If the issue is they believe Sam's focus on commercialization is inherently against their charter, Microsoft is key to that - they are the shining example of this shift. Consulting with them would be antithetical to solving the problem.
For a for-profit, the pragmatic approach due to Microsoft also being the majority computer provider (We can set aside the investments for the moment - most are in the form of compute credits and come in tranches. OpenAI is not sitting on $10B in cash in their bank accounts or whatever) would make a lot of sense.
But they're a non-profit that operate in accordance to their pipe-dream charter. You and I might be skeptical of it or just think it's generally dumb, but non-profits are allowed to believe in pipe-dreams and pursue them.
At the very least they still issued a poorly worded statement and have not been able to recover from that, but it is quite possible that their attitude towards the investors in the for-profit is entirely consistent with the charter they are supposed to be following.
Sorry I'm not sure I understand what Microsoft could possibly do if the board just stays firm on their decision. The non-profit owns the majority of the for profit, and the board has full control over the non-profit. Right? So at best Microsoft could invest in whatever Sam does next, but their $10b is now under OpenAI's control and there is nothing they can do about it, no?
This is not just a "non-profit"... it's a non-profit that owns a $90B for-profit company developing revolutionary, once-in-a-century technology. There is a LOT of money at play here.
Others have commented on how Microsoft actually has access to the IP, so the odds that they could pack their toys and rebuild OpenAI 2.0 somewhere else with what they've learned, their near infinite capital and not have to deal with the non-profit shenanigans are meaningful.
I'm not saying Sam is needed to make OpenAI what it is, but he's definitely "the investors' guy" in the organization, based on what has surfaced over the last 24 hours. Those investors would rather have him there over someone else, hence the pressure to put him back. It doesn't matter whether you and I think he's the man for the job -- what matters is whether investors think they are.
TL;DR the board thinks they have leverage, but as it turns out, they don't
This is a non profit dedicated to researching AI with the goal of making a safe AGI. That’s what the mission is. Sama starts trying to make it a business, restructures it to allow investors, of which MSFT is a 49% owner. He gets ousted and they tell Microsoft afterwards.
It’s questionable how much power Microsoft has as a shareholder. Obviously they have a staked interest in OpenAI. What is up in question is how much interest the new leaders have in Microsoft.
If I had a business relationship with OpenAI that didn’t align with their mission I would be very worried.
Major investors aren't the board's boss in this case because OpenAI is a nonprofit. Microsoft is incentivized to act against the goals nonprofit's charter (and in fact they did in this case).
> I'm curious what recourse Microsoft has, if any. Presumably there's some clause protecting them against openAI self-immolating?
Given the disclaimer attached to the OpenAI Global LLC (the entity Microsoft is directly invested in) operating agreement that is also reposted on OpenAI's own description of its structure about how investment in the firm should be treated as a donation, and that the firm has no obligation to seek profit, and its primary goal is to serve the charitable mission of the nonprofit and that that will trump all other concerns including profit, I doubt very much that that is the case.
Now, if there was actual evidence that the board (which is, remember, the board of the nonprofit) was not making a bona fide effort to serve its understanding of the charitable purpose of the nonprofit, but instead serving some unrelated (especially profit-oriented) reason, that would perhaps be grounds of the lawsuit, but most of the concerns being expressed are exactly the opposite -- that the board is putting its view of the nonprofit's purpose ahead of commercial interests that people wish the firm would pursue. Which is exactly what the entire structure (and the laws governing charities) are set up to assure...
>OpenAI had abandoned its public good mission and had morphed into a psuedo-private for-profit.
>They should be fine with the overwhelming volume of investment available to them.
>Another way to look at it: How could this be wrong, given that their objective was not profit, and they can raise money easily with or without Altman?
This wasn't just some cultural shift. The board of OpenAI created a seperate for profit legal entity in 2019. The for-profit legal entity received overwhelming investment from Microsoft to make money. Microsoft, Early investors, and Employees all have a stake and want returns from this for profit company.
