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Comment by dpkirchner | Hacker News Reader

> If OpenAI had a sound business plan and was on strong financial footing, they'd have IPO'd.

OTOH, if a company has a sound business plan and strong financial footing it may not need to IPO -- unless the founders or VCers want out ASAP.

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They do because the other part of the equation is that they need to keep spending a lot of money to build out infrastructure faster than their two most significant competitors, one of which is public and wildly profitable (for non-AI reasons) and another has already filed for IPO. So it puts them at a disadvantage to walk away from a massive cash infusion.

I think the answer is simply that private money is cheaper than public money for these companies right now.

OpenAI hasn’t had any problems getting impressive amounts of funding. So why ipo?

Two reasons. First, there's more money in the public markets, and Altman's appetite seems insatiable (he's the one who's been calling for gigantic, government-sponsored "Manhattan Project" efforts related to AI); and second, public money comes with fewer strings attached - private investors want protections, board seats, etc.

I certainly wouldn’t say that public money comes with fewer strings attached. Just different strings. But the strings that come with public money tend to have sharper legal teeth behind them.

I don't think this is right.

Who knows what Altman wants? It's moot what individual motivations are as he is definitely fronting for investors who have significant power in the business.

Public money comes with legal fiduciary duties.

The reason to IPO is to get private money out, materialise the whole valuation.

At scale that OpenAI is valued at public markets are only place with enough of liquidity. At smaller scale private equity is an option. But if you are speaking of near trillion scale it really is not.

They are in a vicious circle there’s no good way out of. Building and operating their services is not operationally profitable. Therefore they need more funding. The only way to get more funding is to get a wider adoption and show new features. The only way to do that is to keep spending money.

Not being profitable in itself is not a problem or has not been historically. With software, there’s a bunch of investment into making the service but the variable cost of providing it is negligible. It’s ok not to be profitable because the growth of userbase will pay you back. Capex isn’t a thing, you can just rent somebody else’s from the cloud. This is how the world used to work pretty much for a quarter century, ever since the dot-com bubble. But OpenAI is not like it. Their variable cost is huge as is the capex to enable being able to even make that cost happen. It’s not that they are not profitable, it’s that their financial profile does not fit into anything this generation of decisionmakers is used to.

I don't know why comments pointing out this simple fact are getting downvoted.

The oversimplified view that has been drilled into startup discussions for years has been that IPO is the singular goal for every startup and they need to get there as fast as possible, but that hasn't been true for a long while. There are high profile examples like Stripe with no intent to go public any time soon. Some public companies are even gradually doing share buybacks partially to remove their public exposure.

Being a public company kind of sucks in many ways. I'll admit my sample size is small, but every post-IPO CEO I've known has expressed some regrets about going public. It was a fascinating revelation to me after being raised on the idea that IPO is the ultimate victory goal of every startup.

lol but they're trying to IPO, it's what sam altman has been talking about for the past 2 years? Are you saying you know something better about sam altman than his public opinions?

I am not sure why you'd, at this late date, think Sam Altman's public statements have anything to do with anything. Time and time again demonstrated compulsive bullshitter.

What makes us sure, that his public statement reflect his opinion?

IPO is the singular goal for a venture backed company…

I'm guessing downvotes are not because people don't understand that this happens, but because based on OpenAI's words and actions it is highly unlikely that this is what they are doing. Also, Stripe has been confirmed to be profitable.

I understand it as IPO is the ultimate victory for investors. They finally get their reward, sell in the overpriced moment and can go their merry way.

The investors need to make a couple trillion dollars soon or it all falls apart, right? Maybe I misunderstand how the financing for this works, but my understanding is they have borrowed and set on fire an enormous pile of money as a sacrifice to summon the Machine-God.

If He fails to arrive, or arrives late, they will be the railroad financiers in the Panic of '73.

VCs always want out when they've made their return. They are not in the business of owning companies for income.

The founders and VCs can shell shares to private investors, it's the employees who are sitting on options who get fucked.

Whatever private-market liquidity events they will be permitted to participate in will be highly disadvantaged compared to the other two groups.

Unhinged conspiracy, if you take the implicit goals of AI research orgs at face value (I.e., replacing all knowledge work) and assume it possible; why would they drag a few thousand knowledge workers along to the promised land when they can just shed them after their usefulness has worn out?

What does adding a few more suckers to the pile of tens of millions of other suckers do to those that get the real benefits? It’s not like after they achieve their goals, the people who helped them would have the ramp or resources to recreate the process.

That then begs the question of whether there's any promised land at all after all knowledge work is replaced.

If you've made tens of millions of people unemployed over the timeline of a few years, then you no longer have nearly the market to sell goods and services - including your AI - to.

Assuming these guys answer that with "let's make UBI" - which is a huge assumption given the way SV fetishizes those who "create value" and looks down upon those who don't - you now basically have tech feudalism. The remaining upper crust "generously" pays the rest of the population enough to not starve until they die.

You'll basically have an entire society in stasis, with no hope of improving their lot, being given the bare minimum to keep humans alive, if that. Well, no hope of peacefully improving their lot.

It won't be a promised land at that point.

From my read this line of thought was alluded to by GP's ironic "promised land". A promised land for whom? Not for the vast majority of humankind.

Comparisons to feudalism kind of sell the direness of the AGI vision short: in feudalism, the lord still depended on the peasants. The lord would be inconvenienced if he had them all killed. Not so with AGI! He won't even notice their gone.

Exactly why I’m confused with the “techno-feudalism” point as well. What are the serfs for if they’re useless (sans some physical labor maybe?). The AGI dream is for the smallest amount of humans needed to keep the system running, and if AI can do everything feasible, then that group is basically those that “own” the AI. Techno-feudalism, if even necessary, would be a fleeting blip in the end.

Manual labor and, at least for a while, protection.

Mankind has never been content with "basic" income. Columbus was not starving. He sailed into the unknown anyway because he was greedy.

Besides as much as I love UBI it requires Star Trek technology: ubiquitous space travel and replicators.

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