for anyone making decisions on behalf of the nonprofit
Also curious what conflicts of interest you have in mind.
In this case, my understanding is that e.g. Altman is on the nonprofit board and also makes big $$$ from the for-profit, which seems like a pretty big conflict of interest.
On Altman, the trial showed that Altman does not have any equity in the for-profit. He does have some indirect exposure through his investments in YC, since YC has a small position in OpenAI.
- in 2025, OpenAI’s for-profit entity recapitalized from a capped-profit entity with residuals flowing to the nonprofit to a traditional public benefit corporation with traditional equity
This is the egregious part. Before full for profit conversion it was worth $300B. Then after $850B.
A true fiduciary would set an auction and that would set the price for for profit valuation. And then all existing investors would keep the value of their positions, but would be diluted because capped profit is worth much less than unlimited profit and residuals.
But, they sold it to themselves for a bargain basement price. The nonprofit lost out on $300B or so. Maybe more.
It was not an arm’s length transaction. It was self-dealing.
After conversion, they all own unlimited profit, unlimited return shares. A lot more valuable.
The nonprofit lost the value between the two.
It was not clear in 2019 that OpenAI's IP would ultimately be worth billions. That was well before the current AI boom.
“Elon buying this doesn’t align with the mission” is a completely normal, reasonable, and healthy response for most non-profits.
What’s great is that we don’t need to speculate about a counter factual. He did end up building a chatbot! Whose defining differentiating feature is revenge porn.