The separate non-profit OpenAI has a major problem on its hands if it thinks its goals are no longer aligned with the co-owners of the for-profit company.
> Microsoft's investment is in OpenAI Global, LLC, a for-profit company.
OpenAI Global LLC is a subsidiary two levels down from OpenAI, which is expressly (by the operating agreement that is the LLC's foundational document) subordinated to OpenAI’s charitable purpose, and which is completely controlled (despite the charity's indirect and less-than-complete ownership) by OpenAI GP LLC, a wholly owned subsidiary of the charity, on behalf of the OpenAI charity.
And, particularly, the OpenAI board is. as the excerpts you quote in your post expressly state, the board of the nonprofit that is the top of the structure. It controls everything underneath because each of the subordinate organizations foundational documents give it (well, for the two entities with outside invesment, OpenAI GP LLC, the charity's wholly-owned and -controlled subsidiary) complete control.
The entire setup is structured so that they are not supposed to be beholden to investors. If it is true that they ultimately are and Microsoft is the leverage to get Altman back, then they explicitly failed in the goal in setting up their structure of governance.
The fundamental thing you are missing here is that the charter of the non-profit and structure of their ownership of the for-profit (and the for-profit's operating agreement) is all designed in a way that is supposed to eliminate financial incentives for stakeholders as being the thing that the company and non-profit are beholden to.
It may turn out that the practical reality is different from the intent, but everything you're talking about was a feature and not a bug of how this whole thing was set up.
- First, the for-profit subsidiary is fully controlled by the OpenAI Nonprofit. We enacted this by having the Nonprofit wholly own and control a manager entity (OpenAI GP LLC) that has the power to control and govern the for-profit subsidiary.
-Second, because the board is still the board of a Nonprofit, each director must perform their fiduciary duties in furtherance of its mission—safe AGI that is broadly beneficial. While the for-profit subsidiary is permitted to make and distribute profit, it is subject to this mission. The Nonprofit’s principal beneficiary is humanity, not OpenAI investors.
-Third, the board remains majority independent. Independent directors do not hold equity in OpenAI. Even OpenAI’s CEO, Sam Altman, does not hold equity directly. His only interest is indirectly through a Y Combinator investment fund that made a small investment in OpenAI before he was full-time.
-Fourth, profit allocated to investors and employees, including Microsoft, is capped. All residual value created above and beyond the cap will be returned to the Nonprofit for the benefit of humanity.
-Fifth, the board determines when we've attained AGI. Again, by AGI we mean a highly autonomous system that outperforms humans at most economically valuable work. Such a system is excluded from IP licenses and other commercial terms with Microsoft, which only apply to pre-AGI technology.
> I’m not really clear what your concrete proposal is for raising $10b as a non-profit, perhaps you could flesh that out?
OpenAI, Inc. (the nonprofit) could have partnered with Microsoft directly.
To be fair, maybe Microsoft may have required that certain code be kept secret in a way that OpenAI's charitable purpose would not have allowed. However, that would just suggest that the deal was not open and not in the best interests of the charity.
Moreover, I'm skeptical that OpenAI Global LLC paid fair market value to OpenAI, Inc. for the assets it received. Sure, the GPT-2 itself was open sourced, but a lot of the value of the business lied in other things: all of the datasets that were used, the history of training, what worked and what didn't work, the accessory utilities, emails, documents / memos, the brand, etc. The staff is a little tricky, because - sure - they are ostensibly free to leave, but there's no doubt there's a ton of value in the staff.
If OpenAI, Inc. (non-profit) put itself on the open market with the proceeds to go to another charity, what do you think Microsoft would have paid to buy the business? I bet it would have been a lot more than OpenAI Global LLC paid to OpenAI, Inc for the same assets...
It's for-profit (capped-profit) subsidiary exists solely to be able to enable competitive compensation to its researchers to ensure they don't have to worry about the opportunity costs of working at a non-profit.
They have a mutually beneficial relationship with a deep-pocketed partner who can perpetually fund their research in exchange for exclusive rights to commercialize any ground-breaking technology they develop and choose to allow to be commercialized.
