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> They lead with the fact that it was shocking and irresponsible. I can see where the misalignment (ha!) may be: someone deep in the VC world would reflexively

> They lead with the fact that it was shocking and irresponsible. I can see where the misalignment (ha!) may be: someone deep in the VC world would reflexively think that "value destruction" of any kind is irresponsible. However, a non-profit board has a primary responsibility to its charter and mission - which doesn't compute for those with fiduciary-duty-instincts. Without getting into the specifics of this case: a non-profit's board is expected to make decisions that lose money (or not generate as much of it) if the decisions lead to results more consistent with the mission.

s1artibartfast 3y ago
>However, a non-profit board has a primary responsibility to its charter and mission - which doesn't compute for those with fiduciary-duty-instincts Exactly. The tricky part is that board started a second for profit company with VC investors who are co-owners. This has potential for messy conflicts of interest if there is disagreement about how to run the co-venture, and each party has contractual obligations to each other.
- cthalupa 3y ago
  > Exactly. The tricky part is that board started a second for profit company with VC investors who are co-owners. This has potential for messy conflicts of interest if there is disagreement about how to run the co-venture, and each party has contractual obligations to each other. Anyone investing in or working for the for-profit LLC has to sign an operating agreement that states the LLC is not obligated to make a profit, all investments should be treated as donations, and that the charter and mission of the non-profit is the primary responsibility of the for-profit LLC as well.
  - s1artibartfast 3y ago
    See my other response. If you have people sign a contract that says the mission comes first, but also give them profit sharing stocks, and cap those profits at 1.1 Trillion, it is bound to cause some conflicts of interest in reality, even if it is clear who calls the shots when deciding how to balance the mission and profit
    - cthalupa 3y ago
      There might be some conflict of interest but the resolution to those conflicts is clear: The mission comes first. OpenAI employees might not like it and it might drive them to leave, but they entered into this agreement with a full understanding that the structure has always been in place to prioritize the non-profit's charter.
      - ffgjgf1 3y ago
        > The mission comes first. Which might only be possible with future funding? From Microsoft in this case. And in any case if they give out any more shares in the wouldn’t they (with MS) be able to just take over the for-profit corp?
        s1artibartfast 3y ago
        The deal with Microsoft was 11 billion for 49% of the venture. First off, if open AI can't get it done with 11 billion plus whatever Revenue, they probably won't. Second, the way the for-profit is set up, it may not matter how much Microsoft owns, because the nonprofit keeps 100% of the control. Seems like that's the deal that Microsoft signed. They bought a share of profits with no control. Third, my understanding is that the 11 billion from Microsoft is based on milestones. If openai doesn't meet them, they don't get all the money
anonymouskimmer 3y ago
Just a nitpick. "Fiduciary" doesn't mean "money", it means an entity which is legally bound to the best interests of the other party. Non-profit boards and board members have fiduciary duties.
- sangnoir 3y ago
  Thanks for that - indeed, I was using "fiduciary duty" in the context it's most frequently used - maximizing value accrued to stakeholders. However, to nitpick your nitpick: for non-profits there might be no other party - just the mission. Imagine a non-profit whose mission is to preserve the history and practice of making 17th-century ivory cuff links. It's just the organisation and the mission; sometimes the mission is for the benefit of another party (or all of humanity).
  - anonymouskimmer 3y ago
    The non-profit, in my use, was the party. I guess at some point these organizations may not involve people, in which case "party" would be the wrong term to use.
ffgjgf1 3y ago
Of course they can only achieve their mission with funding from for profit corporations and their actions have possibly jeopardized that

s1artibartfast 3y ago

>However, a non-profit board has a primary responsibility to its charter and mission - which doesn't compute for those with fiduciary-duty-instincts Exactly. The tricky part is that board started a second for profit company with VC investors who are co-owners. This has potential for messy conflicts of interest if there is disagreement about how to run the co-venture, and each party has contractual obligations to each other.

cthalupa 3y ago
> Exactly. The tricky part is that board started a second for profit company with VC investors who are co-owners. This has potential for messy conflicts of interest if there is disagreement about how to run the co-venture, and each party has contractual obligations to each other. Anyone investing in or working for the for-profit LLC has to sign an operating agreement that states the LLC is not obligated to make a profit, all investments should be treated as donations, and that the charter and mission of the non-profit is the primary responsibility of the for-profit LLC as well.
- s1artibartfast 3y ago
  See my other response. If you have people sign a contract that says the mission comes first, but also give them profit sharing stocks, and cap those profits at 1.1 Trillion, it is bound to cause some conflicts of interest in reality, even if it is clear who calls the shots when deciding how to balance the mission and profit
  - cthalupa 3y ago
    There might be some conflict of interest but the resolution to those conflicts is clear: The mission comes first. OpenAI employees might not like it and it might drive them to leave, but they entered into this agreement with a full understanding that the structure has always been in place to prioritize the non-profit's charter.
    - ffgjgf1 3y ago
      > The mission comes first. Which might only be possible with future funding? From Microsoft in this case. And in any case if they give out any more shares in the wouldn’t they (with MS) be able to just take over the for-profit corp?
      - s1artibartfast 3y ago
        The deal with Microsoft was 11 billion for 49% of the venture. First off, if open AI can't get it done with 11 billion plus whatever Revenue, they probably won't. Second, the way the for-profit is set up, it may not matter how much Microsoft owns, because the nonprofit keeps 100% of the control. Seems like that's the deal that Microsoft signed. They bought a share of profits with no control. Third, my understanding is that the 11 billion from Microsoft is based on milestones. If openai doesn't meet them, they don't get all the money

anonymouskimmer 3y ago

Just a nitpick. "Fiduciary" doesn't mean "money", it means an entity which is legally bound to the best interests of the other party. Non-profit boards and board members have fiduciary duties.

sangnoir 3y ago
Thanks for that - indeed, I was using "fiduciary duty" in the context it's most frequently used - maximizing value accrued to stakeholders. However, to nitpick your nitpick: for non-profits there might be no other party - just the mission. Imagine a non-profit whose mission is to preserve the history and practice of making 17th-century ivory cuff links. It's just the organisation and the mission; sometimes the mission is for the benefit of another party (or all of humanity).
- anonymouskimmer 3y ago
  The non-profit, in my use, was the party. I guess at some point these organizations may not involve people, in which case "party" would be the wrong term to use.

ffgjgf1 3y ago

Of course they can only achieve their mission with funding from for profit corporations and their actions have possibly jeopardized that