OpenAI is reportedly considering a shift to "for-profit" Model
KEY FACT: OpenAI is reportedly considering a shift of its organizational model from "non-profit" to "an unfettered for-profit" model. CEO refits the board to suit the proposed change.
Image Source: OpenAI
Artificial intelligence (AI) giant OpenAI is reportedly considering shifting its organizational model from a capped-profit corporation to an unfettered for-profit model. The CEO and co-founder, Sam Altman, is allegedly to have told shareholders that he was considering the move as reported by The Information.
According to the company's website, OpenAI has a purported private valuation of approximately $86 billion and is based on a structure described as “a partnership between our original Nonprofit and a new capped profit arm”. The shift to “capped profit” was meant to incentivize research into the field of artificial general intelligence (AGI) while maintaining the company’s vision. Justifying the shift, OpenAI said that the “donations” required to perform the company’s work were insufficient, and thus, a new cash infusion model was needed to incentivize stakeholders.
At the time of this report, OpenAI's website states a warning that stakeholders should treat their investments as donations.
"Investing in OpenAI Global, LLC, is a high-risk investment. Investors could lose their capital contribution and not see any return. It would be wise to view any investment in OpenAI Global, LLC in the spirit of a donation, with the understanding that it may be difficult to know what role money will play in a post-AGI world.”
However, if the latest push to an unfettered for-profit model, as hinted by Sam Altman is successful, OpenAI’s nonprofit board will lose control of the company.
Meanwhile, OpenAI CEO Sam Altman is reportedly refitting the board to include himself and numerous newly anointed, handpicked stakeholders including Sue Desmond-Hellmann, former CEO of the Bill and Melinda Gates Foundation; Nicole Seligman, former Sony vice president; Fidji Simo, CEO and chair of Instacart; and Paul Nakasone, retired U.S. Army general and former director of the National Security Agency Paul Nakasone.
Analysts are hinting that Nakasone’s placement on the board of directors is unhealthy. Edward Snowden, a former U.S. intelligence contractor has asked the public not to trust OpenAI with this new development.
Snowden, posting on X.com, warned the public to “not ever trust @OpenAI or its products,” citing ChatGPT by name and adding that “there is only one reason for appointing an @NSAGov Director to your board.” He concluded with the chilling admonition that the appointment was “a willful, calculated betrayal of the rights of every person on Earth. You have been warned.” - Source
It is important to understand the three different organizational models highlighted in this report: Non-profit, Capped-profit, and unfettered for-profit models.
Nonprofit organizations (NPOs) exist primarily to serve a public or community benefit rather than to make a profit for owners or shareholders. They often focus on areas such as education, healthcare, social services, arts, and the environment.
Capped-profit organizations (also known as "low-profit limited liability companies") are designed to blend social missions with modest profit-making. They aim to achieve a specific social goal while allowing for limited profitability.
An unfettered for-profit model represents the traditional business structure where the primary goal is to maximize profits for shareholders. There are no formal restrictions on how much profit can be distributed. Key features include profit maximization, shareholder primacy, flexible profit distribution, and market-driven.
With an understanding of the above models and the push for changes, do you think that OpenAI would offer safe services to users or should there be concerns?
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It is really good to see OpenAI greatly shifting from a capped-profit model to a fully for-profit model. This move can be a potential tool for their mission and operations. Do you think this shift will help or hinder OpenAI's goals and trust with the public?