Aggressive commercialization is at odds with their raison d'être and they have no need for it to fund their research. For as long as they continue to push forward the state of the art in AI and build ground-breaking technology they can let Microsoft worry about commercialization and product development.
If a CEO is not just distracting but actively hampering an organisation's ability to fulfill its mission then their dismissal is entirely warranted.
Agreed with the overall sentiment, but let's be clear. OpenAI is currently a (capped) for-profit company. They are partnered with Microsoft, a for-profit company. They commercially license their products. They provide services to for-profit companies. The existential crisis of the last six months of the company seems to have been over moving in the direction of being more profit-oriented, and one side clearly won that battle. OpenAI may soon be getting contracts with the defense department, after silently revoking their promise not to. Describing them as a non-profit company is de facto untrue, regardless of their nominal governance structure, and describing them (or them describing themselves) as a non-profit feels like falling for a sleight of hand trick at this point.
I think it actually isn't that easy. Compared to your example, the difference is that OpenAI's for-profit is getting outside money from Microsoft, not money from non-profit OpenAI. Non-profit OpenAI is basically dealing with for-profit OpenAI as a external partner that happens to be aligned with their interests, paying the expensive bills and compute, while the non-profit can hold on to the IP.
You might be able to imagine a world where there was an external company that did the same thing as for-profit OpenAI, and OpenAI nonprofit partnered with them in order to get their AI ideas implemented (for free). OpenAI nonprofit is basically getting a good deal.
MSF could similarly create an external for-profit hospital, funded by external investors. The important thing is that the nonprofit (donated, tax-free) money doesn't flow into the forprofit section.
Of course, there's a lot of sketchiness in practice, which we can see in this situation with Microsoft influencing the direction of nonprofit OpenAI even though it shouldn't be. I think there would have been real legal issues if the Microsoft deal had continued.
> OpenAI shouldn't even be making a profit, as it's a 501(c)3 charity
First, the “OpenAI" whose profits are being discussed isn't a 501(c)3 charity, but a for-profit LLC (OpenAI Global, LLC) with three other organizations between it and the charity.
Second, charities and other nonprofits can make profits (surplus revenue), they just can't return revenues (but they can have for profit subsidiaries that return profit to them and other investors in certain circumstances.)
> The whole umbrella for-profit corp they formed when they became popular should be illegal
The umbrella organization is a charity. The for profit organizations (both OpenAI Global LLC that Microsoft invests in, and its immediate holding company parent which has some other investors besides the charity) are subordinate to the charity and its goals.
> and is clearly immoral.
Not sure what moral principal and analysis you are applying to reach this conclusion.
I take your point, but still, I don’t think it’s correct to imply that investors in the for-profit company have no sway or influence over the future of OpenAI.
I sure as shit wouldn’t wanna be on Microsoft’s bad side, regardless of my tax status.
Microsoft has zero ownership of the entity the board controls (the OpenAI nonprofit), and a for-profit firm having seats on a nonprofit board especially if it was because they invested in a for-profit subsidiary of the nonprofit would raise serious issues of the “nonprofit” being run for purposes incompatible with its status.
the key thing is that now OpenAI has something of value, they're doing everything they possibly can to benefit private individuals and corporations, i.e. Sam Altman and Microsoft, rather than the public good, which is the express purpose of a non-profit
For a for-profit, the pragmatic approach due to Microsoft also being the majority computer provider (We can set aside the investments for the moment - most are in the form of compute credits and come in tranches. OpenAI is not sitting on $10B in cash in their bank accounts or whatever) would make a lot of sense.
But they're a non-profit that operate in accordance to their pipe-dream charter. You and I might be skeptical of it or just think it's generally dumb, but non-profits are allowed to believe in pipe-dreams and pursue them.
At the very least they still issued a poorly worded statement and have not been able to recover from that, but it is quite possible that their attitude towards the investors in the for-profit is entirely consistent with the charter they are supposed to be following.
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